UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to _________.
Commission File Number 333-29005-01
PANDA GLOBAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2697755
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244 (Address of
principal executive offices, including zip code)
(972) 980-7159
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 12, 1998.
Common Stock, Par Value $.01 Per Share 1,000
<PAGE>
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements (Unaudited) F-1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this Quarterly Report on
Form 10-Q, including, without limitation, statements regarding financial
position, projects under evaluation or development, construction or other
budgets and plans and objectives for future operations, are forward-looking
statements. Although the registrant believes that the expectations reflected in
such forward-looking statements are reasonable, it 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 registrant's expectations
("Cautionary Statements") include the impact of geopolitical occurrences
worldwide; the results of financing efforts; risks under contracts and swap
agreements; changes in laws and regulations; unforeseen engineering and
mechanical or technological difficulties; and other risks described in the
registrant's filings from time to time with the Securities and Exchange
Commission. All subsequent written and oral forward-looking statements
attributable to the registrant or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
December 31 June 30
1997 1998
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 2,929,289 $ 1,926,622
Restricted cash - current ............................... 92,828,082 82,389,739
Accounts receivable ..................................... 9,786,837 10,427,032
Fuel oil, spare parts and supplies ...................... 6,264,549 7,041,373
Other current assets .................................... 257,877 229,181
------------- -------------
Total current assets .................................. 112,066,634 102,013,947
Plant and equipment:
Electric generating facilities .......................... 291,515,328 293,273,268
Furniture and fixtures .................................. 533,663 542,923
Less: accumulated depreciation .......................... (38,114,058) (43,964,336)
Construction in progress ................................ 36,131,069 58,046,364
Development costs ....................................... 2,942,340 2,942,340
------------- -------------
Total plant and equipment, net ........................ 293,008,342 310,840,559
Investment in joint venture ............................... 836,654 836,654
Restricted cash - debt service reserves and escrow deposits 72,430,527 58,960,939
Debt issuance costs, net of accumulated
amortization of $1,583,368 and $2,408,263 respectively .. 13,539,612 12,724,717
------------- -------------
$ 491,881,769 $ 485,376,816
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
(Unaudited)
December 31 June 30
1997 1998
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ................................. $ 5,600,000 $ 8,700,000
Interest and letter of credit fees ................. 9,697,648 9,802,700
Operating expenses and other ....................... 4,879,522 5,876,122
Current portion of long-term debt .................... 5,816,974 5,715,043
------------- -------------
Total current liabilities ........................ 25,994,144 30,093,865
Deferred revenue ....................................... 13,140,387 12,900,962
Long term debt, less current portion ................... 349,667,769 347,416,044
Capital lease obligation ............................... 231,278,528 237,237,129
Minority interest ...................................... 5,741,166 5,741,166
Commitments and contingencies (Note 4)
Shareholder's deficit:
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding ............................ 10 10
Advances to parent ................................... (52,738,381) (52,248,758)
Accumulated deficit .................................. (81,201,854) (95,763,602)
------------- -------------
(133,940,225) (148,012,350)
------------- -------------
$ 491,881,769 $ 485,376,816
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
1997 1998
------------ ------------
REVENUE:
Electric capacity and energy sales ........... $ 32,286,239 $ 34,526,850
Steam and chilled water sales ................ 284,303 380,754
Interest income .............................. 2,914,440 4,376,887
------------ ------------
35,484,982 39,284,491
------------ ------------
EXPENSES:
Plant operating expenses ..................... 13,628,706 11,096,015
Project development and administrative ....... 4,866,550 6,837,864
Interest expense and letter of credit fees ... 25,025,925 29,237,186
Depreciation ................................. 5,897,904 5,850,279
Amortization of debt issuance costs .......... 414,592 824,895
------------ ------------
49,833,677 53,846,239
------------ ------------
NET LOSS ....................................... $(14,348,695) $(14,561,748)
============ ============
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
1997 1998
------------ ------------
REVENUE:
Electric capacity and energy sales ........... $ 14,956,546 $ 17,915,842
Steam and chilled water sales ................ 153,721 190,816
Interest income .............................. 2,484,713 2,104,133
------------ ------------
17,594,980 20,210,791
------------ ------------
EXPENSES:
Plant operating expenses ..................... 5,367,519 6,434,857
Project development and administrative ....... 2,471,528 4,407,345
Interest expense and letter of credit fees ... 14,224,296 14,603,608
Depreciation ................................. 2,949,026 2,932,592
Amortization of debt issuance costs .......... 240,785 411,970
------------ ------------
25,253,154 28,790,372
------------ ------------
NET LOSS ....................................... $ (7,658,174) $ (8,579,581)
============ ============
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- ADVANCES ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT TO PARENT DEFICIT DEFICIT
------ ------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 ........................... 1,000 $ 10 $(52,738,381) $(81,201,854) $(133,940,225)
Advances (to) from parent, net .................... -- -- 489,623 -- 489,623
Net loss .......................................... -- -- -- (14,561,748) (14,561,748)
------ ------ ------------ ------------ -------------
BALANCE, June 30, 1998 .............................. 1,000 $ 10 $(52,248,758) $(95,763,602) $(148,012,350)
====== ====== ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss .................................................. $ (14,348,695) $(14,561,748)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation .......................................... 5,897,904 5,850,279
Amortization of debt issuance costs ................... 414,592 824,895
Amortization of loan discount and deferred
interest on capital lease obligation ................ 10,930,616 11,674,169
Changes in assets and liabilities:
Accounts receivable ..................................... (1,511,376) (640,195)
Fuel oil, spare parts and supplies ...................... 870,396 (776,824)
Other current assets .................................... 252 28,696
Accounts payable and accrued expenses ................... 3,898,017 1,101,651
------------- ------------
Net cash provided (used) by operating activities ...... 6,151,706 3,500,923
------------- ------------
INVESTING ACTIVITIES:
Restricted cash - current ................................. (76,995,991) 10,438,343
Additions to property, plant and equipment ................ (17,414,551) (20,582,495)
Restricted cash - debt service reserves and escrow deposits (59,237,947) 13,469,588
------------- ------------
Net cash provided (used) by investing activities ...... (153,648,489) 3,325,436
------------- ------------
FINANCING ACTIVITIES:
Contributions from minority interest owners ............... 5,741,166 --
Advances (to) from parent ................................. 1,811,286 489,623
Deferred revenue .......................................... 7,190,857 (239,425)
Proceeds from long-term debt .............................. 145,025,088 --
Repayment of long term debt ............................... (2,967,379) (2,855,739)
Repayment of capital lease obligation ..................... (2,642,993) (5,213,485)
Debt issuance costs ....................................... (7,385,484) (10,000)
------------- ------------
Net cash provided (used) by financing activities ...... 146,772,541 (7,829,026)
------------- ------------
Increase (decrease) in cash and cash equivalents ............ (724,242) (1,002,667)
Cash and cash equivalents, beginning of period .............. 1,335,086 2,929,289
------------- ------------
Cash and cash equivalents, end of period .................... $ 610,844 $ 1,926,622
============= ============
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Accrued construction costs ................................ $ -- $ 8,700,000
Interest expense on capital lease obligation .............. 10,759,616 11,172,086
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Holdings, Inc. ("Panda Global", or collectively with its
subsidiaries the "Company"), a wholly owned subsidiary of Panda Energy
International, Inc. ("PEII"), was formed in March 1997 to hold the ownership
interests in independent power projects which were formerly owned by other
wholly owned subsidiaries of PEII. The ownership interests were transferred to
the Company at PEII's historical cost. Because the transfers occurred between
entities under common control, the transactions have been accounted for in a
manner similar to a pooling of interests. The Company has two direct wholly
owned subsidiaries: Panda Energy Corporation ("PEC")( a Texas corporation) which
indirectly holds the Company's ownership interests in domestic projects, and
Panda Global Energy Company ("Global Cayman")(a Cayman Islands company) which
indirectly holds the Company's ownership interests in international projects.
PEC, through its wholly owned subsidiary Panda Interfunding Corporation
("PIC") and PIC's wholly owned subsidiary Panda Interholding Corporation
("Interholding"), holds the Company's ownership interests in the Rosemary
project and the Brandywine project. The entities holding such ownership
interests include the following: Panda Rosemary Corporation ("PRC"), a 91%
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), 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 and, as of July 31, 1996, owns 100% of Panda-Rosemary. Prior to
July 31, 1996, the Company owned 10% of Panda-Rosemary. The Rosemary and
Brandywine projects are located in the United States. Other direct or indirect
wholly owned subsidiaries of PIC include Panda Funding Corporation ("PFC"),
Panda-Rosemary Funding Corporation ("PRFC") and Panda Cayman Interfunding
Corporation ("PIC Cayman"), which have been formed to facilitate the financing
of the development and acquisition of independent power projects.
Additionally, PEC holds the Company's 100% ownership interest in the
Kathleen project through its wholly owned subsidiaries.
Global Cayman (which collectively with its subsidiaries is a development
stage enterprise having no operating revenues) holds a 95.5% ownership interest
in Pan-Sino Energy Development Company LLC ("Pan-Sino")(a Cayman Islands
company), which in turn holds a 99% ownership interest in Pan-Western Energy
Corporation LLC ("Pan-Western")(a Cayman Islands company), which in turn owns an
approximately 88% interest in four joint venture companies (the "Joint Venture
Companies") organized under the laws of the People's Republic of China ("China")
to develop and construct an independent power project located in China. The
Joint Venture Companies are: Tangshan Panda Heat and Power Company, Ltd.
("Tangshan Panda"), Tangshan Pan-Western Heat and Power Company, Ltd. ("Tangshan
Pan-Western"), Tangshan Cayman Heat and Power Company, Ltd. ("Tangshan Cayman")
and Tangshan Pan-Sino Heat Company, Ltd. ("Tangshan Pan-Sino"). Additionally,
Global Cayman indirectly holds an equity investment in Bhote Koshi Power Company
Pvt. Ltd. ("BKPC")(a Nepal company), which was organized under the laws of Nepal
to develop and construct an independent power project in Nepal.
Collectively, PEC, Pan-Sino and Pan-Western are the predecessors of the
Company.
All material intercompany accounts and transactions have been eliminated
in consolidation.
F-7
<PAGE>
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 consolidated financial
statements for the year ended December 31, 1997. The accompanying unaudited
condensed consolidated financial statements for the six-month and three-month
periods ended June 30, 1997 and 1998 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 six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998. The amounts
presented in the balance sheet as of December 31, 1997 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 personnel spent performing these services. The expenses allocated
were $2,110,000 and $3,000,000 for the six-month periods, and $1,000,000 and
$1,900,000 for the three-month periods, ended June 30, 1997 and 1998,
respectively. Such costs 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
LUANNAN PROJECT -- The Company has incurred costs on the Luannan Project
of $36.1 million and $58.0 million as of December 31, 1997 and June 30, 1998,
respectively. Such costs are included in the accompanying balance sheets in
plant and equipment under construction in progress.
NEPAL PROJECT - BKPC, the Company's equity investee, has incurred costs
for the Nepal Project (including development, construction and debt issuance
costs) of $20.3 million and $24.1 million as of December 31, 1997 and June 30,
1998, respectively.
KATHLEEN PROJECT - The Company has incurred development costs on the
Kathleen Project of $2.9 million as of December 31, 1997 and June 30, 1998. Such
costs are included in plant and equipment under development costs in the
accompanying balance sheets. Additionally, in the second quarter of 1998 the
Company expensed certain deposits relating to the Kathleen project of
approximately $750,000. Such expense is included in the statement of operations
under project development and administrative expenses. See Note 4 regarding
contingencies surrounding the Kathleen Project.
4. COMMITMENTS AND CONTINGENCIES
In 1995, Florida Power filed an action with the Florida Public Service
Commission ("Florida PSC") relating to the term of the power purchase agreement
for the Kathleen Project and whether the Kathleen Project, as designed, is
eligible to execute the power purchase agreement pursuant to Florida Power's bid
solicitation and the Florida PSC's regulations. On May 20, 1996, the Florida PSC
issued an order finding that: (1) the Kathleen Project, as designed, did not
comply with the power purchase agreement and the Florida PSC's regulations; (2)
the capacity payments under the power purchase agreement should only extend for
20 years (as opposed to the 30 year stated term of the agreement); and (3) the
construction and commercial operation milestones should be extended for an
additional 18 months. The Company appealed this ruling to the Florida Supreme
Court. On September 18, 1997 the Florida Supreme Court issued a ruling affirming
the earlier finding of the Florida PSC. On April 27, 1998, the U.S. Supreme
Court declined to review the matter. Also on April 27, 1998, the Florida
F-8
<PAGE>
PSC issued an order denying further extension of the previously granted 18-month
milestone extension. On May 12, 1998, the Company filed an action with the
Florida Supreme Court seeking to reverse the Florida PSC's order. The Company
will continue to pursue its legal and other options with respect to the Kathleen
Project. Management believes that the resolution of this matter will not have a
material effect on the accompanying condensed consolidated financial statements.
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. The
date on which commercial operations were achieved and the entitlement of
Raytheon to certain early completion bonuses under the Brandywine EPC Agreement
have been the subject of a dispute between Panda-Brandywine and Raytheon.
Panda-Brandywine and Raytheon have reached an agreement under which payment of
the disputed amount will not be required, subject to payment of
Panda-Brandywine's undisputed obligations to Raytheon in accordance with the
terms of the agreement.
In April 1998, PRC filed suit in federal court charging the Bibb Company
("Bibb") and Westpoint Stevens, Inc. ("Westpoint") with violating a contractual
agreement in the sale of a textile mill in 1997 and in the operation of the mill
since that time. The Rosemary Facility supplies steam and chilled water to the
textile mill under a contract originally signed with Bibb. Westpoint acquired
the textile mill from Bibb in 1997. The suit asked the court to determine and
clarify the rights of the parties to the contract. The federal court dismissed
this action in June 1998. Shortly thereafter, Bibb and Westpoint filed a
separate suit in state court in Halifax County, North Carolina claiming, among
other things, breach of contract in regard to delivery of steam. PRC intends to
vigorously pursue its claims against Bibb and Westpoint in this state court
action. The Company continues to provide steam and chilled water to the mill
pursuant to the contract. The Company believes that the resolution of this
contractual dispute will not have a material adverse effect upon the financial
position, results of operations or cash flows of the Company.
The Company has entered into various long-term contracts for the purchase
and transportation of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 10 to 25 years. The
Company's minimum purchase commitment under these contracts is 2.3 million
British thermal units of gas annually through October 31, 2011. In the
aggregate, such commitments are not at prices in excess of the current market.
PEII is also involved in other legal and administrative proceedings in the
ordinary course of business. Management believes that the amount of ultimate
liability allocable to the Company with respect to these matters will not have a
material affect on the financial position, results of operations or cash flows
of the Company.
5. SUBSEQUENT EVENT
In August 1996, Panda-Brandywine and Potomac Electric Power Company
("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 which relate to the determination of the
interest rate that is the basis for reduction in capacity payments thereunder
(the "PEPCO Interest Rate Dispute"). In late 1997, Panda-Brandywine reached an
agreement with PEPCO, which was finalized in July 1998. Under the agreement, the
amount of capacity payments will be increased (as compared with the capacity
payments originally anticipated) during the first ten years following the
commencement of commercial operations, and will be reduced during the
F-9
<PAGE>
final fifteen years of the Brandywine Power Purchase Agreement. In July 1998,
PEPCO paid to Panda-Brandywine an additional capacity payment of approximately
$3.8 million, which represents the difference between the originally scheduled
capacity payments and the capacity payments due under the agreement for the
first nine months of 1997. The $3.8 million retroactive capacity payment will be
recorded in the financial statements in the third quarter of 1998. In October
1997, PEPCO commenced increased capacity payments to the Company under the terms
of the agreement. Additionally, PEPCO has agreed to release certain amounts of
capacity to Panda-Brandywine for resale of energy to other parties, and to grant
Panda-Brandywine the right to sell additional energy to other parties subject to
the availability of the facility. The agreement with PEPCO required the consent
of the financing parties, including GECC, under the capital lease financing
arrangements for the facility. In this regard, in July 1998 Panda-Brandywine
also executed an agreement with GECC which, among other things, provides for (i)
the reallocation of lease payments to GECC in order to match the revised
capacity payment schedule with PEPCO, (ii) the reimbursement to GECC by
Panda-Brandywine of certain fees, and (iii) certain technical amendments to the
applicable financing documents.
F-10
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE NOTED)
GENERAL
The Company owns 100% equity interests in two completed electric power
generation facilities in the United States: the Rosemary Facility, which began
commercial operations in December 1990, and the Brandywine Facility, which began
commercial operations in October 1996. The Company also owns an approximately
83% indirect interest in the Luannan Facility currently under construction in
China, financing for which was completed in April 1997. Additionally, the
Company owns an indirect equity interest in the Nepal Facility currently under
construction in Nepal, financing for which was completed in December 1997.
RESULTS OF OPERATIONS
The Company's revenues from electric power generation are primarily
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 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. The Company currently believes
that it can meet its liquidity requirements solely from the capacity payments in
the unlikely event that its facilities are not dispatched at all. See "Liquidity
and Capital Resources."
FIRST SIX MONTHS OF 1998 COMPARED TO 1997
The Company recorded a net loss of $14,562 in the first six months of 1998
on revenues of $39,284 compared to a net loss of $14,349 on revenues of $35,485
during the same period in 1997. The increase in revenues in the 1998 period was
primarily caused by increased operating revenues at the Rosemary and Brandywine
facilities and by increased interest income. The increase in interest income
resulted primarily from higher restricted cash balances attributable to the
Luannan Facility construction project.
-1-
<PAGE>
Capacity revenues for the Rosemary Facility were $12,691 and $12,670 for
the 1998 and 1997 periods, respectively. Energy revenues for the Rosemary
Facility for the 1998 and 1997 periods were $1,048 and $842, respectively. The
increase in energy revenues for the Rosemary Facility is attributable to higher
dispatch levels at that facility compared to the 1997 period. Capacity revenues
from Potomac Electric Power Company ("PEPCO") for the Brandywine Facility for
the first six months of 1998 and 1997 were $14,118 and $10,035, respectively.
Capacity revenues for the Brandywine Facility for the 1997 period were lower
than originally anticipated due to a disagreement with PEPCO over the
calculation of the capacity payments. As discussed in Note 5 to the condensed
consolidated financial statements, the Company and PEPCO reached an agreement in
October 1997 (which was finalized in July 1998) under which PEPCO paid
approximately $3.8 million to the Company for the retroactive effect of higher
capacity payments for the first nine months of 1997. The retroactive capacity
payment, which was received in July 1998, will be included in capacity revenues
in the third quarter of 1998. In October 1997, PEPCO commenced increased
capacity payments to the Company under the terms of the agreement. Additionally,
capacity revenues for the 1998 period are higher compared to the 1997 period as
a result of excess capacity sales allowed under the PEPCO agreement and higher
capacity ratings. Energy revenues from PEPCO for the Brandywine Facility for the
first six months of 1998 and 1997 were $6,562 and $5,051, respectively. The
increase in energy revenues for the Brandywine Facility is attributable to
higher dispatch levels at that facility compared to the 1997 period.
Additionally, in the first six months of 1998 and 1997, the Company had energy
revenues of $108 and $3,688, respectively, from the sale of natural gas and fuel
oil to other purchasers.
Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, decreased to $11,096 (28% of
revenues) in the 1998 period from $13,629 (38% of revenues) in the 1997 period.
The higher level of 1997 expenses was primarily due to additional fuel costs
related to low-margin sales of natural gas and fuel oil to other purchasers in
the 1997 period.
Project development and administrative expenses were $6,838 (17% of
revenues) and $4,867 (14% of revenues) for the 1998 and 1997 periods,
respectively. The increase in 1998 was primarily attributable to legal expenses
related to the PEPCO agreement, the write-off of certain deposits related to the
Kathleen development project, and higher administrative costs required to
support the Company's expanding operations.
Interest expense increased to $29,237 (74% of revenues) in the 1998 period
from $25,026 (71% of revenues) in 1997 as a result of the increase in
outstanding indebtedness from the issuance of $145.0 million discounted
principal amount of Senior Secured Notes in April 1997 for the Luannan Facility.
Depreciation and amortization of debt issue costs amounted to $6,675 (17%
of revenues) in the 1998 period and $6,312 (18% of revenues) in 1997. The
increase in 1998 was primarily attributable to amortization of debt issue costs
for the Senior Secured Notes issued in April 1997.
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<PAGE>
As a result of the various factors discussed above, the Company recorded
net losses of $14,562 and $14,349 for the 1998 and 1997 periods, respectively.
SECOND QUARTER 1998 COMPARED TO 1997
The Company recorded a net loss of $8,580 in the second quarter of 1998 on
revenues of $20,211 compared to a net loss of $7,658 on revenues of $17,595
during the same period in 1997. The increase in revenues in the 1998 period was
primarily caused by increased operating revenues at the Rosemary and Brandywine
facilities, partially offset by a decrease in interest income.
Capacity revenues for the Rosemary Facility were $5,770 for both the 1998
and 1997 periods. Energy revenues for the Rosemary Facility for the 1998 and
1997 periods were $1,044 and $738, respectively. The increase in energy revenues
for the Rosemary Facility is attributable to higher dispatch levels at that
facility compared to the 1997 period. Capacity revenues from PEPCO for the
Brandywine Facility for the second quarter of 1998 and 1997 were $7,287 and
$5,000, respectively. Capacity revenues for the Brandywine Facility for the 1997
period were lower than originally anticipated due to a disagreement with PEPCO
over the calculation of the capacity payments. As discussed in Note 5 to the
condensed consolidated financial statements, the Company and PEPCO reached an
agreement in October 1997 (which was finalized in July 1998) under which PEPCO
paid approximately $3.8 million to the Company for the retroactive effect of
higher capacity payments for the first nine months of 1997. The retroactive
capacity payment, which was received in July 1998, will be included in capacity
revenues in the third quarter of 1998. In October 1997, PEPCO commenced
increased capacity payments to the Company under the terms of the agreement.
Additionally, capacity revenues for the 1998 period are higher compared to the
1997 period as a result of excess capacity sales allowed under the PEPCO
agreement and higher capacity ratings. Energy revenues from PEPCO for the
Brandywine Facility for the second quarter of 1998 and 1997 were $3,793 and
$2,505, respectively. The increase in energy revenues for the Brandywine
Facility is attributable to higher dispatch levels at that facility compared to
the 1997 period. Additionally, in the second quarter of 1998 and 1997, the
Company had energy revenues of $23 and $943, respectively, from the sale of
natural gas and fuel oil to other purchasers.
Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, increased to $6,435 (32% of
revenues) in the 1998 period from $5,368 (31% of revenues) in the 1997 period.
The increase in the 1998 period was primarily attributable to higher dispatch
levels at the Company's facilities. The higher level of 1997 expenses as a
percentage of revenues was primarily due to additional fuel costs related to
low-margin sales of natural gas and fuel oil to other purchasers in the 1997
period.
Project development and administrative expenses were $4,407 (22% of
revenues) and $2,472 (14% of revenues) for the 1998 and 1997 periods,
respectively. The increase in 1998 was primarily attributable to legal expenses
related to the PEPCO agreement, the write-off of certain deposits related to the
Kathleen development project, and higher
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<PAGE>
administrative costs required to support the Company's expanding operations.
Interest expense increased to $14,604 (72% of revenues) in the 1998 period
from $14,224 (81% of revenues) in 1997 primarily as a result of the increase in
outstanding indebtedness from the issuance of $145.0 million discounted
principal amount of Senior Secured Notes in April 1997 for the Luannan Facility.
Depreciation and amortization of debt issue costs amounted to $3,344 (17%
of revenues) in the 1998 period and $3,190 (18% of revenues) in 1997. The
increase in 1998 was primarily attributable to amortization of debt issue costs
for the Senior Secured Notes issued in April 1997.
As a result of the various factors discussed above, the Company recorded
net losses of $8,580 and $7,658 for the 1998 and 1997 periods, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In the 1998 and 1997 periods, the Company obtained cash from operations of
the Rosemary Facility and the Brandywine Facility and from interest on cash
balances. The Company utilized this cash to service its debt obligations, make
distributions to its parent to fund project development efforts, and for general
and administrative expenses.
The principal future cash requirement of the Company will be payment of
its debt service obligations. The Company will rely almost exclusively on
distributions from Global Cayman and PIC to meet its cash requirements. Those
entities in turn will rely almost exclusively on distributions from the project
entities to meet their cash requirements. The project entities' ability to make
such distributions will depend upon the financial performance of the Rosemary
Facility, the Brandywine Facility, the Luannan Facility and the Nepal Facility
and will be subject to a number of limitations on distributions contained in the
project-level debt agreements. The Company currently believes that it will have
sufficient liquidity from the cash flows available for distribution from the
project entities, together with amounts held in debt service reserves and other
restricted cash reserves, to satisfy its obligations. The Company's restricted
cash balances are available only for specific uses as stated in the indentures,
such as payment of debt service obligations, project construction and overhaul,
and are not available for general corporate purposes.
The project entities are dependent on capacity payments under their
respective power purchase agreements to meet their fixed obligations, including
payment of project-level debt service, and to make distributions to the Company.
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 1999 and 2006, the capacity payments for the Rosemary
Facility are scheduled to decrease by approximately $1.8 million (7.1%) and $5.4
million (23.1%), respectively, based on the facility's current capacity rating.
The Company currently believes it will be able to continue to meet its
obligations during the periods such
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<PAGE>
reductions are applicable.
Each of the electric energy purchasers under the power purchase agreements
for the Rosemary Facility and the Brandywine Facility has a contractual right to
schedule the facility for dispatch largely at the purchaser's discretion. Thus,
revenues from energy payments will vary depending on the hours these facilities
are dispatched by such purchasers. The Company currently 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.
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 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 payments, may be adjusted
with inflationary increases. The Company currently believes that inflation will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows in the foreseeable future.
YEAR 2000 MATTERS
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
In 1998, the Company initiated a review of existing accounting software to
determine the impact of the Year 2000 Issue. Although such review is still in
process, management estimates that the Year 2000 Issue will not pose significant
operational problems for its computer systems. All costs associated with this
conversion, which are not anticipated to be material, are expensed as incurred.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
FLORIDA POWER PROCEEDINGS
Panda-Kathleen, L.P., an indirect subsidiary of the registrant (the
"Kathleen Partnership"), is a defendant in a legal proceeding before
the Florida Public Service Commission ("Florida PSC"), commenced in
January 1995, captioned IN RE: PETITION FOR DECLARATORY STATEMENT
REGARDING ELIGIBILITY FOR STANDARD OFFER CONTRACT AND PAYMENT
THEREUNDER BY FLORIDA POWER CORPORATION, Case No. 950110-EI, whereby
the Florida Power Corporation ("FPC") sought a declaratory judgment
that a power purchase agreement between the FPC and the Kathleen
Partnership is not "available" to the Kathleen Partnership. The
Florida Supreme Court issued a ruling on September 18, 1997
affirming a prior ruling of the Florida PSC to the effect that such
power purchase agreement is not available to the Kathleen
Partnership as proposed because it has an electric generating
capacity in excess of 75 megawatts and that FPC is only obligated to
make capacity payments under the power purchase agreement for 20
years. On April 27, 1998, the United States Supreme Court denied a
Writ of Certiorari filed therewith by the Kathleen Partnership
regarding this matter. Also, on April 27, 1998, Florida PSC issued
an order denying further extension of an 18 month tolling period
previously granted to meet the commercial milestone date due to the
length of the litigation proceedings. The Kathleen Partnership
filed, on May 12, 1998, a Petition for Writ of Certiorari with the
Florida Supreme Court in this regard. The registrant understands
that the Kathleen Partnership intends to continue to pursue
vigorously this legal matter. The registrant does not believe that
an adverse result in this case would have a material adverse effect
on the business, financial condition or results of operations of the
registrant and its subsidiaries, taken as a whole.
HEARD PROCEEDINGS
PEC is a party to a lawsuit captioned, PANDA ENERGY CORPORATION, V.
HEARD ENERGY CORPORATION, ET AL., (No. 94-0672-J); in the District
Court of Dallas County, Texas (191st Judicial District). PEC
initiated this litigation in April 1994 and has alleged 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. By order
dated June 19, 1996, the court granted the defendants' motions for
summary judgment. PEC appealed this ruling to the Court of Appeals
Fifth District Court of Texas at Dallas. Oral arguments regarding
this appeal were held on May 26, 1998, but no ruling has been made
thereon. The registrant does not believe that an adverse result in
this case would have a material adverse effect on the business,
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<PAGE>
financial condition or results of operations of the registrant and
its subsidiaries, taken as a whole.
BIBB/WESTPOINT STEVENS PROCEEDINGS
In April 1998, PRC filed suit in federal court charging the Bibb
Company ("Bibb") and Westpoint Stevens, Inc. ("Westpoint") with
violating a contractual agreement in the sale of a textile mill in
1997 and in the operation of the mill since that time. The Rosemary
facility supplies steam and chilled water to the textile mill under
a contract originally signed with Bibb. Westpoint acquired the
textile mill from Bibb in 1997. The suit asked the court to
determine and clarify the rights of the parties to the contract. The
federal Court dismissed this action in June 1998 and Westpoint and
Bibb filed a separate suit in state court in Halifax County, North
Carolina shortly thereafter, claiming, among other things, breach of
contract in regard to the delivery of steam. PRC intends to
vigorously pursue its claims against Bibb and Westpoint in this
state court action. PRC continues to provide steam and chilled water
to the mill pursuant to the contract. The registrant does not
believe that an adverse result in this case would have a material
adverse effect on the business, financial condition or results of
operations of the registrant and its subsidiaries, taken as a whole.
ITEM 5. OTHER INFORMATION
As of July 17, 1998, the Company's wholly-owned subsidiary,
Panda-Brandywine, L.P. (the "Brandywine Partnership") satisfied
various conditions precedent (including, but not limited to,
obtaining the written consent of GE Capital Corporation), and
therefore reached a definitive agreement with Potomac Electric Power
Company ("PEPCO"), making certain modifications to the Power
Purchase Agreement, dated August 9, 1991, as amended, between the
Brandywine Partnership and PEPCO. Such modifications resolve various
outstanding issues as to the method of calculation capacity payments
thereunder. In return for the resolution of the aforementioned
issues, PEPCO has agreed that the Brandywine Partnership may acquire
the exclusive right to broker capacity from the Brandywine facility
(owned and operated by the Brandywine Partnership) for resale, up to
certain specified amounts and for specified periods of time. PEPCO
also has agreed to release to the Brandywine Partnership on a
periodic basis through the year 2002 the rights to sell energy for
resale, which energy may or may not be derived from the capacity
released as described above. Further information concerning this
matter is set forth in Exhibit 10.173 attached hereto and made a
part hereof. See also, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Results of
Operations" in Item 2 of Part I herein.
Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed
the Brandywine facility pursuant to a fixed-price, turnkey
engineering, procurement
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<PAGE>
and construction contract (the "Brandywine EPC Agreement") with the
Brandywine Partnership. Raytheon completed the construction and
start-up of the Brandywine facility and has met the requirements for
commercial operations and substantial completion under the
Brandywine EPC Agreement. The date on which commercial operations
were achieved and the entitlement of Raytheon to certain early
completion bonuses under the Brandywine EPC Agreement have been the
subject of a dispute between the Brandywine Partnership and
Raytheon. In July 1998, the Brandywine Partnership and Raytheon
reached an agreement (as amended) under which payment of the
disputed amount will not be required, subject to payment of the
Brandywine Partnership's undisputed obligations to Raytheon in
accordance with the terms of the Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
10.172 Consent and Amendment Agreement, dated July 17, 1998 by and between
Panda Brandywine, L.P., General Electric Capital Corporation, and
the other parties set forth therein.
10.173 Letter Agreement, originally dated October 24, 1997, by and
between Panda Brandywine, L.P. and Potomac Electric Power Company. 1
10.174 Letter of Intent, dated July 2, 1998, by and between GE Power
Systems and Sales and Panda Paris Power, LLC.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K: None.
- ------------
1 The registrant has sought confidential treatment for certain information
identified in this Exhibit.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PANDA GLOBAL HOLDINGS, INC.
Date: August 12, 1998 By: /s/JANICE CARTER
Janice Carter
Executive Vice President, Secretary
and Treasurer
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
10.172 Consent and Amendment Agreement, dated July 17, 1998 by and between
Panda Brandywine, L.P., General Electric Capital Corporation, and
the other parties set forth therein.
10.173 Letter Agreement, originally dated October 24, 1997, by and
between Panda Brandywine, L.P. and Potomac Electric Power Company. 1
10.174 Letter of Intent, dated July 2, 1998, by and between GE Power
Systems and Sales and Panda Paris Power, LLC.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K: None.
- ------------
1 The registrant has sought confidential treatment for certain information
identified in this Exhibit.
EXHIBIT 10.172
CONSENT AND AMENDMENT AGREEMENT
This CONSENT AND AMENDMENT AGREEMENT, dated as of July 17, 1998
(this "AGREEMENT") 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 the 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 as Owner Trustee (in such capacity, the
"OWNER TRUSTEE") and as Security Agent (in such capacity, the "SECURITY AGENT"),
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
in its individual capacity but solely as the Indenture Trustee (the "INDENTURE
TRUSTEE"), CREDIT SUISSE FIRST BOSTON, a bank organized and existing under the
laws of Switzerland, acting by and through its New York branch, in its
individual capacity ("CREDIT SUISSE") and as the Administrative Agent (in such
capacity, the "ADMINISTRATIVE AGENT"), the Loan Participants signatories hereto
(the "LOAN PARTICIPANTS" and each a "LOAN PARTICIPANT") and the Participants (as
defined in the Swap Sharing Agreement dated as of January 31, 1997 among Credit
Suisse First Boston; Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A,
"Rabobank Nederland," Grand Cayman Branch; KB Financial Services (Ireland);
MeesPierson N.V.; and Bayerische Vereinsbank AG, New York Branch) (the "SWAP
PARTICIPANTS" and each a "SWAP PARTICIPANT").
All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given to such terms in Annex A to the Participation
Agreement, dated as of December 18, 1996, as amended by Amendment No. 1 thereto,
dated as of January 31, 1997, among the Partnership, the General Partner, GE
Capital, the Owner Participant, the Owner Trustee, the Security Agent, the
Indenture Trustee, the Administrative Agent and the Loan Participants named
therein (as the same may be further amended, supplemented or otherwise modified
from time to time, the "PARTICIPATION AGREEMENT").
RECITALS
WHEREAS, the Partnership, the General Partner, GE Capital, the Owner
Participant, the Owner Trustee, the Security Agent, the Indenture Trustee, the
Administrative Agent and the Loan Participants entered into the Financing
Documents, including the Participation Agreement, in order to establish rights
and obligations among the parties in connection with the leveraged leaseback of
a gas fired cogeneration facility located in Brandywine, Maryland;
WHEREAS, the Partnership desires to enter into (i) a Letter
Agreement, dated as of October 24, 1997, with the Power Purchaser, as
supplemented by the letter from Ralph T. Killian to Andrew W. Williams dated as
of June 30, 1998 and accepted and agreed to by PEPCO on July 17, 1998, in the
form attached hereto as Exhibit A (the "PANDA-PEPCO LETTER
1
<PAGE>
AGREEMENT"), for the purpose of settling certain disputes between the
Partnership and the Power Purchaser, (ii) an Assignment, Assumption and
Exclusive Sales Agreement, dated as of July 17, 1998, with Panda Power
Corporation, a Delaware corporation ("PPC") in the form attached hereto as
Exhibit B (the "PPC ASSIGNMENT AND EXCLUSIVE SALES AGREEMENT") pursuant to
which, among other things, the Partnership has assigned to PPC certain rights
and PPC has assumed certain obligations under the Panda-PEPCO Letter Agreement
and (iii) a Letter Agreement, dated as of July 17, 1998, with the Power
Purchaser in the form attached hereto as Exhibit C (the "BALANCING SERVICES
LETTER AGREEMENT") pursuant to which the Power Purchaser will provide certain
balancing services;
WHEREAS, pursuant to that certain Collateral Assignment of
Assignment, Assumption and Exclusive Sales Agreement, dated as of July 17, 1998,
by the Partnership in favor of the Security Agent (the "COLLATERAL ASSIGNMENT OF
PPC ASSIGNMENT"), the Partnership has agreed to collaterally assign the PPC
Assignment and Exclusive Sales Agreement to the Security Agent for the benefit
of the Owner Trustee, and by collateral assignment the Indenture Trustee;
WHEREAS, pursuant to that certain Consent and Agreement, dated as of
July 17, 1998, among PPC, the Partnership, GE Capital, the Indenture Trustee and
the Security Agent (the "CONSENT OF PPC"), PPC has consented to the Collateral
Assignment of PPC Assignment;
WHEREAS, the Administrative Agent, the Loan Participants signatories
hereto, the Indenture Trustee, the Owner Participant and the Owner Trustee are
willing to consent to the Partnership entering into the Panda-PEPCO Letter
Agreement, the PPC Assignment and Exclusive Sales Agreement and the Balancing
Services Letter Agreement on the terms and subject to the conditions contained
herein;
WHEREAS, in order to accommodate the provisions of the Panda-PEPCO
Letter Agreement, the PPC Assignment and Exclusive Sales Agreement and the
Balancing Services Letter Agreement, the parties hereto desire to amend certain
provisions of the Financing Documents; and
WHEREAS, simultaneously herewith, the Power Purchaser is approving
the amendments to the Financing Documents set forth herein.
NOW, THEREFORE, in consideration of the agreements herein and in
reliance upon the representations and warranties set forth herein, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
Pursuant to Section 13.1 of the Participation Agreement and
Paragraph I of Schedule II to the Participation Agreement, the following
amendments are hereby made to the Participation Agreement where indicated.
2
<PAGE>
1.1 CERTIFICATES; OTHER INFORMATION. The following amendments,
additions and deletions are hereby made to Section 6.10:
(a) Section 6.10(h) is hereby amended by deleting such section in
its entirety and replacing such section with the following:
(h) five Business Days prior to each Basic Rent Payment Date,
a certificate of an Authorized Officer of the General Partner, in
form and substance reasonably satisfactory to the Owner Participant
and the Administrative Agent, stating the Available Cash Flow, the
Distributable Cash Flow, Cash Flow Available for Distributions and
the Operating Cash Flow Ratio for the three-month period (or in the
case of the Basic Rent Payment Date to occur on July 31, 1998, the
four-month period) ending on the day immediately preceding 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;
(b) The following Section 6.10(m) is hereby added to the end of
Section 6.10:
(m) five days prior to each Basic Rent Payment Date, a
year-to-date summary, in form and substance satisfactory to the
Owner Participant and Administrative Agent, setting forth for such
period all Additional Sales Contracts, the total actual contractual
sales in respect thereof as of such date and for the periods covered
by such Additional Sales Contracts, the total expected revenues to
the Partnership in respect thereof, the amounts of outstanding
receivables due and owing to the Partnership in respect thereof, the
status of such outstanding receivables in respect thereof, the
aggregate amount of payments to PEPCO, PPC, and any other third
parties in respect thereof, and any material amendments or
modifications to any Additional Sales Contracts.
1.2 APPROVAL OF TRANSACTIONS. Between Sections 7.14 and 7.16, a new
Section 7.15 shall be added as follows:
7.15 SALES OF EXCESS ENERGY. The Partnership shall not,
without the prior written approval of the Administrative Agent and
the Owner Participant, agree to sell electricity in respect of any
Transaction with a term of greater than one year or from which the
total expected gross revenues exceed Two Million Dollars
($2,000,000).
1.3 SALE OF ELECTRICITY. Section 7.21 is hereby amended by deleting
such section in its entirety and replacing such section with the following:
3
<PAGE>
7.21 The Partnership will not sell any electricity generated
by the Facility to any other person other than the Power Purchaser
as provided under the Power Purchase Agreement or PPC as provided
under the PPC Assignment and Exclusive Sales Agreement.
1.4 EXTENDING CAPACITY AND ENERGY SALES PROVISIONS. After Section
7.26, a new Section 7.27 shall be added as follows:
7.27. EXTENDING CAPACITY AND ENERGY SALES PROVISIONS. The
Partnership shall not extend beyond May 31, 2000 the right to broker
or sell capacity releases as provided in Paragraph 2 of the
Panda-PEPCO Letter Agreement or beyond December 31, 2002 the right
to broker or sell energy releases as provided in Paragraph 3 of the
Panda-PEPCO Letter Agreement without the prior written consent of
the Administrative Agent, the Majority Loan Participants and the
Owner Participant, PROVIDED, HOWEVER, that in the event consent only
to the extension of the term of the right to broker or sell energy
releases as provided in Paragraph 3 of the Panda-PEPCO Letter
Agreement is requested and such extension will have no Material
Adverse Effect, such consent shall not be unreasonably withheld or
delayed beyond ninety (90) days after such consent is requested.
1.5 ANNEX A. The following amendments, additions and deletions are
hereby made to ANNEX A:
(a) The definition of the term "ADDITIONAL PROJECT DOCUMENTS"
shall be modified by adding after the phrase "and any consent and agreement
which constitutes an Ancillary Document and is delivered in connection
therewith" and before the phrase "but excluding Non-Material Agreements," the
following phrase: "and including, without limitation, the PPC Assignment and
Exclusive Sales Agreement and the Balancing Services Letter Agreement."
(b) After the term "ADDITIONAL PROJECT DOCUMENTS," the term
"ADDITIONAL SALES CONTRACTS" shall be added and defined as follows:
"ADDITIONAL SALES CONTRACTS": the collective reference
to any agreement or contract evidencing any completed or
prospective Transaction.
(c) After the term "AVAILABLE CASH FLOW," the term "BALANCING
SERVICES LETTER AGREEMENT" shall be added and defined as follows:
"BALANCING SERVICES LETTER AGREEMENT": that certain
Letter Agreement with respect to energy balancing services
dated as of July 17 1998 between the Partnership and PEPCO, as
amended, supplemented or
4
<PAGE>
otherwise modified from time to time in accordance with the
terms of such agreement and the Participation Agreement.
(d) After the term "BUSINESS DAY," the term "CAPACITY SALES
RESERVE AMOUNT" shall be added and defined as follows:
"CAPACITY SALES RESERVE AMOUNT": (i) as of April 30,
1998 and until July 31, 1998, fifty percent (50%) of the
amount (without duplication) of the Released Capacity Payments
scheduled to be due and owing to PEPCO during the twelve-month
period ending on April 30, 1999, (ii) as of July 31, 1998 and
on each Basic Rent Payment Date thereafter until January 31,
1999, the total amount (without duplication) of the Released
Capacity Payments scheduled to be due and owing to PEPCO
during the nine-month period ending on April 30, 1999 minus
the amount of the expected revenues during such period to the
Partnership in respect of all Additional Sales Contracts in
effect as of such date for the sales of capacity pursuant to
Paragraph 2 of the Panda-PEPCO Letter Agreement, (iii) as of
January 31, 1999 and on each Basic Rent Payment Date
thereafter until January 31, 2000, the total amount (without
duplication) of the Released Capacity Payments scheduled to be
due and owing to PEPCO during the twelve-month period ending
on January 31, 2000 minus the amount of the expected revenues
during such period to the Partnership in respect of all
Additional Sales Contracts in effect as of such date for the
sales of capacity pursuant to Paragraph 2 of the Panda-PEPCO
Letter Agreement, and (iv) as of January 31, 2000 and on each
Basic Rent Payment Date thereafter until May 31, 2000, the
total amount (without duplication) of the Released Capacity
Payments scheduled to be due and owing to PEPCO during the
four-month period ending on May 31, 2000 minus the amount of
the expected revenues during such period to the Partnership in
respect of all Additional Sales Contracts in effect as of such
date for the sales of capacity pursuant to Paragraph 2 of the
Panda-PEPCO Letter Agreement; provided, HOWEVER, that in all
cases and at all times until the termination of the capacity
sales provisions of paragraph 2 of the Panda-PEPCO Letter
Agreement, the Capacity Sales Reserve Amount shall not be less
than Five Hundred Thousand Dollars ($500,000.00).
(e) After the term "DISCOUNT RATE," the term "DISCRETIONARY
CAPITAL EXPENDITURE" shall be added and defined as follows:
"DISCRETIONARY CAPITAL EXPENDITURE": any capital
expenditure made by the Partnership in any fiscal year of the
Partnership as to which the Owner Participant and the
Administrative Agent have specifically agreed in writing may
be designated in the Operating Budget for such fiscal year as
a "discretionary capital expenditure" for such fiscal year.
5
<PAGE>
(f) After the term "EFFLUENT WATER AGREEMENT," the term
"ENERGY SALES RESERVE AMOUNT" shall be added and defined as follows:
"ENERGY SALES RESERVE AMOUNT": as of April 30, 1998 and
on any Basic Rent Payment Date thereafter, the sum of (x)
fifty percent (50%) of the amount of invoiced receivables to
the Partnership that are not then past-due in respect of sales
of energy pursuant to Paragraph 3 of the Panda-PEPCO Letter
Agreement and (y) the total amount of past-due receivables
owing to the Partnership in respect of sales of energy
pursuant to Paragraph 3 of the Panda-PEPCO Letter Agreement.
(g) The definition of the term "EURODOLLAR RATE" shall be
modified by deleting the definition in its entirety and replacing it with the
following:
"EURODOLLAR RATE": means (a) the rate per annum
determined by the Administrative Agent at approximately 11:00
a.m. (London time) on the date which is two Business Days
prior to the beginning of the relevant Interest Period by
reference to the British Bankers' Association Interest
Settlement Rates for deposits in Dollars (as set forth by any
service selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized
information vendor for the purpose of displaying the rates)
for a period equal to such Interest Period; provided that, to
the extent that an interest rate is not ascertainable pursuant
to the foregoing provisions of this definition, such interest
rate shall be the interest rate per annum determined by the
Administrative Agent to be the rate per annum at which
deposits in Dollars are offered for such relevant Interest
Period to major banks in the London interbank market in
London, England by the Administrative Agent at approximately
11:00 a.m. (London time) on the date which is two Business
Days prior to the beginning of such Interest Period, DIVIDED
BY (b) one minus the Eurocurrency Reserve Requirements.
(h) After the term "O&M LETTER OF CREDIT," the term "O&M
RESERVE AMOUNT" shall be added and defined as follows:
"O&M RESERVE AMOUNT": 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 O&M
Reserve Amount then in effect for the prior calendar year (the
"PRIOR O&M RESERVE AMOUNT") plus (y) the product of the GNP
Deflator for the prior calendar year times the Prior O&M
Reserve Amount.
(i) The definition of the term "OPERATING CASH FLOW" shall be
modified by adding after the phrase "(ii) fees payable pursuant to subsection
2.3(b) and (c) of the
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Reimbursement Agreement," the following phrase, "and (iii) the PPC Adjusted Net
Payment payable pursuant to Section 4.2(a) of the Security Deposit Agreement."
(j) The definition of the term "OPERATING CASH FLOW RATIO"
shall be modified by deleting the definition in its entirety and replacing it
with the following:
"OPERATING CASH FLOW RATIO": as of any date of
determination in any calendar month, the quotient obtained by
dividing Operating Cash Flow for the rolling three-month
period ending on the day immediately preceding the last day of
such calendar month by the sum of Basic Rent payable on the
next succeeding Basic Rent Payment Date.
(k) After the term "OPERATION AND MAINTENANCE RESERVE
ACCOUNT," the term "OPERATION AND MAINTENANCE RESERVE L/C" shall be added and
defined as follows:
"OPERATION AND MAINTENANCE RESERVE L/C": as defined
in Section 7(b)(iv) of the Facility Lease."
(l) After the term "PANDA," the term "PANDA CONFIRMATION
LETTER" shall be added and defined as follows.
"PANDA CONFIRMATION LETTER": a Confirmation Letter
(as defined in the PPC Assignment and Exclusive Sales
Agreement) between the Partnership and PPC.
(m) After the term "PANDA CONFIRMATION LETTER," the term
"PANDA-PEPCO LETTER AGREEMENT" shall be added and defined as follows:
"PANDA-PEPCO LETTER AGREEMENT": that certain Letter
Agreement dated as of October 24, 1997 between the Partnership
and PEPCO, as supplemented by the letter from Ralph T. Killian
to Andrew W. Williams dated as of June 30, 1998 and accepted
and agreed to by PEPCO on July 17, 1998, and as further
amended, supplemented or otherwise modified from time to time
in accordance with the terms of such agreement and the
Participation Agreement.
(n) After the term "PEPCO LETTERS OF CREDIT," the term "PEPCO
PAYMENTS" shall be added and defined as follows:
"PEPCO PAYMENTS": all amounts payable to PEPCO by the
Partnership or any other party pursuant to Paragraphs 2, 3 and
5 of the Panda-PEPCO Letter Agreement which amounts shall
include the Released Capacity Payments, all fees and incentive
payments payable to PEPCO pursuant to such Paragraphs and any
interest accrued on such amounts pursuant to the Panda-PEPCO
Letter Agreement as a result of
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being past due. For the avoidance of doubt, pursuant to the
PPC Assignment and Exclusive Sales Agreement, PPC has assumed
the obligation to make all PEPCO Payments and the Partnership
remains liable for all of its obligations to make PEPCO
Payments to the extent such obligations are not fulfilled in a
timely manner by PPC.
(o) The definition of the term "POWER PURCHASE AGREEMENT"
shall be modified by adding after the phrase, "(including all amendments and
clarification letters relating thereto) delivered to the Owner Participant and
Administrative Agent on the Lease Closing Date," the following phrase, "as
supplemented by the Panda-PEPCO Letter Agreement and."
(p) After the term "POWER PURCHASER," the term "PPC" shall be
added and defined as follows:
"PPC" shall mean Panda Power Corporation, a Delaware
corporation.
(q) After the term "PPC," the term "PPC ADJUSTED NET PAYMENT"
shall be added and defined as follows:
"PPC ADJUSTED NET PAYMENT": as defined in Article 1
to the PPC Assignment and Exclusive Sales Agreement.
(r) After the term "PPC ADJUSTED NET PAYMENT," the term "PPC
ASSIGNMENT AND EXCLUSIVE SALES AGREEMENT" shall be added and defined as follows:
"PPC ASSIGNMENT AND EXCLUSIVE SALES AGREEMENT": the
Assignment, Assumption and Exclusive Sales Agreement, dated as
of July 17, 1998, between the Partnership and PPC, including
all Panda Confirmation Letters executed thereunder, as the
same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such agreement,
the Panda-PEPCO Letter Agreement and the Participation
Agreement.
(s) The definition of the term "PROJECT EXPENSES" shall be
modified as follows:
(i) by deleting clause (viii) in its entirety and
replacing such clause with the following:
(viii) capital expenditures in the ordinary course
of business and set forth in the current Operating
Budget but excluding any Discretionary Capital
Expenditures PLUS
(ii) by adding a new clause (xi) after clause (x) to
read as follows:
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PLUS (xi) the sum of all PEPCO Payments to the
extent PPC has failed to make such PEPCO Payments when
due under the terms of the Panda-PEPCO Letter Agreement.
(iii) by deleting the reference to "(x)" in the last
sentence of such definition and substituting therefor a
reference to "(xi)."
(iv) by adding at the end of the last sentence of such
definition the following phrase, "or any PPC Adjusted Net
Payments payable pursuant to Section 4.2(a) of the Security
Deposit Agreement."
(t) The definition of "QUARTERLY MEASUREMENT PERIOD" shall be
modified by deleting the definition in its entirety and replacing it with the
following:
"QUARTERLY MEASUREMENT PERIOD": as of any Basic Rent
Payment Date, the three-month period (or in the case of the
Basic Rent Payment Date to occur on July 31, 1998, the
four-month period) ending on the day immediately preceding
such Basic Rent Payment Date.
(u) After the term "REIMBURSEMENT EVENT OF DEFAULT," the term
"RELEASED CAPACITY PAYMENTS" shall be added and defined as follows:
"RELEASED CAPACITY PAYMENTS": amounts payable to PEPCO
by the Partnership or any other party as compensation for the
release of capacity by PEPCO pursuant to Paragraph 2 of the
Panda-PEPCO Letter Agreement. For the avoidance of doubt,
pursuant to the PPC Assignment and Exclusive Sales Agreement,
PPC has assumed the obligation to make all Released Capacity
Payments and the Partnership remains liable for all of its
obligations to make Released Capacity Payments to the extent
such obligations are not fulfilled in a timely manner by PPC.
(v) The definition of the term "REQUIRED OPERATION AND
MAINTENANCE RESERVE BALANCE" shall be modified by deleting the definition in its
entirety and replacing it with the following:
"REQUIRED OPERATION AND MAINTENANCE RESERVE
Balance": the sum of the O&M Reserve Amount plus the
Capacity Sales Reserve Amount.
(w) The definition of the term "REQUIRED RENT RESERVE BALANCE"
shall be modified by deleting the definition in its entirety and replacing it
with the following:
"REQUIRED RENT RESERVE BALANCE": the sum of the
Energy Sales Reserve Amount plus:
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(a) at any time prior to April 30, 1997,
$2,610,509.14;
(b) during the period starting on April 30, 1997 and
ending on October 30, 1997, $5,221,018.28;
(c) during the period starting on October 31, 1997 and
ending on January 30, 1998, $5,213,485.62;
(d) during the period starting on January 31, 1998 and
ending on October 30, 1998, $5,205,952.96;
(e) during the period starting on October 31, 1998 and
ending on January 30, 1999, $7,596,956.10;
(f) during the period starting on January 31, 1999 and
ending on October 30, 1999, $9,987,959.24;
(g) during the period starting on October 31, 1999 and
ending on January 30, 2000, $10,159,093.16;
(h) during the period starting on January 31, 2000 and
ending on October 30, 2000, $10,330,227.08;
(i) during the period starting on October 31, 2000 and
ending on January 30, 2001, $11,981,381.20;
(j) during the period starting on January 31, 2001 and
ending on October 30, 2001, $13,632,535.32;
(k) during the period starting on October 31, 2001 and
ending on January 30, 2002, $13,800,830.69;
(l) during the period starting on January 31, 2002 and
ending on October 30, 2002, $13,969,126.06;
(m) during the period starting on October 31, 2002 and
ending on January 30, 2003, $13,961,309.93;
(n) during the period starting on January 31, 2003 and
ending on April 29, 2003, $13,953,493.80;
(o) on April 30, 2003 and at any time thereafter, the
greater of (i) $2,400,000 or (ii) an amount equal to the sum
of the payments of Basic Rent scheduled to be due and owing on
the two next succeeding Rent Payment Dates.
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(x) The definition of the term "SPECIFIED PARTICIPANT" shall be modified by
adding after the phrase "each Gas Transportor" and before the phrase "and the
Power Purchaser," the following phrase: ", PPC."
(y) After the term "TOTAL ACCRETION LINE OF CREDIT COMMITMENT," the term
"TRANSACTION" shall be added and defined as follows:
"TRANSACTION": as defined in Article 1 to the PPC
Assignment and Exclusive Sales Agreement.
1.6 SCHEDULE 6. Schedule 6 to the Participation Agreement is hereby
deleted in its entirety and replaced by Schedule 6 attached hereto.
2. AMENDMENT NO. 1 TO AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT
Pursuant to Section 9.5 of the Amended and Restated Security Deposit
Agreement, the following amendments are hereby made where indicated to the
Amended and Restated Security Deposit Agreement.
2.1 DEPOSITS. The following Section 3.1(i) is hereby added to the
end of Section 3.1:
(i) The Lessee shall instruct PEPCO to make payment directly
to and shall cause to be deposited in the Revenue Account the amount
required to be paid by PEPCO under Paragraph 1 of the Panda-PEPCO
Letter Agreement, which is equal to $3,855,992.00.
2.2 REVENUE ACCOUNT -- MONTHLY TRANSFERS AFTER THE LEASE CLOSING
DATE.
(a) Section 4.2(a) is hereby amended by adding to the third
sentence thereof, a new clause (iii) as follows:
and (iii) so long as (A) all amounts then required to be on
deposit in the Rent Reserve Account, the Operation and
Maintenance Reserve Account and the Warranty Maintenance
Reserve Account (and any other account maintained under the
Security Deposit Agreement other than the Interest Hedging
Account) shall be on deposit therein, (B) the Operating Cash
Flow Ratio for the immediately preceding Quarterly Measurement
Period shall be greater than 1.2 and (C) at the time of the
distribution described in this clause (iii) and after giving
effect thereto, no Lease Default, Lease Event of Default,
Reimbursement Default or Reimbursement Event of Default shall
have occurred and be continuing, then to PPC, up to the amount
then available in the Revenue Account, all amounts due and
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<PAGE>
payable to PPC as the PPC Adjusted Net Payment plus the
accrued interest on any such amounts that are past due
pursuant to the PPC Assignment and Exclusive Sales Agreement.
(b) The Form of Project Certificate set forth in Schedule 1 to
the Security Deposit Agreement is hereby amended by adding a new paragraph (6)
to such Schedule 1 as follows:
(6) As of this Monthly Transfer Date for the
distributions described herein, (a) all amounts
required to be on deposit in the Rent Reserve
Account, the Operation and Maintenance Reserve
Account and the Warranty Maintenance Reserve
Account (and any other account maintained under
the Security Deposit Agreement other than the
Interest Hedging Account) are on deposit therein,
(b) the Operating Cash Flow Ratio for the
immediately preceding Quarterly Measurement Period
is greater than 1.2 and (c) at the time of the
distribution described herein and after giving
effect thereto, no Lease Default, Lease Event of
Default, Reimbursement Default or Reimbursement
Event of Default shall have occurred and be
continuing. Accordingly, the following amount is
due and payable to PPC representing the PPC
Adjusted Net Payments plus the accrued interest on
any such PPC Adjusted Net Payments that are past
due pursuant to the PPC Assignment and Exclusive
Sales Agreement: $___________.
2.3 RENT RESERVE ACCOUNT. Section 4.5 is hereby amended by adding to
the final sentence of such section after the phrase "(less any Accretion
Amount)" and before the phrase "as reasonably determined by the Administrative
Agent and certified to the Security Agent," the following phase, "PLUS the
lesser of (1) the Energy Sales Reserve Amount as of such Basic Rent Payment Date
and (2) the excess of the amount then on deposit in the Rent Reserve Account
over the amount then required to be on deposit in the Rent Reserve Account under
clauses (a) through (o) of the definition of the term "Required Rent Reserve
Balance."
2.4 OPERATION AND MAINTENANCE RESERVE ACCOUNT.
(a) Section 4.6 is hereby amended by adding to the end of the
final sentence of such section the following:
PROVIDED, HOWEVER, that any amounts distributed at any time in
respect of PEPCO Payments shall not be in excess of the lesser
of (1) the Capacity Sales Reserve Amount for the immediately
preceding Basic Rent Payment Date and (2) the excess of the
amount then on deposit in the Operation and Maintenance
Reserve Account over the aggregate amount required to be
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on deposit therein allocated to the O&M Reserve Amount
pursuant to Section 7(b) of the Facility Lease.
If an Operation and Maintenance Reserve L/C is delivered
in satisfaction of all or any part of the Partnership's
funding obligations with respect to the Operation and
Maintenance Reserve Account, then the Security Agent shall
make any withdrawal, transfer or distribution from the
Operation and Maintenance Account as required hereunder,
first, from actual funds on deposit in the Operation and
Maintenance Reserve Account and, second, from drafts on the
Operation and Maintenance Reserve L/C to the extent of any
deficiency in the Operation and Maintenance Reserve Account.
In addition, the Security Agent shall draw the entire amount
of the Operation and Maintenance Reserve L/C on the date that
is forty-five (45) days prior to any expiration date of the
Operation and Maintenance Reserve L/C unless the Partnership
causes the Operation and Maintenance Reserve L/C to be renewed
prior to such date.
(b) Exhibit D to the Amended and Restated Security Deposit
Agreement is hereby amended by:
(i) deleting the second paragraph of such Exhibit D in
its entirety and replacing it with the following:
Please liquidate investments in the Operation and
Maintenance Reserve Account [and draw on the Operation
and Maintenance Reserve L/C] in an amount sufficient to
yield proceeds of $_______________ to be used for [LOC
Reimbursement Obligation in respect of drawings under
the O&M Letter of Credit] [ ]. [LIST REQUESTED
DISBURSEMENTS SEPARATELY.] Such amount[s] should be paid
by [official bank check] [or] [wire transfer] to [GE
Capital] [the Lessee] [payee[s]] at [ADDRESS[ES]] of [GE
Capital] [the Lessee] [payee[s]].
(ii) deleting subparagraph (b) of the third paragraph of
such Exhibit D in its entirety and replacing it with the following:
(b) the moneys to be delivered pursuant hereto
represent [amounts that the Lessee has paid from its own
funds] [amounts that are currently due and owing to the
payees identified above] [constituting Project Expenses
that are maintenance expenses incurred with respect to
the Project or any portion thereof] [constituting PEPCO
Payments] for which funds are not available for payment
from revenues of the Project.
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2.5 RELEASE OF EXCESS AMOUNTS.
(a) Section 4.7 is hereby amended by deleting clause (i) of
such section in its entirety and replacing it with the following:
(i) an amount on deposit in the Rent Reserve Account or the
Operation and Maintenance Reserve Account (including any
amount available for drawing under an Operation and
Maintenance Reserve L/C ) is in excess of the then Required
Rent Reserve Balance or the then 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, a reduction in the Capacity Sales
Reserve Amount or the Energy Sales Reserve Amount, or the
delivery of an Operation and Maintenance Reserve L/C,
(b) Exhibit E to the Amended and Restated Security Deposit
Agreement is hereby amended by deleting subparagraph (b) to the first paragraph
of such Exhibit E in its entirety and replacing it with the following:
(b) the amount on deposit in the [Operation and
Maintenance Reserve] [Rent Reserve] Account
[plus the amount available for drawing under an
Operation and Maintenance Reserve L/C] is
$__________ and the amount of the Required
[Operation and Maintenance] [Rent] Reserve
Balance is $__________, resulting in excess
funds in the amount of $__________ which excess
funds are the result of [income or gain earned
on amounts on deposit therein] [and] [a
reduction in the [Capacity Sales Reserve
Amount] [Energy Sales Reserve Amount]] [and]
[the delivery of an Operation and Maintenance
Reserve L/C] (the "EXCESS AMOUNT").
-------------
3. AMENDMENT NO. 1 TO FACILITY LEASE
Pursuant to Section 20(a) of the Facility Lease, the following
amendments are hereby made where indicated to the Facility Lease.
3.1 OPERATION AND MAINTENANCE RESERVE ACCOUNT. Section 7(b) is
hereby amended by deleting such section in its entirety and replacing it with
the following:
(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 the Basic
Rent Payment Date to
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<PAGE>
occur on April 30, 1998, the Security Agent shall transfer to the
Operation and Maintenance Reserve Account from the cash available in
the Revenue Account an amount equal to the Capacity Sales Reserve
Amount then required. On each Basic Rent Payment Date, 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 unless and until the Required Operation and Maintenance
Reserve Balance (less the amount, if any, then available for drawing
under any Operation and Maintenance Reserve L/C provided by the
Lessee pursuant to paragraph (iv) of this Section 7(b)) shall be on
deposit in the Operation and Maintenance Reserve Account:
(A) for allocation to the O&M Reserve Amount,
unless and until amounts deposited therein allocated to the
O&M Reserve Amount equal or exceed the O&M Reserve Amount
required at that time, (1) 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 allocated to O&M Reserve Amount with respect to
prior periods, (2) 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 allocated to the O&M Reserve Amount with
respect to prior periods and (3) with respect to each Basic
Rent Payment Date thereafter, an amount equal to one fourth of
the "INCREMENTAL REQUIRED BALANCE" (as defined below) for the
Lease Year in which such Basic Rent Payment Date falls, plus
the amount of any accrued deficiencies in contributions
allocated to the O&M Reserve Amount with respect to prior
periods,
(B) for allocation to the Capacity Sales Reserve
Amount, an amount such that after such deposit, the total
amount deposited therein allocated to the Capacity Sales
Reserve Amount shall equal the Capacity Sales Reserve Amount
required at that time, and
"INCREMENTAL REQUIRED BALANCE" for any Lease Year shall be the
difference between the O&M Reserve Amount for such Lease Year and
the O&M Reserve Amount 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,
either:
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(A) 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, or
(B) as a result of the reduction in the Capacity
Sales Reserve Amount, an amount in excess of the Required
Operation and Maintenance Reserve Balance shall be on deposit
therein, or
(C) as a result of the delivery of an Operation
and Maintenance Reserve L/C, the amounts available for drawing
from such Operation and Maintenance Reserve L/C together with
the amounts on deposit in the Operation and Maintenance
Reserve Account exceed the Required Operation and Maintenance
Reserve Balance at such time,
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 as a result
of income or gain in excess of the Required Operation and
Maintenance Reserve Balance, a reduction of the Capacity Sales
Reserve Amount, or the delivery of an Operation and Maintenance
Reserve L/C 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
immediately prior to such Basic Rent Payment Date.
(iv) In lieu of depositing in the Operation and
Maintenance Reserve Account any amount required to be so deposited
by the Lessee under Section 7(a) or (b) hereof (or in lieu of
maintaining in such account any amount previously so deposited), the
Lessee may cause to be provided a letter of credit with an amount
available for drawing not less than such amount required to be so
deposited (or, as the case may be, required to so remain on deposit)
(the "OPERATION AND MAINTENANCE RESERVE L/C"); PROVIDED, that (A)
such letter of credit shall (1) have been issued by a bank or other
financial institution acceptable to each of the Lessor, GE Capital
and the Administrative Agent and (2) be in form and substance
satisfactory to each of the Lessor, GE Capital and the
Administrative Agent in the sole discretion of each (including,
without limitation, in respect of the circumstances under which
drawings can be made under such letter of credit and the Person or
Persons on whose behalf such drawings can be
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<PAGE>
made) and (B) (1) the Lessee has no direct or indirect reimbursement
obligations or liabilities of any type whatsoever to the issuer of
such letter of credit or any other Person in respect of such letter
of credit and (2) none of the Collateral is encumbered as security
for the payment or performance of any obligation under such letter
of credit.
3.2 RENT RESERVE ACCOUNT.
(a) Section 7(c)(ii) is hereby amended by adding to the second
sentence thereof after the phrase "[i]f, 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," the phrase "or a reduction in the Energy Sales
Reserve Amount."
(b) Section 7(c)(iii) is hereby amended by deleting the phrase
"one month" where it appears therein and replacing it with the word
"immediately."
3.3 FACILITY OPERATION AND MAINTENANCE. Section 8(a) is hereby
amended by deleting the final sentence of such section and replacing such
sentence with the following: "The Lessee shall not sell any electricity
generated by the Facility except to the Power Purchaser as provided in the Power
Purchase Agreement or PPC as provided in the PPC Assignment and Exclusive Sales
Agreement."
3.4 REQUIRED FIXED RATE RENEWAL OPTION. Section 12 is hereby amended
by adding immediately after paragraph (c) of such section a new paragraph (d) as
follows:
(d) REQUIRED FIXED RATE RENEWAL OPTION. The Lessor may, by
providing written notice to the Lessee not later than April 30,
2005, require the Lessee to exercise, pursuant to Section 12(a), the
Fixed Rate Renewal Option to renew the Facility Lease at the end of
the Basic Term for one Fixed Rate Renewal Term. In the event that
the Lessor shall have provided such notice, (i) the Lessee shall be
deemed for all purposes hereof to have given on the date of such
notice by the Lessor irrevocable written notice to the Lessor
pursuant to Section 13(a)(ii) hereby that the Lessee intends to
exercise such option and (ii) without the need for any further
action by any party, the Facility Lease shall be renewed at the end
of the Basic Term for one Fixed Rate Renewal Term. Notwithstanding
any provision hereof, the Lessee shall not be required to provide
any Renewal Appraisal in connection with a renewal pursuant to this
Section 12(d).
3.5 SCHEDULE C. Schedule C is hereby amended by deleting such
Schedule in its entirety and replacing it with Schedule C attached hereto.
3.6 SCHEDULE D. Schedule D is hereby amended by deleting such
Schedule in its entirety and replacing it with Schedule C attached hereto.
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4. AMENDMENT NO. 1 TO INTEREST HEDGING AGREEMENT
Pursuant to Section 9(b) of the Interest Hedging Agreement, the
following amendments are hereby made where indicated to the Interest Hedging
Agreement.
4.1 LIBOR DEFINITION. Part 4(m) of the Schedule to the Master
Agreement shall be modified by deleting such section in its entirety and
replacing it with the following:
(m) "LIBOR" shall mean (a) the rate per annum determined by
the Administrative Agent at approximately 11:00 a.m. (London time)
on the date which is two Business Days prior to the beginning of the
relevant Interest Period by reference to the British Bankers'
Association Interest Settlement Rates for deposits in Dollars (as
set forth by any service selected by the Administrative Agent which
has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying the
rates) for a period equal to such Interest Period; provided that, to
the extent that an interest rate is not ascertainable pursuant to
the foregoing provisions of this definition, such interest rate
shall be the interest rate per annum determined by the
Administrative Agent to be the rate per annum at which deposits in
Dollars are offered for such relevant Interest Period to major banks
in the London interbank market in London, England by the
Administrative Agent at approximately 11:00 a.m. (London time) on
the date which is two Business Days prior to the beginning of such
Interest Period, DIVIDED BY (b) one minus the Eurocurrency Reserve
Requirements.
5. CONSENT
5.1 PANDA-PEPCO LETTER AGREEMENT. Each of the Administrative Agent,
the Loan Participants signatories hereto, the Indenture Trustee, the Owner
Trustee and the Owner Participant hereby acknowledges and agrees that it has
been informed of, and consents to, the entering into and the performance by the
Partnership of the Panda-PEPCO Letter Agreement, the PPC Assignment and
Exclusive Sales Agreement and the Balancing Services Letter Agreement.
5.2 INTEREST HEDGING AGREEMENT. Each of the Swap Participants hereby
acknowledges and agrees that it has been informed of, and consents to, the
terms, the existence of, the entering into and the performance under this
Agreement including the provisions of Section 4 hereof.
6. REPRESENTATIONS AND WARRANTIES
Each of the Partnership and the General Partner represents and
warrants as of the date hereof:
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6.1 EXISTENCE.
(a) The Partnership has been duly formed and is validly
existing and in good standing under the laws of Delaware with partnership power
and authority to conduct its business as now conducted and to own, or hold under
lease, its assets and to enter into this Agreement, the Panda-PEPCO Letter
Agreement, the PPC Assignment and Exclusive Sales Agreement, the Balancing
Services Letter Agreement, the Assignment referred to in Section 7.6(ii) hereof
(the "Collateral Assignment of PPC Assignment") and the Consent to Assignment
referred to in Section 7.6(ii) hereof (the "Consent of PPC") and perform its
obligations thereunder.
(b) The General Partner has been duly incorporated and is
validly existing and in good standing under the laws of Delaware with corporate
power and authority to conduct its business as now conducted and to own, or hold
under lease, its assets and to enter into this Agreement, the Panda-PEPCO Letter
Agreement, the PPC Assignment and Exclusive Sales Agreement, the Balancing
Services Letter Agreement, the Collateral Assignment of PPC Assignment and the
Consent of PPC and perform its obligations thereunder.
6.2 AUTHORITY.
(a) The execution, delivery and performance of this Agreement,
the Panda-PEPCO Letter Agreement, the PPC Assignment and Exclusive Sales
Agreement, the Balancing Services Letter Agreement, the Collateral Assignment of
PPC Assignment and the Consent of PPC have been duly authorized by all necessary
partnership action of the Partnership, and such documents have been duly
executed and delivered by the Partnership.
(b) The execution, delivery and performance of this Agreement,
the Panda-PEPCO Letter Agreement, the PPC Assignment and Exclusive Sales
Agreement, the Balancing Services Letter Agreement, the Collateral Assignment of
PPC Assignment and the Consent of PPC have been duly authorized by all necessary
corporate action of the General Partner, and such documents have been duly
executed and delivered by the General Partner.
6.3 NO CONFLICTS.
(a) The execution and delivery by the Partnership of this
Agreement, the Panda-PEPCO Letter Agreement, the PPC Assignment and Exclusive
Sales Agreement, the Balancing Services Letter Agreement, the Collateral
Assignment of PPC Assignment and the Consent of PPC and the performance of the
obligations of the Partnership under such documents do not: (i) violate any
federal, New York, Texas or Delaware statute, rule or regulation applicable to
the Partnership, (ii) violate the provisions of the Partnership Agreement of the
Partnership, (iii) result in the breach of or a default under any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other material
agreement to which the Partnership is a party or by which the Partnership or its
assets are bound, (iv) result in the breach of or a default under any court or
administrative orders, writs, judgments and decrees specifically directed to the
Partnership, or (v) require any consents, approvals, authorizations,
registrations, declarations or filings by the Partnership under any statute,
rule or regulation applicable to the Partnership except such consents,
19
<PAGE>
approvals, authorizations, registrations, declarations and filings that have
already been obtained and are in full force and effect.
(b) The execution and delivery by the General Partner of this
Agreement, the Panda-PEPCO Letter Agreement, the PPC Assignment and Exclusive
Sales Agreement, the Balancing Services Letter Agreement, the Collateral
Assignment of PPC Assignment and the Consent of PPC and the performance of the
obligations of the General Partner under such documents do not: (i) violate any
federal, New York, Texas or Delaware statute, rule or regulation applicable to
the General Partner, (ii) violate the provisions of the Certificate of
Incorporation and Bylaws of the General Partner, (iii) result in the breach of
or a default under any indenture, mortgage, deed of trust, credit agreement,
loan agreement or any other material agreement to which the General Partner is a
party or by which the General Partner or its assets are bound, (iv) result in
the breach of or a default under any court or administrative orders, writs,
judgments and decrees specifically directed to the General Partner, or (v)
require any consents, approvals, authorizations, registrations, declarations or
filings by the General Partner under any statute, rule or regulation applicable
to the General Partner except such consents, approvals, authorizations,
registrations, declarations and filings that have already been obtained and are
in full force and effect.
6.4 ENFORCEABILITY.
(a) Each of this Agreement, the Panda-PEPCO Letter Agreement,
the PPC Assignment and Exclusive Sales Agreement, the Balancing Services Letter
Agreement, the Collateral Assignment of PPC Assignment and the Consent of PPC
constitutes a legally 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.
(b) Each of this Agreement, the Panda-PEPCO Letter Agreement,
the PPC Assignment and Exclusive Sales Agreement, the Balancing Services
Letter Agreement, the Collateral Assignment of PPC Assignment and the
Consent of PPC constitutes a legally valid and binding obligation of the
General Partner, enforceable against the General Partner 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.
6.5 PRO FORMA FINANCIAL STATEMENTS. The pro forma financial
statements for the Partnership and PPC attached hereto as Exhibit D are complete
and correct in all material respects and fairly present the information
contained therein as date hereof and, to the extent they relate to future
periods, are based on reasonable assumptions for the forecast period contained
therein. To the best knowledge of the Partnership, as of the date of the pro
forma financial statements, neither the Partnership nor PPC has any material
liability, contingent or otherwise, or any material forward or long-term
commitments which are not disclosed by, or reserved against in, the pro forma
financial statements. There are no unrealized or anticipated losses from any
20
<PAGE>
unfavorable commitments of the Partnership or PPC which would reasonably be
expected to have a Material Adverse Effect.
6.6 REAFFIRMED REPRESENTATIONS. Each of the Partnership and the
General Partner hereby reaffirms the representations and warranties set forth in
Sections 3.5 (GOVERNMENTAL ACTIONS AND OTHER CONSENTS AND APPROVALS), 3.7 (NO
PROCEEDING OR LITIGATION), 3.8 (NO DEFAULT OR EVENT OF LOSS), 3.13 (INVESTMENT
COMPANY ACT; ETC.), 3.20 (PUBLIC UTILITY STATUS) and 3.27 (QUALIFYING FACILITY)
of the Participation Agreement as each being true and correct as of the date
hereof and represents and warrants that none of the representations and
warranties set forth in any such section will become untrue as a result of the
Partnership's entering into and performing under any of the Panda-PEPCO Letter
Agreement, the PPC Assignment and Exclusive Sales Agreement or the Balancing
Services Letter Agreement.
7. CONDITIONS PRECEDENT
This Agreement shall not become effective until the date as of which
all of the following conditions precedent shall have been fulfilled:
7.1 This Agreement shall have been duly executed and delivered by
each of the Partnership, the Owner Participant, the Administrative Agent, the
General Partner, the Owner Trustee, the Security Agent, the Indenture Trustee,
the Required Loan Participants and the Swap Participants.
7.2 The Owner Participant and the Administrative Agent shall each
have received (with a copy for each Loan Participant) such legal opinions, in
form and substance reasonably satisfactory to the Owner Participant and the
Administrative Agent, as are reasonably requested by the Owner Participant and
the Administrative Agent in respect of this Agreement, the Panda-PEPCO Letter
Agreement and the documents and transactions contemplated therein and herein,
including without limitation, legal opinions from local and federal regulatory
counsel concerning the Panda-PEPCO Letter Agreement, the PPC Assignment and
Exclusive Sales Agreement, the Balancing Services Letter Agreement and the
transactions contemplated in each such agreement.
7.3 The Owner Participant and the Administrative Agent shall each
have received from the Partnership a marketing plan satisfactory to each of them
in respect of the brokering and sale of electric energy and capacity released
for such brokering and sale under the Panda-PEPCO Letter Agreement, and the
Owner Participant and the Administrative Agent shall have received (with a copy
for each Loan Participant) true and correct copies, certified as such by the
Partnership, of all agreements entered into prior to the date hereof in respect
of such brokering and sale, and all such agreements, and all other documents and
arrangements in respect of such brokering and sale, shall be in form and
substance reasonably satisfactory to the Owner Participant and the
Administrative Agent.
21
<PAGE>
7.4 The Owner Participant and the Administrative Agent shall have
received written confirmation regarding PEPCO's interpretation concerning the
number of must-run hours under the Power Purchase Agreement.
7.5 The Partnership shall have paid or caused to be paid to the
Owner Participant, in immediately available funds, all verifiable third-party
costs of match-funding breakage payable by the Owner Participant in connection
with any termination, amendments or other modifications effected or to be
effected in order to reflect the new Schedules C and D of the Facility Lease and
Schedule 6 of the Participation Agreement to be put in place hereby, provided,
HOWEVER, that at the Partnership's option and in a form satisfactory to GE
Capital and the Administrative Agent , such costs can be incorporated into
Schedules C and D of the Facility Lease and Schedule 6 of the Participation
Agreement in lieu of a single cash payment.
7.6 The Owner Participant and the Administrative Agent shall have
received (i) the approval of the Power Purchaser to the amendments to the
Financing Documents as set forth herein, (ii) the consent of the Power Purchaser
to the Partnership's assignment of certain rights and obligations under the
Panda-PEPCO Letter Agreement as set forth in the PPC Assignment and Exclusive
Sales Agreement and (iii) pursuant to Section 6.14(a) of the Participation
Agreement, an Assignment by the Partnership of the PPC Assignment and Exclusive
Sales Agreement and a Consent to Assignment by PPC with respect to such
Assignment, in each case, in form and substance satisfactory to each of the
Owner Participant and the Administrative Agent.
7.7 The following documents shall have been duly authorized,
executed and delivered by the respective parties thereto, and an executed
counterpart of each shall have been delivered to the Owner Participant, the
Administrative Agent and each of the Loan Participants:
(a) this Agreement;
(b) the Panda-PEPCO Letter Agreement (copies only);
(c) the PPC Assignment and Exclusive Sales Agreement;
(d) the Collateral Assignment of PPC Assignment;
(e) the Consent of PPC;
(f) the Amendment to PEPCO Amended and Restated Consent and
Agreement and to PEPCO Compliance Certificate, dated as
of July 17, 1998 (the "Amendment to PEPCO Consent"),
among PEPCO, the Partnership, the Security Agent, the
Owner Trustee, the Indenture Trustee, GE Capital and the
Administrative Agent providing for PEPCO's approval to
the amendments to the Financing Documents as set forth
herein;
(g) the Consent to Assignment , dated as of July 17, 1998,.
among PEPCO, PPC and the Partnership providing for
PEPCO's consent to the Partnership's assignment of
certain rights and obligations under the PPC Assignment
and Exclusive Sales Agreement;
(h) the Balancing Services Letter Agreement; and
22
<PAGE>
(i) the Service Agreement, dated as of July 17, 1998,
between PPC and PEPCO;
(j) the Confirmation Notice, dated as of July 17, 1998
between PPC and PEPCO.
8. MISCELLANEOUS
8.1 EFFECTIVE DATE. This Agreement shall become effective on the
date that all the conditions precedent set forth in Section 7 herein are
satisfied. Thereafter, upon the receipt from PEPCO (in full and in immediately
available funds) and deposit in the Revenue Account of the $3,855,992.00
required to be paid by PEPCO under Paragraph 1 of the Panda-PEPCO Letter
Agreement, the Partnership shall provide to the Administrative Agent, the Owner
Participant, the Security Agent and any other Person, all such information,
certificates, exhibits and schedules as is required on each Basic Rent Payment
Date for the purpose of administering solely the $3,855,992.00 from the Revenue
Account as provided in the Security Deposit Agreement and the other Financing
Documents, as amended hereby, as though such date were the April 30, 1998 Basic
Rent Payment Date. Within five (5) days thereafter, the Security Agent shall
administer the $3,855,992.00 and make the appropriate deposits, withdrawals and
distributions from the Accounts as provided in clauses FIRST through sixth of
Section 4.3 of the Security Deposit Agreement, as amended hereby, as though such
date were the April 30, 1998 Basic Rent Payment Date, without duplication of the
deposits, withdrawals and distributions from the Accounts made pursuant to such
clauses on the actual April 30, 1998 Basic Rent Payment Date except to the
extent that the amount of any such deposit, withdrawal or distribution shall
have changed as a result of the amendments to the Financing Documents made
hereby. After such deposits, withdrawals and distributions have been made, (a)
the Security Agent shall transfer to the Owner Participant and the
Administrative Agent (or to such account or accounts as the Owner Participant
and the Administrative Agent shall designate) from the cash remaining in the
Revenue Account the amounts owning to each of them pursuant to Section 8.9
hereof, and (b) if the conditions precedent to cash distributions to the
Partners set forth in Section 7.3 of the Participation Agreement are then
satisfied (as certified in a certificate of an Authorized Officer of the
Partnership and countersigned by the Administrative Agent and the Owner
Participant substantially in the form of Exhibit F to the Security Deposit
Agreement), the Security Agent shall distribute to the Partnership from the cash
available in the Revenue Account an amount equal to the $3,855,992.00 less the
sum of (i) the aggregate amount of the deposits, withdrawals and distributions
made pursuant to the immediately previous sentence hereto plus (ii) the
aggregate amount transferred pursuant to clause (a) of this sentence.
8.2 NO OTHER AMENDMENTS. Except as otherwise expressly provided in
this Agreement which shall be read as one with the Financing Documents as if
fully set forth therein, the Financing Documents shall remain unchanged and in
full force and effect and are hereby ratified and confirmed in all respects. The
execution, delivery and effectiveness of this Agreement shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
any of the Administrative Agent, the Loan Participants, the Indenture Trustee,
the
23
<PAGE>
Owner Participant or the Owner Trustee, nor constitute a waiver of any provision
of the Financing Documents.
8.3 SEVERABILITY. In the event that any portion of this Agreement
shall be invalid, illegal or unenforceable in any respect, it shall not affect
the validity, legality or enforceability of any other provision of this
Agreement.
8.4 JOINT EFFORT. This Agreement shall be considered for all
purposes as having been prepared through the joint efforts of the parties
hereto, and shall not be construed against one party or the other as a result of
the preparation, submittal or other event of negotiation, drafting or execution
thereof.
8.5 HEADINGS. The heading in this Agreement are for convenience only
and are not part of the substance hereof.
8.6 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts with the same effect as if the parties had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
8.7 GOVERNING LAW. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
8.8 INSTRUCTIONS. Both the Owner Participant, authorized to give the
instructions herein on behalf of the Owner Trustee, and the Administrative
Agent, authorized to give the instructions herein on behalf of the Indenture
Trustee, hereby instruct the Security Agent to execute this Agreement, the
Amendment to PEPCO Consent and the Consent of PPC in accordance with Section 2.1
of the Amended and Restated Security Deposit Agreement and Section 3.10 of the
Indenture. The Administrative Agent, authorized to give the instructions herein
on behalf of the Loan Participants, hereby instructs the Indenture Trustee to
execute this Agreement, the Amendment to PEPCO Consent and the Consent of PPC
pursuant to Section 10.2 of the Indenture. The Owner Participant, authorized to
give the instructions herein, hereby instructs the Owner Trustee to execute this
Agreement and the Amendment to PEPCO Consent pursuant to Section 5.2 of the
Trust Agreement.
8.9 EXPENSES. The Partnership shall pay all reasonable expenses and
fees incurred by the Owner Participant, the Security Agent, the Owner Trustee,
the Indenture Trustee and the Administrative Agent with respect to the review,
negotiation, preparation, execution and delivery of this Agreement and of any
document required or contemplated hereunder, including, without limitation, all
reasonable fees and expenses of Simpson Thacher & Bartlett, counsel to the Owner
Participant, and all reasonable fees and expenses of Latham & Watkins, counsel
to the Administrative Agent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the day and year first written above.
PANDA-BRANDYWINE, L.P.,
a Delaware limited partnership
By: PANDA BRANDYWINE CORPORATION,
a Delaware corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
PANDA BRANDYWINE CORPORATION,
a Delaware corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation, in its individual
capacity and as the Owner Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
FLEET NATIONAL BANK
(formerly known as Shawmut Bank
Connecticut, National Association),
a national banking association,
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
a national banking association,
as the Indenture Trustee
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
CREDIT SUISSE FIRST BOSTON, a bank organized
and existing under the laws of Switzerland,
in its individual capacity, as the
Administrative Agent, as a Swap Participant,
and (successor to Greenwich Funding
Corporation, a Delaware Corporation) as a
Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A, "RABOBANK NEDERLAND,"
GRAND CAYMAN BRANCH,
as a Loan Participant and a Swap Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
KB FINANCIAL SERVICES (IRELAND),
as a Loan Participant and a Swap Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
MEESPIERSON CAPITAL CORP.,
(successor to MeesPierson N.V.),
as a Loan Participant and a Swap Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
BAYERISCHE VEREINSBANK AG, NEW YORK BRANCH,
as a Loan Participant and a Swap Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
COMMERZBANK AG ATLANTA AGENCY,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
BAYERISCHE HYPOTHEKEN - UND WECHSEL -
BANK AG, NEW YORK BRANCH,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
THE SAKURA BANK, LTD.,
as a Loan Participant
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
EXHIBIT A
to Consent and Amendment Agreement
PANDA-PEPCO LETTER AGREEMENT
<PAGE>
EXHIBIT B
to Consent and Amendment Agreement
PPC ASSIGNMENT AND EXCLUSIVE SALES AGREEMENT
<PAGE>
EXHIBIT C
to Consent and Amendment Agreement
BALANCING SERVICES LETTER AGREEMENT
<PAGE>
EXHIBIT D
to Consent and Amendment Agreement
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
SCHEDULE 6
BASIC RENT FACTORS AND STIPULATED LOSS VALUES
<PAGE>
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 1.57167249
10-13 2.81464490
14-17 2.87615513
18-21 3.43116902
22-25 3.46301515
26-29 3.47664757
30-33 3.47674760
34-37 3.48179760
38-41 3.42509587
42-45 3.41354975
46-49 3.40486159
50-53 3.39221516
54-57 3.46319234
58-61 3.66733571
62-65 3.48825657
66-69 3.51034280
70-73 3.54490113
74-77 3.58090559
78-80 3.15861490
<PAGE>
Schedule 6 to
Participation Agreement
STIPULATED LOSS VALUE
(Does not include Accrued Basic Rent)
PERCENTAGE OF
SETTLEMENT DATE LESSOR'S COST
--------------- -------------
Jul 17 1998 112.64536213
Jul 31 1998 112.71308712
Oct 31 1998 113.91731461
Jan 31 1999 115.14498938
Apr 30 1999 115.01708587
Jul 31 1999 114.93505309
Oct 31 1999 114.84492657
Jan 31 2000 114.78081328
Apr 30 2000 114.54875403
Jul 31 2000 114.33061011
Oct 31 2000 114.10386054
Jan 31 2001 113.92031850
Apr 30 2001 113.05472531
Jul 31 2001 112.22369205
Oct 31 2001 111.37277588
Jan 31 2002 110.52885184
Apr 30 2002 109.51177897
Jul 31 2002 108.52606794
Oct 31 2002 107.51748310
Jan 31 2003 106.52235014
Apr 30 2003 105.36380230
Jul 31 2003 104.23224238
Oct 31 2003 103.07404271
Jan 31 2004 101.93217098
Apr 30 2004 100.68618945
Jul 31 2004 99.47544283
Oct 31 2004 98.27413562
Jan 31 2005 97.13086772
Apr 30 2005 95.88018356
Jul 31 2005 94.68950681
Oct 31 2005 93.48603662
Jan 31 2006 92.30641592
Apr 30 2006 91.05464194.
Jul 31 2006 89.84134564.
Oct 31 2006 88.62198077
Jan 31 2007 87.42375473
Apr 30 2007 86.11963871
Jul 31 2007 84.84935696
Oct 31 2007 83.57109181
<PAGE>
PERCENTAGE OF
SETTLEMENT DATE LESSOR'S COST
--------------- -------------
Jan 31 2008 82.31174988
Apr 30 2008 80.97168221
Jul 31 2008 79.64806236
Oct 31 2008 78.32198898
Jan 31 2009 77.04289304
Apr 30 2009 75.65696295
Jul 31 2009 74.30342694
Oct 31 2009 72.94648339
Jan 31 2010 71.61222862
Apr 30 2010 70.09815797
Jul 31 2010 68.60949239
Oct 31 2010 67.11289778
Jan 31 2011 65.63397417
Apr 30 2011 63.83933843
Jul 31 2011 62.05867000
Oct 31 2011 60.25987307
Jan 31 2012 58.48589904
Apr 30 2012 56.77569776
Jul 31 2012 55.06217957
Oct 31 2012 53.33251719
Jan 31 2013 51.61230087
Apr 30 2013 49.75708704
Jul 31 2013 47.91950660
Oct 31 2013 46.07511493
Jan 31 2014 44.24972466
Apr 30 2014 42.28993909
Jul 31 2014 40.34052308
Oct 31 2014 38.38062448
Jan 31 2015 36.34313514
Apr 30 2015 34.12331390
Jul 31 2015 31.83033821
Oct 31 2015 29.44090323
Jan 31 2016 26.94407615
Apr 30 2016 24.73495288
Jul 31 2016 22.42381459
Oct 31 2016 20.00000000
<PAGE>
SCHEDULE C
BASIC RENT FACTORS
<PAGE>
SCHEDULE C TO FACILITY LEASE
BASIC RENT
BASIC RENT FACTOR
(EXPRESSED AS A
PERCENTAGE OF BASIC RENT
BASIC RENT PAYMENT DATES LESSOR'S COST) ($)
- ------------------------ ----------------- -------------
Jan 31 1997 $
Apr 30 1997 1.20029675 $ 2,610,509.14
Jul 31 1997 1.20029675 $ 2,610,509.14
Oct 31 1997 1.20029675 $ 2,610,509.14
Jan 31 1998 1.20029675 $ 2,610,509.14
Apr 30 1998 1.57187249 $ 3,418,644.18
Jul 31 1998 1.57187249 $ 3,418,644.18
Oct 31 1998 1.57187249 $ 3,418,644.18
Jan 31 1999 1.57187249 $ 3,418,644.18
Apr 30 1999 2.81464490 $ 6,121,533.05
Jul 31 1999 2.81464490 $ 6,121,533.05
Oct 31 1999 2.81464490 $ 6,121,533.05
Jan 31 2000 2.81464490 $ 6,121,533.05
Apr 30 2000 2.87615513 $ 6,255,310.82
Jul 31 2000 2.87615513 $ 6,255,310.82
Oct 31 2000 2.87615513 $ 6,255,310.82
Jan 31 2001 2.87615513 $ 6,255,310.82
Apr 30 2001 3.43116902 $ 7,462,403.00
Jul 31 2001 3.43116902 $ 7,462,403.00
Oct 31 2001 3.43116902 $ 7,462,403.00
Jan 31 2002 3.43116902 $ 7,462,403.00
Apr 30 2002 3.46301515 $ 7,531,664.73
Jul 31 2002 3.46301515 $ 7,531,664.73
Oct 31 2002 3.46301515 $ 7,531,664.73
Jan 31 2003 3.46301515 $ 7,531,664.73
Apr 30 2003 3.47664757 $ 7,561,313.70
Jul 31 2003 3.47664757 $ 7,561,313.70
Oct 31 2003 3.47664757 $ 7,561,313.70
Jan 31 2004 3.47664757 $ 7,561,313.70
Apr 30 2004 3.47674760 $ 7,561,531.25
Jul 31 2004 3.47674760 $ 7,561,531.25
Oct 31 2004 3.47674760 $ 7,561,531.25
Jan 31 2005 3.47674760 $ 7,561,531.25
Apr 30 2005 3.48179760 $ 7,572,514.42
Jul 31 2005 3.48179760 $ 7,572,514.42
Oct 31 2005 3.48179760 $ 7,572,514.42
Jan 31 2006 3.48179760 $ 7,572,514.42
Apr 30 2006 3.42509587 $ 7,449,194.60
Jul 31 2006 3.42509587 $ 7,449,194.60
Oct 31 2006 3.42509587 $ 7,449,194.60
<PAGE>
SCHEDULE C TO FACILITY LEASE
BASIC RENT
BASIC RENT FACTOR
(EXPRESSED AS A
PERCENTAGE OF BASIC RENT
BASIC RENT PAYMENT DATES LESSOR'S COST) ($)
- ------------------------ ----------------- -------------
Jan 31 2007 3.42509587 $ 7,449,194.60
Apr 30 2007 3.41354975 $ 7,424,083.10
Jul 31 2007 3.41354975 $ 7,424,083.10
Oct 31 2007 3.41354975 $ 7,424,083.10
Jan 31 2008 3.41354975 $ 7,424,083.10
Apr 30 2008 3.40486159 $ 7,405,187.33
Jul 31 2008 3.40486159 $ 7,405,187.33
Oct 31 2008 3.40486159 $ 7,405,187.33
Jan 31 2009 3.40486159 $ 7,405,187.33
Apr 30 2009 3.39221516 $ 7,377,682.78
Jul 31 2009 3.39221516 $ 7,377,682.78
Oct 31 2009 3.39221516 $ 7,377,682.78
Jan 31 2010 3.39221516 $ 7,377,682.78
Apr 30 2010 3.46319234 $ 7,532,050.10
Jul 31 2010 3.46319234 $ 7,532,050.10
Oct 31 2010 3.46319234 $ 7,532,050.10
Jan 31 2011 3.46319234 $ 7,532,050.10
Apr 30 2011 3.66733571 $ 7,976,038.75
Jul 31 2011 3.66733571 $ 7,976,038.75
Oct 31 2011 3.66733571 $ 7,976,038.75
Jan 31 2012 3.66733571 $ 7,976,038.75
Apr 30 2012 3.48825657 $ 7,586,561.94
Jul 31 2012 3.48825657 $ 7,586,561.94
Oct 31 2012 3.48825657 $ 7,586,561.94
Jan 31 2013 3.48825657 $ 7,586,561.94
Apr 30 2013 3.51034280 $ 7,634,597.00
Jul 31 2013 3.51034280 $ 7,634,597.00
Oct 31 2013 3.51034280 $ 7,634,597.00
Jan 31 2014 3.51034280 $ 7,634,597.00
Apr 30 2014 3.54490113 $ 7,709,757.44
Jul 31 2014 3.54490113 $ 7,709,757.44
Oct 31 2014 3.54490113 $ 7,709,757.44
Jan 31 2015 3.54490113 $ 7,709,757.44
Apr 30 2015 3.58090559 $ 7,788,063.04
Jul 31 2015 3.58090559 $ 7,788,063.04
Oct 31 2015 3.58090559 $ 7,788,063.04
Jan 31 2016 3.58090559 $ 7,788,063.04
Apr 30 2016 3.15861490 $ 6,869,628.74
Jul 31 2016 3.15861490 $ 6,869,628.74
Oct 31 2016 3.15861490 $ 6,869,628.74
<PAGE>
SCHEDULE D
STIPULATED LOSS VALUES
<PAGE>
SCHEDULE D TO FACILITY LEASE
STIPULATED LOSS VALUES
(Does Not Include Accrued Basic Rent)
STIPULATED LOSS VALUE
(Expressed as a Percentage
BASIC RENT PAYMENT DATES of Lessor's Cost)
- ------------------------ -------------------------
Jul 17 1998 112.64536213
Jul 31 1998 112.71308712
Oct 31 1998 113.91731461
Jan 31 1998 115.14498938
Apr 30 1999 115.01708587
Jul 31 1999 114.93505309
Oct 31 1999 114.84492657
Jan 31 2000 114.78081328
Apr 30 2000 114.54875403
Jul 31 2000 114.33031011
Oct 31 2000 114.10386054
Jan 31 2001 113.92031850
Apr 30 2001 113.05472531
Jul 31 2001 112.22369205
Oct 31 2001 111.37277588
Jan 31 2002 110.52885184
Apr 30 2002 109.51177897
Jul 31 2002 108.52606794
Oct 31 2002 107.51748310
Jan 31 2003 106.52235014
Apr 30 2003 105.36380230
Jul 31 2003 104.23224238
Oct 31 2003 103.07404271
Jan 31 2004 101.93217098
Apr 30 2004 100.68618945
Jul 31 2004 99.47544283
Oct 31 2004 98.27413562
Jan 31 2005 97.13086772
Apr 30 2005 95.88018356
Jul 31 2005 94.68950681
Oct 31 2005 93.48603662
Jan 31 2006 92.30641592
Apr 30 2006 91.05484194
Jul 31 2006 89.84134564
Oct 31 2006 88.62198077
<PAGE>
SCHEDULE D TO FACILITY LEASE
STIPULATED LOSS VALUES
(Does Not Include Accrued Basic Rent)
STIPULATED LOSS VALUE
(Expressed as a Percentage
BASIC RENT PAYMENT DATES of Lessor's Cost)
- ------------------------ -------------------------
Jan 31 2007 87.42375473
Apr 30 2007 86.11963871
Jul 31 2007 84.84935696
Oct 31 2007 83.57109181
Jan 31 2008 82.31174988
Apr 30 2008 80.97168221
Jul 31 2008 79.64806236
Oct 31 2008 78.32198898
Jan 31 2009 77.04289304
Apr 30 2009 75.65696295
Jul 31 2009 74.30342694
Oct 31 2009 72.94648339
Jan 31 2010 71.61222862
Apr 30 2010 70.09815797
Jul 31 2010 68.60949239
Oct 31 2010 67.11289778
Jan 31 2011 65.63397417
Apr 30 2011 63.83933843
Jul 31 2011 62.05867000
Oct 31 2011 60.25987307
Jan 31 2012 58.48589904
Apr 30 2012 56.77569776
Jul 31 2012 55.06217957
Oct 31 2012 53.33251719
Jan 31 2013 51.61230087
Apr 30 2013 49.75708704
Jul 31 2013 47.91950660
Oct 31 2013 46.17511493
Jan 31 2014 44.24972466
Apr 30 2014 42.28993909
Jul 31 2014 40.34052308
Oct 31 2014 38.38062448
Jan 31 2015 36.34313514
Apr 30 2015 34.12331390
Jul 31 2015 31.83033821
Oct 31 2015 29.44090323
Jan 31 2016 26.94407615
Apr 30 2016 24.73495288
Jul 31 2016 22.42381459
Oct 31 2016 20.00000000
EXHIBIT 10.173
CONFIDENTIAL TREATMENT
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT BY BRACKETS.
October 24, 1997
Mr. Ralph T. Killian
Senior Vice president
Panda Brandywine Corporation
4100 Spring Valley Road
Suite 1001
Dallas, TX 75244
Dear Ralph:
This letter agreement sets forth the agreement between Potomac Electric
Power Company ("PEPCO") and Panda-Brandywine, L.P. ("Panda") to settle all
claims associated with four disputes concerning the adjustment of capacity
payments and the implementation of energy payments that have arisen under the
Power Purchase Agreement, dated August 9, 1991, entered into by PEPCO and Panda,
as amended ("Power Purchase Agreement"). The first dispute involves application
of Subsection 6.1(c)(i) and Appendix L of the Power Purchase Agreement to
determine the adjustment, if any, to be made to the Capacity Rate used to
calculate the Monthly Capacity Payment in order to reflect the yield to maturity
on United States Treasury securities with a maturity of 12 years in effect as of
the Commitment Date.1 PEPCO asserts that, for purposes of this adjustment, the
Commitment Date should be December 19, 1996, the date of the permanent lease
financing for the Panda Facility. Panda asserts that, for purposes of
determining the adjustment set forth in Subsection 6.1(c)(i) and Appendix L of
the Power Purchase Agreement, the commitment Date should be October 6, 1994, the
date of the commitment letter for financing for the Panda Facility entered into
by Panda and General Electric Capital Corporation. PEPCO and Panda also have
asserted various legal and equitable arguments concerning Subsection 6.1 (c)(i)
of the Power Purchase Agreement.
The second dispute concerns the manner of determining any adjustment to be
made to the Monthly Capacity Payments in accordance with Subsection 6.1(g) of
the Power Purchase Agreement. In particular, Panda asserts that, for purposes of
determining the CPWIRR Increase under such subsection following the merger or
other combination of PEPCO with another electric utility, the actual peak load
experienced by PEPCO should be deemed to be the actual peak load experienced by
the company resulting from the merger or combination. PEPCO asserts that, for
purposes of calculating the CPWIRR Increase under such subsection after such a
merge or combination, the actual peak load experienced by PEPCO should be deemed
to be the actual peak load of only that portion of the system of the merged or
combined company that constituted the
- -----------------
1 Capitalized terms that are not otherwise defined in this letter agreement
will have the definitions set forth in the Power Purchase Agreement.
<PAGE>
PEPCO system prior to the merger or combination. Again, the parties have raised
various legal and equitable arguments to support their positions.
The third dispute involves the initial determination of the firm
displacement tariff rate for transportation on the Columbia LNG pipeline for
purposes of determining the FGMRi and IGRi pursuant to Subsections 6.2(b)(v) and
6.2(b)(vi) of the Power Purchase Agreement, respectively. The fourth dispute
involves determining the period of time for which the Unit commitment Payment
for Must Run hours will be made under Subsection 6.2(b) of the Power Purchase
Agreement under existing circumstances.
According to Article 17 of the Power Purchase Agreement, the Parties are
required to attempt to resolve all disputes arising under the Power Purchase
Agreement promptly, equitably and in a good faith manner. In the event that the
Parties are unable to resolve any such dispute, the parties are required to
submit such dispute to the Maryland Public Service Commission. This letter
agreement settles all claims between PEPCO and Panda with respect to each of the
disputes described above. In particular, PEPCO and Panda each hereby waives, and
releases the other party from, all actions, claims, demands, causes of action
and assertions of right that may be brought by it, whether known or unknown,
developed or undeveloped, arising out of each of the disputes described above.
Such waiver and release, however, is not applicable to actions, claims, demands,
causes of action and assertions of right arising out of implementation of the
provisions of this letter agreement.
In consideration of these premises, and the mutual covenants set forth
herein, PEPCO and Panda hereby agree as follows:
1. For the purpose of implementing Subsection 6.1(c)(i) and Appendix L
of the Power Purchase Agreement and resolving the first dispute
described in the first paragraph of this letter agreement, PEPCO
will: (i) make a payment of $3,855,992.00 to Panda within 2 Business
Days after the date on which this letter agreement becomes
effective; and (ii) adjust the schedule of Capacity Rates in Column
2 of Appendix L of the Power Purchase Agreement for purposes of
calculating the Monthly Capacity Payments due after the date this
letter agreement becomes effective to make the majority of the
adjustment in years 11 through 25 of the Term. However, the
adjustment must produce an equivalent net present value to PEPCO,
and must include an equitable distribution of risk. PEPCO will
adjust the Capacity Rates in Column 2 of Appendix L of the Power
Purchase Agreement for periods after the date this letter agreement
becomes effective to the rates as set forth in Columns 1 and 2 of
Exhibit I attached to this letter agreement. The Capacity Rates as
set forth in columns 3 and 4 of Exhibit I attached to this letter
agreement reflect further adjustment of the Capacity Rates set forth
in Columns 1 and 2 of Exhibit I for the percentage change in the GNP
Deflator for the period between June 1, 1994 and the Actual
Commercial Operation Date referred to in footnote 2 to Appendix L to
the Power Purchase Agreement.(2) This adjustment was calculated
using a GNP Deflator of 104.71 for June 1, 1994 and a GNP Deflator
of 110.54 for the Actual Commercial Operation
- --------------
2 In accordance with a letter dated April 10, 1996, PEPCO and Panda have
agreed that the GNP Deflator shall be defined as the Implicit Price
Deflator for Gross Domestic Products as reported on Table 7.1 of the
"Survey of Current Business," published by the U.S. Department of
Commerce, Bureau of Economic Analysis.
<PAGE>
Date.(3) PEPCO and Panda agree that the foregoing amounts are the
appropriate values for the GNP Deflator for such dates for all
purposes of Subsection 6.1(a) of the Power Purchase Agreement for
the Term. PEPCO and Panda further agree that the Capacity Rates are
set forth in columns 3 and 4 of Exhibit I attached to this letter
agreement will be used for purposes of calculating the Monthly
Capacity Payments due after the date this letter agreement becomes
effective, pursuant to Subsection 6.1(a) of the Power Purchase
Agreement for the Term. PEPCO and Panda hereby waive any further
adjustment to such Capacity Rates pursuant to Column 3 of Appendix L
of the Power Purchase Agreement
2. PEPCO will sell to Panda an exclusive right to broker (as defined by
FERC) a sale of capacity from the Brandywine Facility, backed up by
the PEPCO System, for resale up to the amounts, and for the periods,
shown below (released capacity). PEPCO will sell the capacity
pursuant to its Power Sales Tariff on file with FERC. (Electric
Tariff No. 4). PEPCO has represented to Panda that the rate
provisions of Electric Tariff No. 4 may reasonably be interpreted in
the manner described in Appendix A to this letter agreement. In any
proceeding in which such interpretations are placed in issue before
FERC or another forum, PEPCO shall, in good faith support the
interpretations set forth in Appendix A. PEPCO will provide Panda
prior written notice of any change to its Power Sales Tariff that
PEPCO determines in good faith may have a material adverse impact on
Panda's rights under this letter agreement before filing such change
with FERC. The failure of PEPCO to give such prior written notice to
Panda shall not be resulting in any liability of PEPCO, and shall
not in any way limit PEPCO's right to file any such change with
FERC. Panda will obtain all authorizations or other approvals
required for it to act as a power broker in such transactions,
including, but not limited to, any authorization or other approval
required from FERC. In exchange for exclusivity in arranging such
sales, Panda will compensate PEPCO for its lost opportunity at the
rate of [ ]/kW/yr (this is a minimum estimate of today's market
price) for al capacity that is subject to such exclusivity rights,
irrespective of whether Panda arranges a sale of this capacity to
another entity, the price for such sale, or whether the Brandywine
Facility is unavailable. However PEPCO will not require Panda to pay
the full annual charge up front but Panda may make the payment on a
monthly basis (at a rate of [ ]/kW). In addition, PEPCO will net the
amount payable by Panda against any revenues due it from a
corresponding sale brokered by Panda. (For example, in early April
1998, PEPCO will bill Panda for the capacity released in March - 130
MW. At the same time, PEPCO would also bill the third party with
whom Panda had arranged a sale for March, at the sales price
arranged by Panda. When the payment from the third party is received
by PEPCO later in April, PEPCO will offset the payment required from
Panda against this received amount, and remit the residual
difference to Panda as Panda's brokerage fee.)
During any period specified below when there is a reduction in
capacity available from the Brandywine Facility, PEPCO will make
available for brokering by Panda an amount of capacity from the
PEPCO System equal to the amount of such reduction, up to the
applicable amount of capacity specified below. For all
- -----------------
3 The 104.71 figure used for the GNP Deflator for June 1, 1994 is the GDP
Deflator for the second quarter of 1994. The 110.54 figure used for the
GNP Deflator for the Actual Commercial Operation Date is the GDP Deflator
for the third quarter of 1996.
<PAGE>
capacity from the PEPCO system so released by PEPCO to Panda for
brokering, in addition to the [ ]/kW/month payment specified above,
Panda will make a further payment to PEPCO equal to [ percent (__%)]
of the difference between the price at which the capacity is sold in
the transaction brokered by Panda and [ ]/kW/month. If the
difference between the sales price and [____]/kW/month is a negative
number, Panda will not be entitled to any refund from PEPCO and will
remain obligated to pay PEPCO the [ ]/kW/month price.
The amount of released capacity sold to Panda pursuant to this
paragraph is as follows
1/1/98 - 5/31/98 [ ] MW for five months
6/1/98 - 5/31/99 [ ] MW for twelve months
6/1/99 - 5/31/2000 [ ] MW for twelve months
The right to broker capacity conferred by this paragraph may be
assigned by Panda to an entity controlled by Panda, provided that:
(x) such entity agrees to assume all of the obligations of Panda
under this letter agreement with respect to such assigned rights
(which assumption and agreement shall be set forth in a form
reasonably satisfactory to PEPCO), and (y) Panda will not be
relieved of liability, and will remain liable, for all obligations
under this letter agreement with respect to such assigned rights to
the extent such obligations are not fulfilled in a timely manner by
such entity. Except as set forth in this paragraph 2 and in
paragraph 3 of this letter agreement, Panda shall not assign any of
its rights under this letter agreement to any other party, without
the prior written consent of PEPCO, which consent shall not be
unreasonably withheld.
PEPCO and Panda hereby waive Subsection 5.1(a) of the Power Purchase
Agreement with respect to the capacity released by PEPCO under this
paragraph provided that nothing in this letter agreement alters
PEPCO's obligation to make payments for the Brandywine Facility's
Dependable Capacity under Subsection 6.1(a) of the Power Purchase
Agreement. The transactions contemplated under this paragraph shall
not constitute a sale by Panda under Subsection 15.1(d) of the Power
Purchase Agreement. The testing, revalidation, verification,
scheduling and maintenance procedures described in subsections
8.2(a), 8.2(b), 8.2(c), 8.2(e) and 8.3(a), and Sections 8.4 and 8.5,
of the Power Purchase Agreement shall be coordinated in a fashion
that takes into consideration the obligations associated with sales
of capacity brokered by Panda under this paragraph.
3. PEPCO is willing to release to Panda on a periodic basis, through
the year 2002, the right to sell energy from the Brandywine Facility
for resale. The energy may or may not be from capacity released
pursuant to paragraph 2 of this letter agreement. PEPCO will base
such releases on PEPCO's projections of facility operation to serve
PEPCO loads, including projections of the PJM Pool interchange
deliveries. Sales of energy not related to released capacity will be
subject to the availability of the Brandywine Facility. Sales of
energy outside the PJM Pool not related to released capacity will be
interruptible in accordance with PJM Pool rules and requirements.
PEPCO hereby waives the first sentence of subsection 8.3(b) of the
Power Purchase Agreement with respect to all energy
<PAGE>
released by PEPCO pursuant to this letter agreement. PEPCO further
waives Subsection 15.1(d) of the Power Purchase Agreement with
respect to all energy released by PEPCO pursuant to this letter
agreement. PEPCO and Panda waive subsection 5.1(a) of the Power
Purchase Agreement with respect to all energy released by PEPCO
pursuant to this letter agreement. The foregoing waivers, however,
do not include Section 5.5 of the Power Purchase Agreement, the
provisions of which are applicable to energy released by PEPCO
pursuant to this letter agreement. Panda hereby waives payment by
PEPCO of all Monthly Energy Payments specified in Section 6.2 of the
Power Purchase Agreement for any energy released by PEPCO pursuant
to this letter agreement.
To effect the sales from released energy, Panda can function as a
power marketer or power broker (in either case, as defined by FERC).
If Panda elects to function as a power marketer, Panda must become a
member of the PJM Pool and will obtain all authorizations or other
approvals required for it to serve as a power marketer in such
transactions, including, but not limited to, any authorization or
other approval required from FERC. In these circumstances, Panda
will pay PEPCO a base fee equal to [ percent ( %)] of Panda's gross
revenues from each sale of released energy, which base fee is
subject to increase pursuant to subparagraphs 5 1) and 2) of this
letter agreement. As between PEPCO and Panda, Panda will retain the
remaining gross revenues from each such sale of released energy.
If Panda elects to function as a power broker, it will obtain all
authorizations or other approvals required for it to act as a power
broker in such transactions, including, but not limited to, any
authorization or other approval required from FERC. In order to
implement sales of released energy in transactions brokered by
Panda, Panda will transfer, and PEPCO will take, title to such
released energy from the Brandywine Facility at zero cost to PEPCO
(zero being the net of payments received from the purchaser in
excess of the fees specified below and the price of the released
energy to PEPCO), and PEPCO will sell such released energy under
PEPCO's Power Sales Tariff (Electric Tariff No. 4) on file with
FERC. PEPCO will provide Panda prior written notice of any change to
its Power Sales Tariff that PEPCO determines in good faith may have
a material adverse impact on Panda's rights under this letter
agreement before filing such change with FERC. The failure of PEPCO
to give such prior written notice to Panda shall not result in any
liability of PEPCO, and shall not in any way limit PEPCO's right to
file any such change with FERC.
If Panda elects to function as a power broker, PEPCO will perform
transaction scheduling with the PJM Pool, and perform accounting and
billing services for the sales of released energy brokered by Panda.
The billing will specify that the purchaser shall forward all
payments for released energy to Panda. Panda, in turn, will pay to
PEPCO: (i) a base fee equal to [ percent ( %)] of the gross revenues
from each sale of released energy brokered by Panda (which base fee
is subject to increase pursuant to subparagraphs 5 1) and 2) of this
letter agreement) and (ii) an additional fee equal to [ percent (
%)] of the gross revenues from each sale as compensation for the
services described above provided by PEPCO in connection with such
sale. Panda will retain the remaining revenues from the sale as its
brokerage fee. Panda will hold PEPCO harmless from any failure of
Panda, or the Brandywine Facility, to perform.
<PAGE>
Whether Panda acts as a broker or marketer, sales of released energy
from the Brandywine Facility will be subject to PJM Pool rules and
requirements, and will be subject to the terms and conditions of
transmission service procured by the purchaser. The PJM Pool, not
PEPCO, will supply transmission service for these transactions.
Panda may assign its rights to sell or broker released energy under
this letter agreement to an entity controlled by Panda or to a third
party power marketer or power broker, provided that: (i) such
entity, third party power marketer or power broker agrees to assume
all of the obligations of Panda under this letter agreement with
respect to such assigned rights (which assumption and agreement
shall be set forth in writing in a form reasonably satisfactory to
PEPCO) and (ii) Panda will not be relieved of liability, and will
remain liable, for all obligations under this letter agreement to
the extent such obligations are not fulfilled in a timely manner by
the assignee. Except as specified in this paragraph 3 or paragraph 2
of this letter agreement, Panda shall not assign any of its rights
under this letter agreement to any other party, without the prior
written consent of PEPCO, which consent shall not be unreasonable
withheld.
4. For each calendar year from 1999 through 2002, PEPCO will release
the rights to energy: (a) in blocks corresponding to the Dispatch
Segment definitions as contained in the Power Purchase Agreement;
and (b) for specific periods during the year. Prior to December 1 of
each year, PEPCO will determine in its sole discretion the blocks
that will be made available during the following calendar year on a
monthly basis, designated between peak and off-peak periods. The
peak and off-peak periods will be in accordance with then current
market practice. Today, the peak period is defined as the period
from 0700 to 2300, Monday through Friday; all other times are
off-peak.
For calendar year 1998 and the remainder of calendar year 1997
following the date this letter agreement becomes effective, the
energy releases will be as follows:
DISPATCH SEGMENTS
Mon-Fri
0700-2300
2300-0700
Sat, Sun 0-2400
[INFORMATION IN THIS TABLE HAS BEEN DELETED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
CONTEMPORANEOUS WITH THE FILING HEREOF]
5. For the period through 2002, in addition to the annual practice
outlined in paragraph 4 above, PEPCO may, in its sole discretion,
make additional releases from time to time throughout the year,
based on updated predictions of its requirements for energy from the
Brandywine Facility. Panda and PEPCO shall endeavor to make such
additional releases on a seasonal, monthly or daily basis. These
activities will be administered through the Operating Committee.
<PAGE>
For weekdays during the periods from the date this letter agreement
becomes effective to May 31, 1998, and from September 1, 1998 to
December 31, 1992, PEPCO agrees to make additional releases from the
First Dispatch Segment, from 0700 to 0800, and from 2000 to 2300.
The purpose of these additional releases is to reconcile the
difference between the "peak period" as defined above based on
market practice, and the Must Run Hours as defined in the Power
Purchase Agreement, and provide Panda the opportunity to effect a
sale of energy from the First Dispatch Segment for periods that
fully supplement the Must Run Hours. PEPCO and Panda agree to make a
comparable adjustment to the energy releases in the event that the
Operating Committee revises the Must Run Hours in accordance with
the Power Purchase Agreement.
PEPCO Release Incentive
1) If the sum of the number of equivalent full load hours
(EFLH) of PEPCO's annual energy releases to Panda and
the number of actual PEPCO EFLH is equal to or greater
than [ %] of the product of the facility Equivalent
Availability Factor as defined in the Power Purchase
Agreement (EAF) and the number of hours in the period
(PH) during the year, then PEPCO shall be compensated in
an annual lump sum payment with a [ %] increase of its
base fee in accordance with the following formula:
ACTUAL PEPCO EFLH / ANNUAL ENERGY EFLH
-------------------------------------- > [ %]
(EAF x PH)
2) In addition, if the sum of the number of EFLH of PEPCO's
weekly energy releases and the number of actual PEPCO
EFLH is equal to or greater than [ %] of the product of
EAF and PH in any given month, then PEPCO shall be
compensated in a monthly lump sum payment with a [ %]
increase of its base fee for the given month in
accordance with the following formula:
ACTUAL PEPCO EFLH / WEEKLY ENERGY RELEASE EFLH
---------------------------------------------- > [ %]
(EAF x PH)
For purposes of the above formula, Weekly Energy Releases
shall include energy previously released on a monthly and
annual basis for the relevant period.
6. PEPCO will agree to make the Unit Commitment Payment for the First
Dispatch Segment, in response to dispatch by PEPCO, for the period
of time from the point when the generator breaker for the steam
turbine is closed to the point when this breaker is opened. PEPCO
will further agree that the Must Run Hours will be 60 hours per week
at the output corresponding to the First Dispatch Segment (e.g.: 99
MW at 59(Degree) F, 50% relative humidity). The Operating Committee
has agreed at this time that the Must Run hours are from 0800 to
2000 Monday through Friday. Panda must achieve the full output of
the First Dispatch Segment as soon as possible considering Prudent
Utility Practices but no later than 60 minutes after the steam
turbine breaker is closed and prior to 0800
<PAGE>
Monday through Friday. Likewise, Panda must maintain the full output
of the First Dispatch Segment as long as possible considering
Prudent Utility Practices prior to opening the steam turbine
breaker. This period of operation below full output of the First
Dispatch Segment will not be longer than 30 minutes and will not
begin earlier than 2000 Monday through Friday. Since PEPCO is unable
to determine from its data collection when the Must Run Hours as
described in this paragraph begin and end, Panda agrees to furnish
copies of its automatic plant data recordings that provide this
information. The Unit commitment Payment for the Third dispatch
Segment will be made by PEPCO for the period of time from when, with
the breakers for the first combustion turbine and the steam turbine
closed, the generator breaker for the second combustion turbine is
closed to when this breaker is opened.
In the event Panda arranges a sale of released energy from the First
Dispatch Segment preceding Must Run Hours that eliminates a unit
startup that PEPCO would otherwise have required to meet the Must
Run Hours obligation, PEPCO will make the Unit Commitment Payment
for the Must Run Hours only, and the Unit Commitment Payment will
include a startup cost component in accordance with Subsection
6.2(b)(ii) of the Power Purchase Agreement as though the sale of
released energy never occurred.
In the event that Panda arranges a sale of released energy from the
Third Dispatch Segment, or from the First Dispatch Segment other
than preceding Must Run Hours, that eliminates a unit startup that
would otherwise be required for a PEPCO dispatch, PEPCO will make
the Unit Commitment Payment commencing at the start of its scheduled
dispatch, and the Unit Commitment Payment will include a startup
cost component in accordance with Subsection 6.2(b)(ii) of the Power
Purchase Agreement, as though the sale of released energy never
occurred.
Nothing in this letter agreement will prevent the Operating
committee from changing the Must Run Hours in accordance with
Subsection 8.3(a) of the Power Purchase Agreement for the
convenience of PEPCO.
7. PEPCO agrees to set the "firm displacement tariff rate . . . for
transportation on the Columbia LNG pipeline" at $0.05/Mbtu for
purposes of determining the FGMRi and IGRi pursuant to Subsections
6.2(b)(v) and 6.2(b)(vi) of the Power Purchase Agreement
8. PEPCO will provide sufficient detail regarding its calculations of
the monthly Capacity Payment and Monthly Energy Payment to allow
Panda to verify PEPCO's invoices and payments.
9. For purposes of calculating the CPWIRR Increase under Subsection
6.1(g) of the Power Purchase Agreement following any merger or other
combination of PEPCO with another electric utility, the actual peak
load experienced by PEPCO during any relevant year shall be deemed
to be the actual peak load experienced by the portion of the merged
or combined company's system that constituted the PEPCO system prior
to such merger or combination.
<PAGE>
PEPCO will bill Panda for payments due in connection with released
capacity and released energy under this letter agreement in accordance with the
schedule for PEPCO" billings for energy and capacity sold under its Power Sales
Tariff (Electric Tariff No. 4) on file with FERC. Past due payments from Panda
shall bear interest in accordance with the provisions of PEPCO's Power Sales
Tariff (Electric Tariff No. 4) on file with FERC. If payment from Panda is past
due by thirty days or more, PEPCO may suspend capacity releases and energy
releases under this letter agreement until all outstanding payments have been
made.
Panda shall enter into good faith negotiations with PEPCO to reach
agreement on a buydown or buyout of the Power Purchase Agreement in a manner
that maximizes and equitably shares the benefits of such buydown or buyout
between PEPCO and Panda. Neither PEPCO nor Panda shall be required to enter into
a buyout or buydown agreement unless it is to their mutual economic benefit to
do so. The negotiations shall commence as soon as possible after PEPCO presents
a buydown or buyout proposal to Panda. At the preset time, PEPCO anticipates
presenting a buydown or buyout proposal to Panda prior to the end of 1997.
PEPCO shall enter into good faith negotiations with Panda prior to the end
of 2002 for PEPCO to continue to make energy releases to Panda after 2002 in a
manner that maximizes and equitably shares the benefits of such releases between
PEPCO and Panda. Neither PEPCO nor Panda shall be required to enter into an
agreement for such releases unless it is to their mutual economic benefit to do
so. These negotiations will consider, among other matters, the marketplace for
electricity that is expected to exist after 2002, PEPCO's needs for electricity,
the rules of the control area in which PEPCO and the Brandywine Facility are
located, how well the arrangement for energy releases from the Brandywine
Facility prior to 2002 has worked under this letter agreement, proposals that
PEPCO may have received from any other parties with respect to energy from the
Facility for the period after 2002, and methods to maximize the Brandywine
Facility's capacity factor.
As I mentioned to you on the telephone, PEPCO continues to discuss sales
of capacity for periods after 1997 continues to discuss sales of capacity for
periods after 1997 with other parties. Upon execution of this letter agreement
by PEPCO and Panda, PEPCO shall immediately cease its discussions for any such
sales.
PEPCO and Panda agree that various provisions of the Power Purchase
Agreement should also be made applicable to this letter agreement. Therefore,
Article 17 and Sections 19.2, 19.6, 19.7, 19.8, 19.9, 19.10, 19.11, 19.12,
19.13, 19.15, and 19.17 of the Power Purchase Agreement are hereby incorporated
by reference in this letter agreement as if set out herein in full. For purposes
of application of such incorporated sections to this letter agreement; (i) all
references in such sections to "Agreement" shall be deemed to be to this letter
agreement, (ii) all references in such sections to "Seller" shall be deemed to
be to Panda, and (iii) all references in such sections to "Party" shall be
deemed to be to PEPCO and/or Panda, as the context indicates, and all references
to "Parties" shall be deemed to be to both PEPCO and Panda. Additionally, for
purposes of application of the incorporated provisions of Section 19.8 of the
Power Purchase Agreement to this letter agreement, the reference to "Subsection
3.1(a)" in the first sentence of such subsection shall be deemed to be to "the
second to last paragraph of this letter agreement."
This letter agreement sets forth the entire understanding of PEPCO and
Panda with respect to the settlement of the disputes identified in the first
three paragra0hs of this letter agreement and supersedes any and all previous
understandings, whether oral or written, between PEPCO and Panda with respect to
such settlement. This letter agreement shall be binding upon and
<PAGE>
inure to the benefit of PEPCO and Panda, and their respective successors and
permitted assigns.
THIS LETTER AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY THE
LAWS OF THE STATE OF MARYLAND AND, TO THE EXTENT APPLICABLE, FEDERAL LAW,
WITHOUT REGARD TO ANY APPLICABLE CONFLICT OF LAW PROVISION. THE PARTIES HEREBY
SUBMIT TO THE JURISDICTION OF COURTS LOCATED IN, AND VENUE IS HEREBY STIPULATED
TO BE IN, BALTIMORE, MARYLAND.
PEPCO and Panda have considered whether something other than formal
approval for this letter agreement by the Maryland Public Service Commission and
the Public Service Commission of the District of Columbia may be appropriate and
based upon the advice of their respective counsels have each determined that no
such formal approvals will be required. In addition, the effectiveness of this
letter agreement is subject to PEPCO providing the prior notice to the Owner
Trustee, the Owner Participant, the Indenture Trustee and the Security Agent
required pursuant to Section 1.4 of the PEPCO Amended and Restated Consent and
Agreement. Panda must also obtain approvals required under its Financing
Documents. Each party will notify the other party in writing when it has
fulfilled all requirements to provide or obtain the foregoing notices and
approvals. This letter agreement will be effective on the first day after the
date on which Panda and PEPCO have each received such written notice from the
other party.
If the foregoing correctly reflects our understanding and is acceptable to
Panda, please do indicate by signing the enclosed duplicate original of this
letter in the space provided below and returning it to me at your earliest
convenience.
Sincerely,
Andrew W. Williams
ACCEPTED AND AGREED TO THIS 24th- DAY OF OCTOBER, 1997 BY PANDA-BRANDYWINE, L.P.
By Its General Partner,
Panda Brandywine Corporation
By: /S/ RALPH T. KILLIAN
Ralph T. Killian
Senior Vice President
<PAGE>
10/10/97
EXHIBIT I
Capacity Rates
PEPCO - Panda Agreement October 24, 1997
ACOD October 31, 1996
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
Appendix L Appendix L Adjusted Adjusted Annual Annual First Annual
Rates Rates Rate Rate Capacity Amendment Adjusted
S/kW/Mo. S/kW/Mo. Per GDP Per GDP Payment Adjustments Payments
Jan. to Oct. Nov. & Dec. Jan. to Oct. Nov. & Dec. ($ Millions) ($ Millions) ($ Millions)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 13.74 0.00 14.51 0.00 0.00 0.000
-------------------------------------------------------------------------------------------------------
1997 13.74 13.92 14.51 14.70 40.12 -15.00 25.121
-------------------------------------------------------------------------------------------------------
1998 13.92 14.12 14.70 14.91 40.66 -16.00 24.655
-------------------------------------------------------------------------------------------------------
1999 14.12 14.33 14.91 15.13 41.24 0.00 41.243
-------------------------------------------------------------------------------------------------------
2000 14.33 16.97 15.13 17.91 43.03 -1.00 42.035
-------------------------------------------------------------------------------------------------------
2001 16.07 17.13 16.96 18.08 47.33 2.00 49.334
-------------------------------------------------------------------------------------------------------
2002 16.90 17.14 17.84 18.09 49.35 0.00 49.346
-------------------------------------------------------------------------------------------------------
2003 16.93 16.93 17.88 17.88 49.34 0.00 49.340
-------------------------------------------------------------------------------------------------------
2004 16.93 16.92 17.88 17.87 49.34 0.00 49.335
-------------------------------------------------------------------------------------------------------
2005 16.94 16.94 17.88 17.88 49.36 0.00 49.356
-------------------------------------------------------------------------------------------------------
2006 16.49 17.33 17.41 18.29 48.45 0.00 48.451
-------------------------------------------------------------------------------------------------------
2007 16.63 16.63 17.56 17.56 48.45 0.00 48.454
-------------------------------------------------------------------------------------------------------
2008 16.61 16.69 17.54 17.62 48.45 0.00 48.448
-------------------------------------------------------------------------------------------------------
2009 16.49 17.33 17.41 18.30 48.46 0.00 48.461
-------------------------------------------------------------------------------------------------------
2010 17.16 17.71 18.12 18.70 50.27 0.00 50.270
-------------------------------------------------------------------------------------------------------
2011 18.10 20.32 19.11 21.45 53.82 -1.34 52.471
-------------------------------------------------------------------------------------------------------
2012 19.25 19.81 20.32 20.91 56.35 -7.87 48.489
-------------------------------------------------------------------------------------------------------
2013 18.89 19.17 19.94 20.24 55.18 -6.67 48.514
-------------------------------------------------------------------------------------------------------
2014 18.67 17.73 19.71 18.72 53.95 -5.47 48.489
-------------------------------------------------------------------------------------------------------
2015 18.74 14.88 19.79 15.71 52.74 -4.27 48.474
-------------------------------------------------------------------------------------------------------
2016 15.97 16.28 16.86 17.19 46.68 -3.07 43.616
-------------------------------------------------------------------------------------------------------
2017 15.55 15.89 16.42 16.77 45.47 -1.87 43.607
-------------------------------------------------------------------------------------------------------
2018 15.13 15.48 15.97 16.34 44.25 -0.67 43.588
-------------------------------------------------------------------------------------------------------
2019 14.72 15.08 15.54 15.92 43.06 0.53 43.599
-------------------------------------------------------------------------------------------------------
2020 14.32 14.71 15.12 15.53 41.91 1.73 43.648
-------------------------------------------------------------------------------------------------------
2021 14.04 0.00 14.82 0.00 34.09 2.28 36.369
-------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------
MARA 8.10%
- ----------------------------
MARA 9.84%
- ----------------------------
GDP Index 5.57%
- ----------------------------
Footnotes:
- ----------
Columns (5), (6) & (7) are subject to further adjustment in accordance with the
provisions of the Power Purchase Agreement other than Appendix L.
<PAGE>
APPENDIX "A" TO LETTER AGREEMENT
BETWEEN PEPCO AND PANDA
DATED OCTOBER 24, 1997, PAGE 1
APPENDIX "A"
ARTICLE 1
GENERAL
1.1 LETTER AGREEMENT AND PURPOSE OF THIS APPENDIX "A": Pursuant to the letter
agreement between Panda and PEPCO dated October 24, 1997 ("letter
agreement"), Panda has the right to broker sales of capacity, and sales of
energy, from the Brandywine Facility, as specifically described therein.
Under the letter agreement, such sales of capacity, and sales of energy,
are to be brokered by Panda under PEPCO's Power Sales Tariff on file with
FERC (Electric Tariff No. 4), the effective date of which is December 31,
1994. PEPCO has made certain representations to Panda as to how the rate
provisions of Electric Tariff No. 4 (the "Tariff") should be interpreted
in the specific context of these brokered sales of capacity, and sales of
energy, upon which Panda has relied in entering into the letter agreement.
The purpose of this Appendix "A" is to set forth these interpretations.
ARTICLE 2
THE RELEVANT PROVISIONS OF THE TARIFF
2.1 COMPENSATION FOR ECONOMY POWER TRANSACTIONS: Article 3, P. 3.1 of the
Tariff establishes compensation for Economy Power transactions. Such
compensation is to be as agreed between the Parties subject to a maximum
charge equal to the sum of the charges specified in Appendices 3-A or 3-B
and a minimum charge equal to System Incremental Cost. "System Incremental
Cost" is defined as "the sum of hourly production operating and
maintenance expenses for the system, operating capacity expenses (where
applicable), and other expenses incurred that would not have been incurred
by PEPCO if the Economy Power had not been supplied."
2.2 APPENDICES 3-A AND 3-B -- MAXIMUM CHARGES: Appendix 3-A, entitled "Units
Most Likely to Participate Method," establishes the method (and one
alternative
<PAGE>
method) for determining maximum rates for transactions not predicated on
PEPCO supplying power purchased from third parties, and the method for
determining maximum rates for transactions predicated on PEPCO supplying
power purchased from third parties. Appendix 3-B, entitled "Unit Sale
Method," sets forth the method for determining maximum rates for certain
PEPCO units, not including the Brandywine Facility.
ARTICLE 3
APPLICATION OF THE RELEVANT TARIFF PROVISIONS
TO THE LETTER AGREEMENT TRANSACTIONS
3.1 BROKERING OF CAPACITY: Under paragraph 2 of the letter agreement, Panda
has the right to broker a sale of capacity from the Brandywine Facility,
backed up by the PEPCO System, in certain amounts and for certain periods.
In order to provide this backup, under the letter agreement, PEPCO has
agreed to make available for brokering by Panda an amount of capacity from
the PEPCO System equal to any reduction in capacity available from the
Brandywine Facility, up to the amounts stated in the letter agreement.
3.2 RATE TREATMENT FOR SALES OF CAPACITY BROKERED BY PANDA: Under the Tariff,
the maximum demand charge for sales of capacity brokered by Panda shall be
as follows:
3.2.1 SALES OF INSTALLED CAPACITY FROM THE BRANDYWINE FACILITY TO BE
BACKED UP BY THE PEPCO SYSTEM: The letter agreement contemplates
that the Brandywine Facility will be backed up by PEPCO System
Capacity. The back-up capacity will be supplied if all or part of
the Brandywine Facility's installed capacity is unavailable during
the period of a brokered capacity sale, up to the maximum amount of
megawatts and periods of time specified in the letter agreement (see
letter agreement paragraph 2).
3.2.2 MAXIMUM CHARGE FOR CAPACITY FROM BRANDYWINE FACILITY: If the
capacity is supplied from the Brandywine Facility, the PEPCO charge
for sales of capacity under this section 3.2 shall be the brokered
price of the released capacity. This brokered price, plus the price
of the brokered energy (if any) related to the released capacity
(under section 3.4 below), comprises the total purchased power cost
to PEPCO. The maximum charge allowed under the Tariff, as specified
in Appendix 3-A (Part II), is 110% of this purchased power cost.
<PAGE>
3.2.3 MAXIMUM CHARGE FOR CAPACITY FROM PEPCO SYSTEM: If the capacity is
supplied from the PEPCO System, the maximum charge for sales of
capacity under this section 3.2 shall be the product of the Contract
Amount times the Maximum Demand Charge Rate calculated pursuant to
Schedule 2 of the Tariff, as specified in Appendix 3-A (Part I). For
purposes of this calculation, the Maximum Demand Charge Rate shall
be calculated on the basis of the original cost of PEPCO's System
Capacity as to time periods when the Brandywine Facility is
unavailable, and for the number of megawatts of installed capacity
from the Brandywine Facility that were unavailable.
3.2.4 MINIMUM CHARGE FOR CAPACITY FROM BRANDYWINE FACILITY: If the
capacity is supplied from the Brandywine Facility, the minimum
charge for sales of capacity described under this section 3.2 is
zero. This is because, under the letter agreement, PEPCO is required
to pay the capacity rate for the Brandywine Facility regardless of
whether a sale of released capacity is brokered by Panda; therefore,
if PEPCO sells the released capacity, there is no incremental
capacity cost to PEPCO for purposes of the SIC minimum charge
specified in Appendix 3-A (Part II) of the Tariff.
3.2.5 MINIMUM CHARGE FOR CAPACITY FROM PEPCO SYSTEM: If the capacity is
supplied from the PEPCO System, the minimum charge for sales of
capacity described under this section 3.2 is zero. This is because
the Demand Charge specified in Appendix 3-A (Part I) of the Tariff
is a ceiling rate.
3.3 BROKERING OF ENERGY: Under paragraph 3 of the letter agreement, Panda has
the right to elect to broker released energy from the Brandywine Facility.
The rates and terms for such brokered sales are to be consistent with the
Tariff.
<PAGE>
3.4 RATE TREATMENT FOR SALES OF RELEASED ENERGY BROKERED BY PANDA: Under the
Tariff, the maximum charge for energy is specified in Schedule 3, Appendix
3-A. The minimum charge is the System Incremental Cost, as defined in
Article 3, paragraph 3.1 of the Tariff.
3.4.1 SALES OF ENERGY RELATED TO INSTALLED CAPACITY: The letter agreement
contemplates that the Brandywine Facility will be backed up by PEPCO
System capacity. If the Brandywine Facility is not available, PEPCO
will interrupt sales of released energy brokered by Panda; provided,
however, PEPCO will continue the energy sale at a market rate if the
released energy transaction is related to a sale of released
capacity to serve load located outside the control area in which
PEPCO and the Brandywine Facility are located, and further provided,
Panda will attempt diligently to make energy available to PEPCO from
an alternative source for this purpose. Panda and PEPCO may mutually
decide that the alternative source will be the PEPCO System.
3.4.2 MAXIMUM CHARGE FOR SALES OF RELEASED ENERGY SUPPLIED FROM BRANDYWINE
FACILITY: For sales of released energy brokered by Panda and
supplied by the Brandywine Facility, the PEPCO charge under this
section 3.4 shall be the brokered price of the released energy. This
brokered price, plus the price of the brokered capacity (if any)
related to the sale of the released energy (under section 3.2
above), comprises the total purchased power cost to PEPCO. The
maximum charge allowed under the Tariff, as specified in Appendix
3-A (Part II), is 110% of this purchased power cost.
3.4.3 MAXIMUM CHARGE FOR SALES OF RELEASED ENERGY SUPPLIED FROM PEPCO
SYSTEM: If energy is supplied from the PEPCO System, the maximum
charge allowed by the Tariff, as specified in Appendix 3-A (Part I),
is 110% of PEPCO's SIC.
3.4.4 MINIMUM CHARGE FOR SALES OF RELEASED ENERGY SUPPLIED FROM BRANDYWINE
FACILITY: The minimum charge for sales of released energy brokered
by Panda is the incremental cost to PEPCO of supplying the energy.
If the energy is supplied from the Brandywine Facility, the
incremental cost to PEPCO is zero.
3.4.5 MINIMUM CHARGE FOR SALES OF RELEASED ENERGY SUPPLIED FROM THE PEPCO
SYSTEM: If energy is supplied from the PEPCO System pursuant to this
subsection 3.4 when the Brandywine Facility is not available, the
incremental cost to PEPCO is PEPCO's SIC, which may be the
incremental cost to PEPCO of operating its own resources or of
purchasing the energy from others.
3.5 RATE TREATMENT FOR "MIXED" SALES OF CAPACITY AND ASSOCIATED ENERGY
BROKERED BY PANDA: Under the Tariff, the maximum demand charge for sales
of capacity and energy brokered by Panda shall be the maximum demand
charge for capacity specified in paragraph 3.2.2 or 3.2.3 plus the maximum
energy charge specified in paragraph 3.4.2 or 3.4.3.
<PAGE>
ARTICLE 4
APPLICATION OF ALTERNATIVE TARIFF PROVISIONS
TO THE LETTER AGREEMENT TRANSACTIONS
4.1 ALTERNATIVE TARIFFS: If during the term of the letter agreement PEPCO
makes effective an alternative power sales tariff, or tariff provisions,
which permit PEPCO to sell energy or capacity brokered by Panda pursuant
to the letter agreement on terms at least as favorable to Panda as those
set forth herein, PEPCO may at its option carry out the letter agreement
by transacting pursuant to such tariff or tariff provisions in place of
the Tariff provisions referenced herein.
<PAGE>
June 30, 1998
Andrew W. Williams
Group Vice President - Energy & Market
Policy and Development
POTOMAC ELECTRIC POWER COMPANY
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068-0001
Dear Andy:
This letter pertains to the letter agreement between Pepco and
Panda-Brandywine, L.P. ("Panda") dated October 24, 1997 (the "Letter
Agreement"). The purpose of this letter is to memorialize the mutual
understanding of the parties as to three issues that have arisen in connection
with the interpretation and administration of the Letter Agreement.
First, on line 21 of page 6 of the Letter Agreement, reference is made to
"[t]he amount of released capacity sold to Panda . . .." The parties acknowledge
that this language refers to "released capacity" as defined in the first
sentence of Paragraph 2 of the Letter Agreement, which is to say, the sale by
Pepco to Panda of an exclusive right to broker the sale of certain capacity by
Pepco from the Brandywine Facility, as further set forth in Paragraph 2.
Consistent with the remainder of Paragraph 2 and the intent of the parties,
Pepco is to sell the released capacity to third parties as brokered by Panda,
not, sell the capacity to Panda for resale.
Second, at lines 17 through 19 of page 15, the Letter Agreement states
that "[p]ayment from Panda will be due in accordance with the payment provisions
of PEPCO's Power Sales Tariff (Electric Tariff No. 4) on file with FERC." In
accordance with section 5.2 of that Tariff, the parties have agreed that payment
from Panda will be
<PAGE>
Andrew W. Williams
June 30, 1998
Page 2
due on the 25th day of the month following the month in which the obligation to
make the payment was incurred, the same as the due date for payment pursuant to
the underlying Power Purchase Agreement between Pepco and Panda.
Third, the parties acknowledge that the Pepco Power Sales Tariff
referenced in the Letter Agreement, Appendix "A" to the Letter Agreement, and in
the previous paragraph of this letter has been designated by FERC as Electric
Tariff No. 1, not No. 4.
If the foregoing correctly reflects your understanding and is acceptable
to Pepco, please so indicate by signing the enclosed duplicate original of this
letter in the space provided below and returning it to me at your earliest
convenience.
Sincerely,
Ralph T. Killian
Executive Vice President
ACCEPTED AND AGREED TO THIS __ day of _______________, 1998 BY PEPCO By its
Group Vice President - Energy & Market
Policy and Development
By:___________________________
Andrew W. Williams
EXHIBIT 10.174
[PANDA PARIS POWER, LLC LETTERHEAD]
July 2, 1998
GE Power Systems and Sales
Re: Panda Paris Power, LLC ( "Panda")/Ercot I Project: Letter of Intent
Gentlemen:
Whereas GE Power Systems and Sales ("GE") and Panda are in substantial agreement
with regard to the commercial terms associated with the purchase of the
Equipment for the Panda Ercot I Project, it is agreed by the Parties to execute
a definitive contract document by August 15, 1998 that includes among other
terms and conditions the following provisions:
EQUIPMENT:
One lot of material as described in proposal GE-80160AG dated May 15, 1998,
which is incorporated herein by reference, ("GTG Units"), and GE STG units. The
equipment shall include Qty 4 PG7241 GT Units and Qty 2 nominal 170 MW TC2F30
STG Units (30" last stage buckets). Steam Turbine Scope is as preliminarily
defined per Exhibit A attached hereto except the last stage bucket is 30 inches.
EQUIPMENT PRICING:
Qty 4 PG7241 GT Units.......................................$ 104,000,000
Qty 2 TC2F30 nominal 170 MW STG Units.......................$ 34,000,000
EQUIPMENT DELIVERY:
Delivery will be FOB factory, with freight allowed for rail transportation to
the siding nearest the job site. Title will pass to Panda at the Delivery point,
but GE will retain risk of loss until the equipment reaches the rail siding at
the site. Delivery is scheduled as follows:
Gas Turbine Generator Units: 2 units by 10/31/99; 2 units by 12/15/99
Steam Turbine Generator Units: 1 unit by 10/15/99; 1 unit by 11/15/99
<PAGE>
Delivery dates are dependent on reaching a heads of agreement by July 24, 1998
and completion of the definitive contract document by August 15, 1998, and a
full steam turbine release (including finalization of heat balances) by August
1, 1998.
TERMS OF PAYMENT AND TERMINATION:
Payment terms are per attached Schedule "A". Should Panda terminate for
convenience, termination charges as indicated in Schedule "B" attached, shall be
payable. Credit will be given for payments received. GE shall have the right to
terminate the contract should Panda fail to fulfill its obligations under the
contract, and in such case, the termination charges will become payable. Panda
will pay in cash or Panda will provide a Letter of Credit, in form acceptable to
GE, in the amount of the termination charges less payments made to date.
LIQUIDATED DAMAGES - DELIVERY:
Delivery of the Equipment shall be subject to Liquidated Damages as indicated
herein:
A. Equipment Deliveries
For unit delays 1-15 days . . . .. . . . . . . . . . $15,000 /day per "unit"
For unit delays 16-30 days . . .. . . . . . . . . . $25,000 /day per "unit"
For unit delays > 30 days. . . .. . . . . . . . . . $50,000 /day per "unit"
LD's shall be capped at 20% of the price of the "unit" in question, and are the
sole and exclusive remedy for late delivery.
B. Substantial Completion:
Subject to GE's review and acceptance of Contractor's schedule for start up and
commissioning of the equipment (to insure adequate time for start up and
testing), in the event that Substantial Completion is delayed beyond
Contractor's guaranteed date, and the Owner assesses liquidated damages,
Contractor shall assess liquidated damages as follows:
<PAGE>
If during performance, demonstration, or reliability testing, GE's equipment
fails to perform according to the guarantees agreed upon and Panda assesses
damages, and is the sole cause of the failure to meet the Substantial Completion
date, GE shall pay to the Contractor LD's as follows:
For delays in Substantial Completion of 1-30 days . . . . . . . .$320,000 / day*
For delays in Substantial Completion of 31-60 days. . . . . . . .$370,000 / day*
For delays in Substantial Completion of > 60 days . . . . . . . .$470,000 / day*
* Figures are typical for a 1000 MW capacity. Actual LD's to reflect partial
operation.
If GE's equipment fails to perform according to the guarantees agreed upon and
in conjunction with other equipment causes a delay in achieving the Substantial
Completion Date, liquidated damages will be assessed to GE according to the
following formula:
Sum of (Days of delay due to GE's failure divided by (N * total days of
Delay)) multiplied by the days of delay beyond the Substantial Completion
Date multiplied by the figures above. For example, if GE causes a delay of
seven (7) days, along with three other parties, and the Substantial
Completion Date is not achieved until two (2) days after the Guaranteed
Date, and Panda assesses LD's, the LD's would be calculated as follows:
The sum of (7 days divided by 4 parties * 7 days) multiplied by 2 days,
times the amount per day. (7/28)*2 = 1/2 * 320,000 - $160,000.
LIQUIDATED DAMAGES - PERFORMANCE:
GE agrees to provide for payment of Liquidated Damages associated with failure
to meet performance guarantees of GT output and heat rate, and STG output and
heat rate. We understand that exact LD values have not been set, however the
typical values of $600/Kw and $125,000/BTU are agreeable. Overall combined cycle
design is the responsibility of Panda. GE reserves the right to perform its
obligations under the equipment warranties. LD's will be payable only to the
extent that Panda assesses such LD's for failure to meet required plant
performance due to the performance of GE equipment on GE.
<PAGE>
LIQUIDATED DAMAGES - OVERALL CAP:
Liquidated Damages shall be subject to an overall cap of thirty percent (30%) of
the Contract Price.
ASSIGNMENT:
This Agreement may be assigned by Panda (to Raytheon Engineers & Constructors,
Inc. without consent or to any other assignee with consent which will not be
unreasonably withheld) or superceded by subsequent contract between Panda or
such assignee and GE.
ACCEPTANCE:
Assuming the above proposal is acceptable, please sign below where indicated to
evidence your agreement to the terms stated herein.
GE POWER SYSTEMS AND SALES
By:
Name: Robert M. Terhune
Title: General Manager Southwest
PANDA PARIS POWER, LLC
By:
Name: Darol S. Lindloff
Title: President
<PAGE>
SCHEDULE A
($ IN MILLIONS)
PAYMENT SCHEDULE:
The Payment Schedule is as follows: CASH ONLY L/C CASH
07/02/98............................ $ 1.0 $0 $ 1.0
08/01/98............................ .5 .5 0
08/15/98............................ .6 .6 0
09/01/98............................ .6 .6 0
09/15/98............................ 1.2 1.2 0
10/01/98............................ 1.2 1.2 0
10/15/98............................ 1.35 1.35 0
11/01/98............................ 1.35 1.35 0
11/15/98............................ 1.9 0 12.0
12/01/98............................ 1.9 0 0
12/15/98............................ 2.1 .7 0
12/24/98............................ 33.0 0 33.0
01/01/99............................ (to be determined taking
02/01/99............................ into account the revised
03/01/99............................ equipment delivery dates
04/01/99............................ and a revised commercial
05/01/99............................ operations date of
06/01/99............................ August 1, 1998, as
07/01/99............................ 1998, as discussed between
08/01/99............................ GE and Panda on July 2,
09/01/99............................ 1998)
10/01/99............................
11/01/99............................
12/01/99............................
08/01/00............................
o all dollars US
<PAGE>
SCHEDULE B
($ IN MILLIONS)
CUMULATIVE TERMINATION CHARGES:
Should Panda terminate this contract, the following cumulative termination
charges will apply:
07/02/98............................ $ 1.0
08/01/98............................ 1.5
08/15/98............................ 2.1
09/01/98............................ 2.7
09/15/98............................ 3.9
10/01/98............................ 5.1
10/15/98............................ 6.45
11/01/98............................ 7.8
11/15/98............................ 9.7
12/01/98............................ 11.6
12/15/98............................ 13.7
01/01/99............................ 15.8
02/01/99............................ (to be determined taking
03/01/99............................ into account the revised
04/01/99............................ equipment delivery dates
05/01/99............................ and a revised commercial
06/01/99............................ operations date of
07/01/99............................ August 1, 1998, as
08/01/99............................ discussed between
09/01/99............................ GE and Panda on July 2,
10/01/99............................ 1998)
11/01/99............................
12/01/99............................
08/01/00............................
<PAGE>
STEAM TURBINE-GENERATOR
3.1 MAJOR EQUIPMENT DESCRIPTION
3.1.1 TURBINE
One (1) 3,600 RPM reheat, double flow, 40 inch last stage bucket,
steam turbine designed for nominal inlet throttle steam conditions
of 1846 psig, 1050(Degree)F, with 1050(Degree)F reheat temperature,
exhausting to 3.56" HgA, will include:
o Forged steel rotor with integral wheel geometry
- Mechanically attached, aerodynamic impulse type buckets
- Shroud bands at bucket tips
- Integral thrust runner and generator coupling
- Designed for thermal cyclic operation
o Cast alloy steel casing construction
- Casings split and machine ground at horizontal
centerline (for easier maintenance)
o Fabricated steel exhaust casing
o Centerline supported diaphragms
- Welded steel construction
- Split and keyed at horizontal joint
- Contains high performance nozzle profiles
- Support of spring-backed interstage shaft packing
- Contains radial spill strips (as required)
- Contains moisture removal devices in high moisture
regions (ears, dams and orifices)
o Cast babbitt-on-steel journal bearing design
- Replaceable without removing turbine casing upper half
- Bently-Nevada(R) probe assemblies for X+Y vibration
monitoring
o Front standard containing
- Pivoted shoe thrust bearing
- Three axial position probes for thrust position
monitoring
- Tilt pad journal bearing design with Bently-Nevada(R)
X+Y vibration probes
- Speed pick-ups
o Combined GE inlet stop and control valves
<PAGE>
- Integral wire mesh strainers
- Hard stem valve packing
- Hydraulic actuator assemblies (including power cylinder,
servo valve and feedback transducers)
- Stop valve hydraulic line flushing valve
- On-line test of valve stem freedom
- Valve supports
- Located off chest
- Air operated before and after seat drain valves
- Blowdown cover/gasket, acid wash cover and seat blanking
assembly
o GE reheat valves
- Integral wire mesh strainers
- Hard stem valve packing
- Hydraulic actuator assemblies (including power cylinder,
servo valve and feedback transducers)
- Stop valve hydraulic line flushing valve
- On-line test of valve stem freedom
- Valve supports
o Admission valves
- High performance butterfly type
- Hydraulic actuator assembly including power cylinder,
servovalve and feedback transducers
o Exhaust casing blowout diaphragm, with one spare
o Lagging
- Specifications for thermal lagging and piping insulation
- Appearance lagging/enclosure for HP/IP casing (outdoor
installation)
- Thermal lagging to maintain a maximum surface
temperature of 140(Degree)F at the 69(Degree)F ambient
day
- Acoustic treatment to lagging as required to meet site
acoustic level requirements - 85 dba (near field)
3.1.1.1 SEPARATE LUBRICATION AND HYDRAULIC OIL SYSTEMS
3.1.1.1.1 LUBRICATION SYSTEM
o Welded steel oil reservoir shipped fully assembled, wired and
sealed after factory flushing, including:
- Two (2) AC motor-driven vapor extractors and damper
valves
- Oil separator on vapor extractor suction
- Oil return tray and screen
<PAGE>
- Bearing pressure regulator
- Connections for oil supply to generator shaft seal
system
- Permissive valve for maintaining oil supply to generator
seals during bearing inspection
- Terminal strips for field wiring
- Relief and access doors
- Connections for draining and cleaning
- Provisions for lifting fully assembled reservoir
- CO2 connections
o Two (2) full capacity AC motor-driven lube and seal oil pumps,
including:
- Inlet strainer baskets
- Starting pressure switches
- Service capability without draining reservoir
o One (1) DC motor-driven emergency lube oil pump including:
- Inlet strainer basket
- Starting pressure switch
- Service capability without draining reservoir
- DC motor starter
o One (1) DC motor driven emergency seal oil pump including:
- Inlet strainer basket
- Starting pressure switch
- Service capability without draining reservoir
- DC motor starter
o Two (2) full capacity oil coolers
- Mounted on end of reservoir
- Designed for fresh cooling water with maximum conditions
of 105(Degree)F (35(Degree)C) and 125 psig (8.78 kg/cm2)
- Cooling water regulator sensor
- 3-way diverter valve
o Pump test system
o Control instrumentation console with manual pump test valves
3.1.1.1.2 HYDRAULIC POWER UNIT FOR USE WITH FIRE RESISTANT FLUID
o Stainless steel reservoir with cleanout and drains
o Two (2) AC motor-driven, pressure-compensated variable
displacement type pumps with automatic air bleed valve for
starting, and relief valve for overpressure
<PAGE>
o High-pressure filters after pump discharge
o Stainless steel interconnecting piping on reservoir
o Gas charged fluid accumulators
o Emergency trip system
- Two (2) normally energized DC trip devices (ETD's)
- Off-line testing capability of each ETD (generator
breaker open)
o Manual hydraulic header bypass for cold start
o Pre-wired at the factory with all external connections
(excluding motors) made to terminals or terminal boards
o Air dryer and reservoir vent (desiccant type)
o Heating and cooling system with thermostat to maintain fluid
temperature, incorporating a single, 100% capacity, air/fluid
heat exchanger
o Fluid conditioning unit including:
- Circulating pump
- Selexsorb filter and cartridge type polishing filter
- Connections for filling and draining the unit
o Instrument panel with test valves and gauges
3.1.1.1.3 LUBE OIL CONDITIONING SYSTEM
o Turbo-TOC KLC-30 lube oil conditioner
- Skid mounted, pressure coalescing system
- Removes up to 99.5% of free and emulsified water
- Removes up to 98.7% of solid contaminants when used in
conjunction with the full-flow filters
3.1.2 CONTROL SYSTEM
3.1.2.1 GE MARV V TMR (TRIPLE MODULAR REDUNDANT)
o Control functions
- Speed control
- Load/load limit (valve position)
- Load runback from external signal
- Inlet pressure limiting
<PAGE>
- Auto transfer between inlet pressure control and
speed/load functions
- Remote speed raise/lower contact inputs
- Remote speed/load contact inputs
- Megawatt control
o Turbine Generator Protectives
- Speed, three (3) channels
- Emergency overspeed, three (3) channels with
two-out-of-three voting logic
- Axial position alarm and trip, three channels
- Bearing vibration (Bently-Nevada(R)), "X" and "Y"
directions
- Differential expansion alarm and trip
- Eccentricity
- Exhaust pressure, temperature
- Lube and control fluid pressure
- Lube and control fluid level
o On and off-line testing
- Primary overspeed
- Electrical trip devices
- Emergency overspeed
o Monitoring of discrete contact and variable signals
o Automation of setpoints and ramps for speedset, load targets
and ramp rates
o Operator controls consist of:
- A personal computer (33 MHz, 486)
- Color graphics CRT, 19" table-top mounted
- Keyboard
- Mouse or track ball
- Trip and reset buttons
- HP paint jet III color printer
o Redundant 115V or 230V AC primary power supplies
o NEMA 4 junction boxes
3.1.3 GENERATOR - HYDROGEN COOLED
o 18,000 volts, 60 Hz
o Line terminals and neutral terminals mounted at collector end
of generator, leads down in lower-frame extension (terminal
box)
<PAGE>
o 0.90 power factor (lagging)
o Generator rotation - clockwise (viewed from collector end of
the generator)
o Proximity probes and proximeters
o Conventional cooled stator
o Direct cooled rotor
- Rotor balanced to (less than or equal to) two (2.0) mils
(peak-to-peak at 3600 rpm)
- Ground brush rigging
o Generator terminal enclosure
- Conventional cooled high voltage bushings (HVB)
- Generator leads exit bottom
- C400 CT's
- Line leads inboard of neutral leads at collector end of
generator
- 36 inch centerline spacing for iso-phase bus
connection
- Phase sequence left-center-right (RCL) as viewed
from collector end (CE)
o Generator from prime painted
o Compact collector enclosure with ac lighting
o Generator cooling system
- Generator hydrogen coolers
- Four (4) vertical single-pass coolers
- 90-10 Cu-Ni tubes
- Carbon steel tube sheets
- ASME code stamp
- Coolers shipped installed in generator
- Hydrogen system
- Gas purge control manifold - shipped loose
- Removable spool piece for H2/CO2 gas supply
o Lubrication system integral with steam turbine lubrication
system
- Bearing Lube Oil
- One (1) oil drain sight flow per bearing
- Lube oil pressure valve and gauge
- Seal oil system
- Seal oil control unit
- Stainless steel seal oil feed piping
<PAGE>
- Carbon steel seal oil drain piping
- Seal drain enlargement liquid level detector
- Two (2) carbon steel seal drain enlargement
- Carbon steel float trap
o Bearings
- Bearings drain electronic temperature device - one (1)
dual element
o Generator temperature monitoring devices
- Nine (9) stator slot RTD's
- Collector air inlet RTD
- Collector air outlet RTD
- GTG-2 common cold gas RTD (for customer's use)
- RTD's are 100 ohm platinum
o Static bus fed excitation system
- Forced air cooled potential source
- EX2000 digital controls
- Under excitation limited (UEL)
- Reactive current compensator
o Generator collector ring assembly
- Two (2) shrunk-on rings
- Shaft-mounted fan
o Compact collector enclosure
- Structural steel brush holder rigging base
- AC lighting and convenience outlets
3.1.3.1 GENERATOR CONTROL PANEL (MOUNTED IN CUSTOMER CONTROL ROOM)
3.1.3.1.1 GENERATOR CONTROL PANEL FEATURES (SHIP LOOSE)
3.1.3.1.1.1 GENERATOR BREAKER TRIP SWITCH (52G/CS)
3.1.4 AC MOTOR-DRIVEN TURNING GEAR
o Engaging lever for local manual engagement
o Engage and disengage limit switches
o Solenoid valve in air supply used for remote or automatic
engagement
o Pressure switch interlock to prevent operation without
adequate lube oil supply
<PAGE>
o Hand crank provisions for emergency manual operation
o Remote jog pushbutton extension cable, with remote jog control
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-END> JUN-30-1997 JUN-30-1998
<CASH> 95,757,371 84,316,631
<SECURITIES> 0 0
<RECEIVABLES> 9,786,837 10,427,032
<ALLOWANCES> 0 0
<INVENTORY> 6,264,549 7,041,373
<CURRENT-ASSETS> 112,066,634 102,013,947
<PP&E> 331,122,400 354,804,895
<DEPRECIATION> (38,114,058) (43,964,336)
<TOTAL-ASSETS> 491,881,769 485,376,816
<CURRENT-LIABILITIES> 25,994,144 30,093,865
<BONDS> 349,667,769 347,416,044
0 0
0 0
<COMMON> 10 10
<OTHER-SE> (133,940,235) (148,012,360)
<TOTAL-LIABILITY-AND-EQUITY> 491,881,769 485,376,816
<SALES> 32,570,542 34,907,604
<TOTAL-REVENUES> 35,484,982 39,284,491
<CGS> 13,628,706 11,096,015
<TOTAL-COSTS> 18,495,256 17,933,879
<OTHER-EXPENSES> 6,312,496 6,675,174
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 25,025,925 29,237,186
<INCOME-PRETAX> (14,348,695) (14,561,748)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (14,348,695) (14,561,748)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,348,695) (14,561,748)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
