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 March 31, 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 May 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 5
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 6. Exhibits and Reports on Form 8-K 6
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 BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
December 31 March 31
1997 1998
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 2,929,289 $ 1,653,293
Restricted cash - current ............................... 92,828,082 75,722,413
Accounts receivable ..................................... 9,786,837 10,997,365
Fuel oil, spare parts and supplies ...................... 6,264,549 6,365,651
Other current assets .................................... 257,877 280,944
------------- -------------
Total current assets .................................. 112,066,634 95,019,666
Plant and equipment:
Electric generating facilities .......................... 291,515,328 292,358,814
Furniture and fixtures .................................. 533,663 542,885
Less: accumulated depreciation .......................... (38,114,058) (41,031,745)
Construction in progress ................................ 36,131,069 43,931,416
Development costs ....................................... 2,942,340 2,942,340
------------- -------------
Total plant and equipment, net ........................ 293,008,342 298,743,710
Investment in joint venture ............................... 836,654 836,654
Restricted cash - debt service reserves and escrow deposits 72,430,527 76,727,217
Debt issuance costs, net of accumulated
amortization of $1,583,368 and $1,996,293 respectively .. 13,539,612 13,136,688
------------- -------------
$ 491,881,769 $ 484,463,935
============= =============
</TABLE>
See accompanying notes to condensed 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 March 31
1997 1998
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ................................. $ 5,600,000 $ 5,200,000
Interest and letter of credit fees ................. 9,697,648 11,405,836
Operating expenses and other ....................... 4,879,522 2,651,470
Current portion of long-term debt .................... 5,816,974 5,922,470
------------- -------------
Total current liabilities ........................ 25,994,144 25,179,776
Deferred revenue ....................................... 13,140,387 12,984,390
Long term debt, less current portion ................... 349,667,769 348,431,639
Capital lease obligation ............................... 231,278,528 234,218,456
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) (54,907,481)
Accumulated deficit .................................. (81,201,854) (87,184,021)
------------- -------------
(133,940,225) (142,091,492)
------------- -------------
$ 491,881,769 $ 484,463,935
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
1997 1998
------------ ------------
REVENUE:
Electric capacity and energy sales ........... $ 17,329,693 $ 16,611,008
Steam and chilled water sales ................ 130,582 189,938
Interest income .............................. 429,727 2,272,754
------------ ------------
17,890,002 19,073,700
------------ ------------
EXPENSES:
Plant operating expenses ..................... 8,261,187 4,661,158
Project development and administrative ....... 2,395,022 2,430,519
Interest expense and letter of credit fees ... 10,801,629 14,633,578
Depreciation ................................. 2,948,878 2,917,687
Amortization of debt issuance costs .......... 173,807 412,925
------------ ------------
24,580,523 25,055,867
------------ ------------
NET LOSS ....................................... $ (6,690,521) $ (5,982,167)
============ ============
See accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- ADVANCES ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT TO PARENT DEFICIT DEFICIT
------ ------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 ............................. 1,000 $ 10 $(52,738,381) $(81,201,854) $(133,940,225)
Advances to parent, net ............................. -- -- (2,169,100) -- (2,169,100)
Net loss ............................................ -- -- -- (5,982,167) (5,982,167)
------ ------ ------------ ------------ -------------
BALANCE, March 31, 1998 .............................. 1,000 $ 10 $(54,907,481) $(87,184,021) $(142,091,492)
====== ====== ============ ============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss .................................................. $(6,690,521) $ (5,982,167)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation .......................................... 2,948,878 2,917,687
Amortization of debt issuance costs ................... 173,807 412,925
Amortization of loan discount and deferred
interest on capital lease obligation ................ 5,380,052 5,794,925
Changes in assets and liabilities:
Accounts receivable ..................................... 183,066 (1,210,528)
Fuel oil, spare parts and supplies ...................... 1,015,869 (101,102)
Other current assets .................................... (69,680) (23,067)
Accounts payable and accrued expenses ................... (4,852,153) (519,864)
----------- ------------
Net cash provided (used) by operating activities ...... (1,910,682) 1,288,809
----------- ------------
INVESTING ACTIVITIES:
Restricted cash - current ................................. 2,694,706 17,105,669
Additions to property, plant and equipment ................ (4,415,625) (9,053,055)
Restricted cash - debt service reserves and escrow deposits -- (4,296,690)
----------- ------------
Net cash provided (used) by investing activities ...... (1,720,919) 3,755,924
----------- ------------
FINANCING ACTIVITIES:
Advances (to) from parent ................................. 5,220,899 (2,169,100)
Deferred revenue .......................................... -- (155,997)
Repayment of long term debt ............................... (1,592,257) (1,375,122)
Repayment of capital lease obligation ..................... -- (2,610,509)
Debt issuance costs ....................................... (134,056) (10,001)
----------- ------------
Net cash provided (used) by financing activities ...... 3,494,586 (6,320,729)
----------- ------------
Increase (decrease) in cash and cash equivalents ............ (137,015) (1,275,996)
Cash and cash equivalents, beginning of period .............. 1,335,086 2,929,289
----------- ------------
Cash and cash equivalents, end of period .................... $ 1,198,071 $ 1,653,293
=========== ============
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Accrued construction costs ................................ $ -- $ 5,200,000
Interest expense on capital lease obligation .............. 5,380,052 5,550,437
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-5
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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.
F-6
<PAGE>
All material intercompany accounts and transactions have been eliminated
in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1997. The accompanying unaudited
condensed consolidated financial statements for the three-month periods ended
March 31, 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 three months
ended March 31, 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 $1,110,000 and $1,100,000 for the three months ended March 31, 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 $43.9 million as of December 31, 1997 and March 31, 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 $25.0 million as of December 31, 1997 and March 31,
1998, respectively.
KATHLEEN PROJECT - The Company has incurred costs on the Kathleen Project
of $2.9 million as of December 31, 1997 and March 31, 1998. Such costs are
included in plant and equipment under development costs in the accompanying
balance sheets. 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 PSC
issued an order denying further extension of the previously granted
F-7
<PAGE>
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.
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 a
tentative agreement with PEPCO under which 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 final fifteen years of the Power Purchase
Agreement. The agreement provides that PEPCO will pay to Panda-Brandywine within
two business days following the effective date of the settlement (as discussed
below) 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. In October 1997, PEPCO commenced
increased capacity payments to the Company under the terms of the tentative
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 effectiveness of the agreement with PEPCO
is subject to the consent of the financing parties, including GECC, under the
capital lease financing arrangements for the facility. In this regard,
Panda-Brandywine has commenced discussions with GECC and the other financing
parties concerning such consents, and has executed an agreement in principle
with GECC. Among other things, this agreement in principle 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. The finalization of the tentative agreement is subject to
several conditions, including but not limited to written consents from all other
financing parties and other applicable parties, receipt of legal opinions
concerning the tax and regulatory consequences of the transaction, and the
preparation of definitive legal documentation of the transaction to the
satisfaction of all parties involved.
Raytheon constructed the Brandywine Project pursuant to a fixed-price,
turnkey engineering, procurement and construction contract (the "Brandywine EPC
Agreement") with Panda-Brandywine. Raytheon completed the construction and
start-up of the Brandywine Project and has met the requirements for commercial
operations and substantial completion under the Brandywine EPC Agreement,
although the date on which commercial operations were achieved and the
entitlement of Raytheon to certain early completion bonuses under the Brandywine
EPC Agreement are the subject of a dispute between Panda-Brandywine and
Raytheon. The Company estimates that the amount in dispute is less than $1
million and believes that the resolution of this dispute will not have a
material adverse effect upon the financial position, results of operations or
cash flows of the Company.
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 asks the court to determine and
clarify the rights of the parties to the contract. The
F-8
<PAGE>
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 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.
F-9
<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 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 QUARTER 1998 COMPARED TO 1997
The Company recorded a net loss of $5,982 in the first quarter of 1998 on
revenues of $19,074 compared to net loss of $6,690 on revenues of $17,890 during
the same period in 1997. The increase in revenues in the 1998 period was
primarily caused by increased interest income, partially offset by a decrease in
operating revenues at the Rosemary and Brandywine facilities. The increase in
interest income resulted primarily from higher restricted cash balances
attributable to the Luannan Facility construction project. For the 1998 and 1997
periods, capacity revenues for the Rosemary Facility were $6,922 for each
period. Energy revenues for the Rosemary Facility for the 1998 and 1997 periods
were $4 and $153, respectively. The decrease in energy revenues for the Rosemary
Facility is
-1-
<PAGE>
attributable to lower 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 quarter of 1998 and 1997 were $6,831 and
$5,035, respectively. Capacity revenues for the Brandywine Facility for 1997
were lower than originally anticipated due to a disagreement with PEPCO over the
calculation of the capacity payments. As discussed in Note 4 to the condensed
consolidated financial statements, the Company and PEPCO have reached a
tentative agreement under which PEPCO will pay approximately $3.8 million to the
Company for the retroactive effect of higher capacity payments for the first
nine months of 1997. In October 1997, PEPCO commenced increased capacity
payments to the Company under the terms of the tentative agreement. The
agreement is subject to the consent of the financing parties. Energy revenues
from PEPCO for the Brandywine Facility for the first quarter of 1998 and 1997
were $2,769 and $2,546, 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 quarter of 1998 and
1997, the Brandywine Facility had energy revenues of $85 and $2,674,
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 $4,661 (24% of revenues) in
the 1998 period from $8,261 (46% 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 $2,431 (13% of
revenues) and $2,395 (13% of revenues) for the 1998 and 1997 periods,
respectively. The slight increase in 1998 was primarily attributable to
inflation.
Interest expense increased to $14,634 (77% of revenues) in the 1998 period
from $10,802 (60% 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 $3,331 (17%
of revenues) in the 1998 period and $3,122 (17% 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 $5,982 and $6,691 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
-2-
<PAGE>
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 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.
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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 being 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. Further discussion of this matter is
set forth in the registrant's Annual Report on Form 10-K for the
year ended December 31, 1997. 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 has appealed this ruling to the Court of
Appeals Fifth District Court of Texas at Dallas. Oral arguments
regarding this appeal currently are set for May 1998. Further
discussion of this matter is set forth in the registrant's Annual
Report on Form 10-K for the year ended December 31, 1997. The
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<PAGE>
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.
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 asks the court to determine
and clarify the rights of the parties to the contract. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the registrant's Annual Meeting of Stockholders on March 18,
1998, there were no matters voted upon other than the elections of
directors. No proxies were solicited in regard to such meeting. Mr.
Robert W. Carter was unanimously elected as Director, and Mr. Brian
G. Trueblood was unanimously elected as Independent Director, of the
registrant. No other directors were elected at such annual meeting,
and the registrant has no other director whose term continued after
such annual meeting.
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
27.01 Financial Data Schedule. (1)
10.94.01 Second Amended and Restated On-Shore Operation and Maintenance
Agreement, Commercial Operations Phase, By and Between Tangshan
Panda Heat and Power Co., LTD., Tangshan Pan-Western Heat and Power
Co., LTD., Tangshan Cayman Heat and Power Co., LTD., Tangshan
Pan-Sino Heat Co., LTD. and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.94.02 Second Amended and Restated On-Shore Operation and Maintenance
Agreement, Construction Phase, By and Between Tangshan Panda Heat
and Power Co., LTD, Tangshan Pan-Western Heat and Power Co., LTD,
Tangshan Cayman Heat and
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<PAGE>
Power Co., LTD, Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor
Daniel International Services, January 1, 1998. (1)
10.94.03 Offshore Services Agreement, Commercial Operation Phase, By and
Between Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western
Heat and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.94.04 Offshore Services Agreement, Construction Phase, By and Between
Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western Heat
and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.138.06 Change Order No. 006 to EPC Contract, dated April 21, 1998. (1)
- ----------
(1) Filed herewith.
(b) The registrant filed a Report on Form 8-K (reflecting disclosure
under "Item 5. - Other Events") with the Securities and Exchange
Commission on February 19, 1998. No financial statements were
included in such filing.
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<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: May 14, 1998 By:/s/JANICE CARTER
Janice Carter
Executive Vice President, Secretary
and Treasurer
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
27.01 Financial Data Schedule. (1)
10.94.01 Second Amended and Restated On-Shore Operation and Maintenance
Agreement, Commercial Operations Phase, By and Between Tangshan
Panda Heat and Power Co., LTD., Tangshan Pan-Western Heat and Power
Co., LTD., Tangshan Cayman Heat and Power Co., LTD., Tangshan
Pan-Sino Heat Co., LTD. and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.94.02 Second Amended and Restated On-Shore Operation and Maintenance
Agreement, Construction Phase, By and Between Tangshan Panda Heat
and Power Co., LTD, Tangshan Pan-Western Heat and Power Co., LTD,
Tangshan Cayman Heat and Power Co., LTD, Tangshan Pan-Sino Heat Co.,
LTD and Duke/Fluor Daniel International Services, January 1, 1998.
(1)
10.94.03 Offshore Services Agreement, Commercial Operation Phase, By and
Between Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western
Heat and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.94.04 Offshore Services Agreement, Construction Phase, By and Between
Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western Heat
and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
Services, January 1, 1998. (1)
10.138.06 Change Order No. 006 to EPC Contract, dated April 21, 1998. (1)
EXHIBIT 10.94.01
SECOND AMENDED AND RESTATED
ON-SHORE
OPERATION AND MAINTENANCE AGREEMENT
COMMERCIAL OPERATIONS PHASE
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.
TANGSHAN PAN-WESTERN HEAT AND POWER CO.. LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
<PAGE>
SECOND AMENDED AND RESTATED
ON-SHORE
OPERATION AND MAINTENANCE AGREEMENT
COMMERCIAL OPERATIONS PHASE
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.,
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
RECITALS:
THIS AMENDED AND RESTATED OPERATION AND MAINTENANCE AGREEMENT is made and
entered into on the 1st day of January, 1998, by and between Tangshan Panda Heat
and Power Co., Ltd., a Chinese Joint Venture company ("Tangshan Panda"),
Tangshan Pan- Western Heat and Power Co., Ltd., a Chinese Joint Venture company
("Tangshan Pan- Western"), Tangshan Cayman Heat and Power Co., Ltd., a Chinese
Joint Venture company ("Tangshan Cayman") and Tangshan Pan-Sino Heat Co., Ltd.,
a Chinese Joint Venture company ("Tangshan Pan-Sino") (collectively, hereinafter
referred to as "Owner"), and Duke/Fluor Daniel International Services, a general
partnership formed in the State of Nevada by Duke Coal Project Services Pacific,
Inc., a Nevada corporation, and Fluor Daniel Asia, Inc., a Delaware corporation,
(hereinafter referred to as "Operator"), individually referred to hereinafter as
"Party" and collectively as "Parties."
WHEREAS, Duke Coal Project Services Pacific, Inc. entered into a
Partnership Agreement dated September 1, 1994 with Fluor Daniel Asia, Inc. to
form the partnership to be known as Duke/Fluor Daniel International Services;
WHEREAS, Owner and North China Power Group Company, a Chinese company (the
"Utility") entered into an Electric Energy Purchase and Sales Agreement dated
September 22, 1995, pursuant to which Owner intends to construct and operate two
nominal 5OMW coal-fired electric and thermal energy cogeneration power
generation stations (collectively, the "Facilities") in Luannan County near the
city of Gujiaying, Hebei Province, the People's Republic of China and pursuant
to which Owner will sell and the Utility will purchase electrical energy
produced by the Facilities and Owner shall sell steam and heat to local
businesses;
WHEREAS, Owner and Harbin Power Engineering Company, Limited, a Chinese
company (the "EPC Contractor") have entered into a turnkey Engineering,
Procurement and Construction Agreement dated April 24, 1996 (the "EPC Contract")
a copy of which has previously been furnished to Operator pursuant to which the
EPC Contractor thereunder will design, construct, test and startup the
Facilities:
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WHEREAS, Owner desires to have Operator provide pre-commercial and
post-commercial operation and maintenance services at the Facilities and
Operator desires to provide such services;
WHEREAS, Owner and Duke/Fluor Daniel International Services, Inc. entered
into the Operation and Maintenance Agreement dated June 26, 1996 and where
Duke/Fluor Daniel International Services, Inc. was characterized incorrectly as
a Nevada corporation; and
WHEREAS, the Operation and Maintenance Agreement dated June 26, 1996 was
superseded by an Amended and Restated Operation and Maintenance Agreement dated
as of March 6, 1997;
WHEREAS, the parties have allocated the services to be provided into four
separate contracts; two of which relate to off-shore services, one during the
Construction Phase and one during the Commercial Operations, and two of which
relate to on-shore services, one during the Construction Phase and one during
the Commercial Operations; and
WHEREAS, the parties have agreed that the Amended and Restated Agreement
of March 6, 1997, is superseded by the four Agreements described above, one of
which is this Second Amended and Restated On-shore Operation and Maintenance
Agreement, Commercial Operations Phase, dated as of the date first written
above.
NOW, THEREFORE, in consideration of the foregoing and of the premises
hereinafter contained, Owner and Operator agree as follows:
SECTION I
DEFINITIONS
Whenever the following terms appear in this Agreement, they shall have the
following meanings:
"Affiliate" shall mean, with respect to any corporation, a corporation
which controls, is controlled by, or is under common control with such
corporation or successor thereto.
"Agreement" shall mean this Operation and Maintenance Agreement made and
entered into on the date set forth above by and between Tangshan Panda Heat and
Power Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd., Tangshan Cayman
Heat and Power Co., Ltd., Tangshan Pan-Sino Heat Co., Ltd., and Duke/Fluor
Daniel International Services.
"Annual Budget" shall mean the budget of all costs and expenses
anticipated to be incurred by Operator to meet its obligations under this
Agreement during any calendar year, or part thereof.
"Annual Outage Period" shall mean the annual period from November 1
through October 31 each year.
"Approved Budget" shall mean the annual budget prepared and submitted by
Operator pursuant to Section 2.17 hereof, which has been approved by Owner.
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"Authorization To Proceed" shall mean Owners' written notice to Operator
to commence the work required by this Agreement.
"Claims" shall have the meaning given such term in Section 8.03A. hereof.
"Commencement Date" shall mean the calendar date upon which Operator is to
commence the work required by this Agreement as specified in the Authorization
to Proceed.
"Commercial Operation Date" shall mean the date upon which Owner's
Facilities start regular delivery of their electric energy delivered to the
Utility's Grid which shall be determined by the Utility and Owner after approval
of 72 hour full-load testing operation by both the generation units of Owner's
Facilities.
"Consumables" shall have the meaning set forth in Section 2.07 hereof.
"EPC Contract" shall mean the Turnkey EPC Contract between Owner and EPC
Contractor relating to the design, procurement, construction, testing and
starting up of the Facilities as the same may be amended, supplemented or
modified from time-to-time.
"EPC Contractor" shall mean Harbin Power Engineering Company Limited, a
Chinese company.
"Facilities" shall mean two nominal 50 MW coal-fired electric and thermal
energy cogeneration power stations and steam and hot water distribution systems
to be built by Owner in Luannan County near the city of Gujiaying in Hebei
Province, The People's Republic of China to supply electrical energy to the
Utility and thermal energy to a number of Chinese companies in Luannan County
and all equipment contained therein and parts thereof. It shall include, without
limitation, the fuel receiving and storage facility, all fuel delivery equipment
from the fuel storage facility to the balance of the Facility, interconnection
facilities to interconnect disconnect switch with the Utility (that is on the
high side of Owner's step-up transformer) and other auxiliary equipment and
systems described in the EPC Contract. It shall also include the steam and hot
water distribution systems, including, without limitation, piping, heat
exchangers, valves, controls, and insulation, to be built under separate
contracts, up to the interconnect point at each individual customer.
"Facilities Funding Date" shall mean the date upon which the initial loans
are made by the Lenders to Owner.
"Heat Rate" shall mean the net electrical output divided into the thermal
input expressed in British Thermal Units Per Kilowatt Hours (BTU/kWh) at a
specific process steam flow and condition.
"Indemnitee" shall have the meaning set forth in Section 8.03A. hereof.
"Lender" and "Lenders" shall mean Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
4
<PAGE>
"Loan Documents" shall mean the relevant documentation executed between
the Lender(s) and Owner for the financing of the Facilities and any other
financing documents as may be amended from time-to-time, excerpts of which are
attached hereto as Exhibit C.
"Lost Work Day" shall mean any employee lost work day resulting from an
on-the-job injury or illness.
"Net Facilities Output" shall mean the power output of the Facilities in
Kilowatts (kW) measured at the high voltage side of the main power transformer.
"Notice to Proceed for the EPC Contract" shall mean a written notice from
Owner to the EPC Contractor directing the EPC Contractor to commence the
performance of the EPC Contract work.
"Operator" shall mean Duke/Fluor Daniel International Services.
"Owner" shall mean collectively Tangshan Panda Heat and Power Co., Ltd., a
Chinese Joint Venture company, Tangshan Pan-Western Heat and Power Co., Ltd., a
Chinese Joint Venture company, Tangshan Cayman Heat and Power Co., Ltd., a
Chinese Joint Venture company, and Tangshan Pan-Sino Heat Co., Ltd., a Chinese
Joint Venture company.
"Owner's Account" or "Account of Owner" shall have the meaning set forth
in Section 4.02 of this Agreement.
"Owner's Representative" shall have the meaning set forth in Section 3.01
of this Agreement.
"Outage" shall mean any interruption of required (dispatched) electric
energy deliveries (as set forth in Sections 2.1 and 2.2 of the Electric Energy
Purchase and Sales Agreement) to the Utility's Grid by Owner's Facilities.
"Outage Days" shall mean the cumulative elapsed outage time of any type
for each 50 MW unit of the Facilities calculated for each Annual Outage Period.
Outage Days will be calculated on an actual time elapsed basis. (For example,
twenty-four (24)one (1) hour outages shall be equal to one (1) day). Outage Days
do not include the time when the Utility dispatches the unit(s) off-line or the
Utility is unable to accept electrical energy due to Force Majeure conditions.
"Plant Manager" shall mean Operator's on-site employee responsible for the
operation and maintenance of the Facilities.
"Power Agreement" shall mean the Electric Energy Purchase and Sales
Agreement, and the General Interconnection Agreement, both dated as of September
22, 1995, the Supplemental Agreement dated February 10, 1996 and the technical
interconnect dispatch agreement (to be executed prior to the Commercial
Operation Date), relevant excepts of which are attached hereto as Exhibit A, all
between Owner and the Utility.
"Prudent Utility Practices" shall mean those practices generally followed
by the United States electric utility industry with respect to the operation and
maintenance of electric generating facilities (including, but not limited to,
the operation and safety practices generally followed by the electric utility
industry), to the extent reasonably possible, unless otherwise directed in
writing by Owner or
5
<PAGE>
otherwise required for financing of the Facilities. Operator will not be
responsible, however, for any failure to comply with those standards, or
portions thereof, where that failure is caused or necessitated by differences
between Chinese Prudent Utility Practices (or the like) and those of the United
States, or by workforce or industry customs in China that make compliance by
Operator with United States Prudent Utility Practices imprudent or impractical.
"Reimbursable Costs" or "Reimbursable Cost" shall mean all reasonable and
actual direct costs properly incurred.
"Scheduled Commercial Operation Date" shall mean the expected date which
the Facilities achieve Commercial Operation Date which is estimated to be
November 1, 1998. Owner may change the Scheduled Commercial Operation Date by
giving two hundred and forty (240) days prior written notice to Operator.
"Scheduled Annual Overhaul Outages" shall mean those planned outages of
the Facilities applied for by the Operator and approved and scheduled by the
Utility annually in advance of the November 1 to October 31 annual period.
"Scheduled Outage" shall mean those times the unit(s) are scheduled
off-line by the Utility or Operator's request in advance such that they are not
dispatched to produce electric energy by the Utility.
"Site" shall mean that real property upon which the Facilities are
located.
"Utility" shall mean North China Power Group Company, a Chinese company
organized under the laws of China.
"$" shall mean United States Dollars.
SECTION II
SERVICES TO BE PERFORMED BY OPERATOR
Operator will provide all operation and maintenance services necessary for
the efficient, sound and effective operation of the Facilities so as to enable
the Facilities to satisfy the requirements set forth in the Power Agreement,
attached as Exhibit A hereto and which may be amended from time-to-time, and to
maintain the Facilities in good mechanical and operating repair and condition
all in accordance with Prudent Utility Practices. Without limiting the
generality of the foregoing, Operator shall do the following:
2.01 Personnel. Operator shall recruit and train, in a manner consistent
with Prudent Utility Practices, competent qualified personnel to operate and
maintain the Facilities including, without limitation, the following:
A. A Plant Manager, assigned to the Facilities full time, to manage
on-site operations and maintenance, which individual shall be
approved in writing by Owner.
6
<PAGE>
B. Additional full time on-site personnel as needed.
C. Additional engineering support, operations, maintenance, and
management personnel not located full time at the Facilities, as
needed to perform the requirements of this Agreement.
Without limiting the generality of the foregoing, Operator will arrange to
(i) staff the Facilities during all hours; (ii) provide those full time on-site
personnel identified and agreed to by Operator and Owner. Operator shall submit
the qualifications of full-time, on-site management and key supervisory
personnel hired for review and approval by Owner, and such personnel shall be
acceptable to Owner at all times. Owner's approval or acceptance of any such
personnel shall not be construed as or imply Owner's acceptance of the conduct,
performance or qualifications of such personnel nor result in any waiver of
Operator's duties and responsibilities for providing personnel as required for
its performance or for responsibility for compliance with any standard or other
duty of performance hereunder and as required by the Power Agreement and the
Loan Documents. Personnel other than on-site management and key supervisory
positions shall be recruited, trained, supervised, administered and directed by
Operator, but shall be directly employed under contract with Owner or one of its
affiliates or subsidiaries.
2.02 INITIAL STAFFING, STARTUP AND TESTING. After receiving Authorization
to Proceed, Operator shall prepare a hiring schedule for the personnel
identified and agreed to by Operator and Owner. After review and written
approval of the hiring schedule by Owner, Operator shall cause the commencement
of initial hiring of personnel. Operator shall adjust the hiring schedule, as
requested by Owner in writing, in accordance with changes in the construction,
startup, and Commercial Operation Date, and shall obtain Owner's review and
approval of such changes.
Operator shall provide capable operating personnel to assist in initial
training, startup and testing of the Facilities under the direction and
supervision of the EPC Contractor. It is understood that Owner is obligated to
pay for Operator's services during startup and testing as provided herein but
that total supervision and direction of all startup and testing activities
(including those of Operator) shall be furnished by the EPC Contractor who will
have care, custody and control of the Facilities prior to Commercial Operation
Date of the Facilities.
2.03 OPERATION AND MAINTENANCE. Operator shall operate and maintain the
Facilities, seven (7) days a week, twenty-four (24) hours per day, in accordance
with Prudent Utility Practices, manufacturers' recommendations as applicable,
and as required by the Power Agreement attached hereto as Exhibit A, or Loan
Documents as may be amended relating to the Facilities and this Agreement. The
Operator will operate the Facilities in a manner to maximize the useful life of
the equipment, to avoid excessive fuel consumption, to minimize downtime for
repairs, and to avoid forced outages, in a manner consistent with that of a
prudent owner maintaining its own facility for its own account. Operator shall
consult with Owner in order to clarify its obligations in the event that any
conflict exists in these obligations under this Agreement. Operator shall be
solely responsible for the operation and maintenance of the Facilities hereunder
but will follow the directions of Owner with respect to financial or economic
matters as long as compliance with such directions will not materially and
adversely affect the operation and maintenance of the Facilities nor its
performance as required hereunder after comparison of the relative benefits and
detriment of incurring any cost and the relative effect on operations if such
cost were not incurred.
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2.04 TOOLS.
A. Operator shall review the tool list developed by the EPC Contractor
pursuant to the EPC Contract, and shall identify and prepare a list
of recommended tools required to adequately perform the requirements
of this Agreement. Said list will be submitted to Owner in one or
more increments and shall be modified or supplemented throughout the
term of this Agreement by agreement of the Parties as necessary to
permit the timely acquisition thereof. The initial list of such
tools shall, in no event, be submitted to Owner later than one
hundred eighty (180) days prior to the Scheduled Commercial
Operation Date.
B. The initial supply of tools identified on the list described in
Section 2.04A. above shall be subject to the written approval of the
Owner and will be procured by Operator to Owner's account as
provided in Section IV of this Agreement or as a Reimbursable Cost.
Operator shall promptly notify Owner in writing of tools that were
not approved that could impact its obligations and duties hereunder.
C. Operator shall be responsible for annually, or as otherwise
reasonably requested by Owner in writing, preparing and presenting
to Owner an accurate reconciliation of the Facilities' tool
inventory.
D. Operator shall be responsible for the use, management, control,
care, and custody of the Facilities' tools.
E. Operator shall repair or replace tools as required, as a
Reimbursable Cost or to the Account of Owner, as provided in Section
IV.
F. Operator shall periodically, and no less frequently than annually,
review the Facilities tools, and make recommendations to Owner for
additional tools that would improve the Facilities operations.
2.05 SPARE PARTS.
A. Operator shall review the spare parts list developed by the EPC
Contractor pursuant to the EPC Contract, and shall identify and
prepare a list of recommended spare parts required to adequately
perform the requirements of this Agreement. Said list will be
submitted to Owner in one or more increments and shall be modified
or supplemented throughout the term of this Agreement by agreement
of the Parties as necessary to permit the timely acquisition
thereof. The initial list of such spare parts shall, in no event, be
submitted to Owner later than one hundred eighty (180) days prior to
the Scheduled Commercial Operation Date. Spare parts will be
determined with reference to generally accepted practices in the
industry and with reference to manufacturer's recommendations.
B. The initial supply of spare parts identified on the list described
in Section
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2.05A. above shall be subject to the written approval of the Owner
and will be procured by Operator for Owner's account as provided in
Section IV of this Agreement or as a Reimbursable Cost.
C. Operator shall, subsequent to submitting the initial list of spare
parts described in Section 2.05A. above be responsible for
procuring, for Owner's account as provided in Section IV hereof or
as a Reimbursable Cost, replacements for said listed spare parts as
necessary.
D. Operator shall be responsible for the use, care, custody, management
and control of said spare parts.
E. Operator shall be responsible for annually, or as otherwise
reasonably requested by Owner in writing, performing and presenting
to Owner an accurate reconciliation of the Facilities' spare parts
inventory.
F. Operator shall be responsible for establishing proper and effective
on-site warehousing and inventory controls for such spare parts. The
inventory control system is to be coupled to an Owner approved plant
maintenance management information system.
G. Operator shall procure additional parts subject to Owner's written
approval or replacement parts to maintain inventory at levels to
support Facilities requirements, as a Reimbursable Cost or to the
Account of Owner as provided for in Section IV.
2.06 EQUIPMENT.
A. Operator shall identify and prepare a list of recommended machinery,
equipment, office furnishings, computers, and software (the
"Equipment") required to adequately perform the requirements of this
Agreement. Said list will be submitted to Owner in one or more
increments and shall be modified or supplemented throughout the term
of this Agreement by agreement of the Parties as necessary to permit
the timely acquisition thereof. The initial list of such Equipment
shall, in no event, be submitted to Owner later than one hundred
eighty (180) days prior to the Scheduled Commercial Operation Date.
B. The Equipment identified on the list of such Equipment described in
Section 2.06A. above shall be subject to the written approval by
Owner and shall be procured by Operator for Owner's Account as
provided in Section IV or as a Reimbursable Cost. Operator shall
promptly notify Owner in writing of the Equipment that was not
approved that could impact Operator's obligations and duties
hereunder.
C. Operator shall periodically review the Equipment required to perform
under this Agreement and make recommendations to Owner of
modifications or additions to the Facilities equipment throughout
the term of this Agreement that would improve or enhance the
Facilities operations.
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D. Operator shall be responsible for the use, management, care,
custody, operation and maintenance of said Equipment. Operator shall
repair or replace, as a Reimbursable Cost or to the Account of Owner
as provided for in Section IV, the Equipment.
E. Operator shall, when approved in advance by Owner in writing,
procure and install additional Equipment as a Reimbursable Cost or
to the Account of Owner as provided for in Section IV.
2.07 CONSUMABLES AND OTHER MATERIALS.
A. Operator shall identify those consumable, expendable, and other
materials and supplies ("Consumables") necessary to perform the
requirements of this Agreement. Said Consumables will be identified
to Owner throughout the term of this Agreement as necessary to
permit the timely acquisition thereof. The initial list of such
Consumables shall, in any event, be identified and submitted to
Owner in writing no later than one hundred eighty (180) days prior
to the Scheduled Commercial Operation Date.
B. Operator shall use, manage, care for, control and maintain
Consumables as required to support the needs of the Facilities, and
procure Consumables, as Reimbursable Costs or to Owner's Account as
provided in Section IV, throughout the term of this Agreement.
2.08 PURCHASED PARTS, LABOR AND SERVICES. Operator shall identify and
procure, as Reimbursable Costs or for the account of Owner as provided for in
Section IV, parts other than spare parts and labor and services throughout the
term of this Agreement as necessary to perform the requirements of this
Agreement. This will include procurement for the services of equipment
manufacturer's personnel, or personnel trained and qualified to provide
equivalent services, to perform manufacturer's recommended service procedures
when deemed necessary. Without limitation, Operator, in its capacity as Owner's
agent, shall procure as a Reimbursable Cost third-party contracts to clean up
and remove hazardous waste and solid waste, except to the extent such waste
arises out of the negligence or fault of Operator or pursuant to Section 2.16.
Any maintenance or repair which can reasonably be performed by regular full time
on-site personnel, provided pursuant to Section 2.01 above, shall be performed
by them.
2.09 MAINTENANCE AND REPAIRS. Operator shall comply with procedures
developed pursuant to Section 2.10 below and otherwise provide all maintenance
and repair services necessary to keep the Facilities in good working order in a
manner consistent with Prudent Utility Practices, to correct by appropriate
measures any damage to or malfunction of the Facilities, and provide all
necessary information to and cooperate with Owner so that Owner may enforce or
make warranty claims with respect to any repair or malfunction. Any parts
utilized in performing operation and maintenance services shall be new or
refurbished according to manufacturer's recommendations. Operator shall assign
to Owner the manufacturer's warranty on all parts Operator has procured.
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2.10 OPERATING, MAINTENANCE AND SAFETY PLANS AND PROCEDURES. Using the
operations and maintenance manuals supplied to Owner by the EPC Contractor
pursuant to the EPC Contract as supplemented by Operator's standard procedures
developed for like facilities, Operator shall develop (and furnish copies to
Owner for review and approval in writing) necessary, specific and fully
integrated operating, maintenance and safety plans and procedures including,
without limitation, the following (each of which shall satisfy the requirements
set forth in the Power Agreement):
A. Startup, operating, dispatching and shutdown procedures for the
Facilities equipment and systems including appropriate periodic
checks of and/or for water quality and treatment requirements, fluid
or gaseous leaks, improper temperatures, excessive noise and
vibrations, proper pressures and liquid levels, emission levels and
other pertinent operating information indicative of the equipment
condition.
B. Periodic maintenance plans identifying schedules and procedures for
the equipment lubrication, packing and seal checks, filter checks
and services, and electrical and control system checks.
C. Plans and procedures for long-term maintenance and overhaul of the
Facilities' equipment.
D. Plans and procedures for as-needed repairs and overhauls.
E. Plans and procedures for emergency service and repairs as needed,
twenty-four (24) hours a day, each day of the year. Such procedures
will provide for expedited service and repairs; for the availability
of Operator's management personnel, in connection with such
services, on a twenty-four (24) hours a day, each day of the year
basis; for notification of and expediting the availability of
factory or service personnel when necessary repairs are beyond the
capabilities of on-site personnel, and for the immediate
notification of Owner of any emergency event or condition, of
anticipated corrective actions to be taken and of anticipated
service and repair times and cost consequences.
F. Procedures for identifying, acquiring and maintaining required spare
parts to ensure that the Facilities has an adequate inventory of
spare parts, in accordance with Section 2.05 of this Agreement
including a critical spare parts analysis which will identify key
parts that may require over-stocking for the purpose of increased
plant availability.
G. Procedures for notice to and approval by Owner of any alterations or
capital improvements to the Facilities, so that no alterations or
capital improvements to the Facilities will be made without the
written consent of Owner.
Operator will, without limitation, provide in such plans and procedures
for visual, mechanical or instrumental inspection as necessary in order to
provide early detection of required adjustments, repairs or replacements so that
required adjustments, repairs or replacements can be scheduled with minimum
interference to the Facilities operations insofar as possible. Such procedures
will be consistent with applicable manufacturer's recommendations, will provide
for the services of factory
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representatives and/or outside consultants where appropriate and will provide
for orderly shutdowns and minimum interference with operations. Such procedures
will be reviewed as required and in no event less frequently than annually with
a copy of the review provided to Owner. No alterations to the Facilities shall,
in any event, be made without the prior written approval of Owner.
2.11 RECORDS. Operator shall keep and maintain maintenance and operation
records for the Facilities and for the equipment therein. Such records shall
satisfy the requirements set forth in the Power Agreement and Lenders'
requirements under Loan Documents and shall include, without limitation: the
logging of daily exception reports; daily Operator's logs; a record of all
maintenance and repairs performed; copies of all plans and procedures developed
pursuant to Section 2. 1 0 above or otherwise; emissions and compliance reports;
equipment and instrument calibration records; fuel consumption records; and
electricity production, consumption and delivery records. All records shall be
made available for examination by Owner, the Utility (where required by the
Power Agreement) or Lender (where required by the Loan Documents) during normal
working hours
2.12 REPORTS. Operator shall prepare and furnish a monthly operations
report within ten (10) business days following the close of each calendar month,
including the following:
A. A review of operations for the prior month (fuel consumption,
electricity and steam production, consumption and deliveries).
B. Identification of significant exceptions to the normal status of
equipment.
C. Identification of all major repairs or alterations made to equipment
during the prior month.
D. Identification and explanation of significant performance deviations
from the prior month or from anticipated performance.
E. Identification of maintenance and shutdowns planned for the
succeeding twelve (12) months.
F. Any significant personnel issues including hiring, disciplinary
action or lost time due to injuries.
G. Such other matters as may be reasonably requested by Owner in
writing.
Operator shall also provide all notices and reports required in connection
with the operation and maintenance of the Facilities by applicable permits, laws
and regulations and the Power Agreement and Loan Documents relating to the
Facilities within the times required. Owner shall be responsible, pursuant to
Section 3.10C., for providing those documents which identify all required
notices relating to the operation and maintenance of equipment contained in the
Facilities that are required by this Section 2.12 and Operator will cooperate
with Owner in the identification and obtaining of all such documents.
2.13 GOVERNMENTAL, REGULATORY, UTILITY AND SAFETY REQUIREMENTS. Operator
shall operate and maintain the Facilities in compliance with all applicable
laws, permits, approvals, ordinances, rules, regulations and orders of central,
provincial, city, county and local governmental authorities. Operator
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shall also comply with all safety and other rules and regulations reasonably
established in writing by Owner with respect to the Facilities and with all
safety and other rules and regulations established by the Utility with respect
to interconnection delivery facilities and with respect to property owned by or
leased from the Utility. In the event that such requirements change during the
term of the Agreement, and such changes require additional costs of Operator,
these additional costs shall be mutually determined by Owner and Operator and
reimbursed to Operator by Owner as Reimbursable Costs. In the event such changes
require alteration to the Facilities, Owner shall be responsible for the costs
of such alterations.
2.14 LIENS AND ENCUMBRANCES. Operator shall keep all real property and all
personal property and equipment associated with or part of the Facilities free
and clear of all liens and encumbrances caused by an action or failure to act by
Operator or any of its consultants, suppliers or subcontractors in the
performance of its obligations under this Agreement, including, without
limitation, failure by Operator to pay, when due, any bill or charge for labor
or services performed or materials or equipment furnished for use in connection
with this Agreement. Contractor shall immediately notify Owner in writing of any
such liens or encumbrances. Nothing herein contained shall require Operator to
pay any claims for labor, materials or services which Operator, in good faith
disputes and which Operator, at its own expense, is currently and diligently
contesting; provided, however, that Operator shall, not later than thirty (30)
days after notice of the filing of any claim of lien that is disputed or
contested by Operator, post a surety bond sufficient to release said claim of
lien in accordance with the relevant laws and approvals of the People's Republic
of China or other relevant laws.
2.15 METERING. Operator shall verify the accuracy of meters and devices
used to measure the delivery of thermal energy as required, but in no event less
frequently than quarterly. Operator shall verify the accuracy of meters and
devices used to measure the delivery of electricity, coal, and water as
required, but in no event less frequently than annually. Such verification is to
be performed in a manner consistent with the requirements of the Power Agreement
and the steam sales agreements, and other applicable regulations of the Utility.
2.16 WASTE. Operator shall not allow any hazardous or solid waste to
accumulate on the Site in contravention of any applicable law, regulation or
governmental permit or license, the Power Agreement, or any Loan Documents
relating to the Facilities or otherwise to cause any impediment to operations
and maintenance services to be performed or which may threaten the health or
safety of persons present at the Facilities. Operator shall notify Owner
immediately should any hazardous or solid waste problem arise and shall assist
Owner to remedy such situation.
2.17 SCOPE OF WORK. Operator shall perform, throughout the term of this
Agreement, all services described in this Agreement. Such services shall be
performed and supplied in connection with, but not limited to, the following:
A. Prior to and until such time as construction of the Facilities is
commenced pursuant to funding from non-affiliated third party
lenders to the Facilities, Operator will:
i. Develop a written plan for the conduct of its responsibilities
under this Agreement and form, or be prepared to immediately
form, a
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business entity appropriate for the conduct of its
responsibilities under this Agreement and in accordance with a
written business plan to be agreed to by the Owner;
ii. Provide a preliminary review and consult with Owner regarding
all plant design specifications, paying particular attention
to designs which affect the Facilities operations and
operability, and submit a written assessment thereof to Owner
for its review;
iii. Conduct a preliminary assessment of the available local
Chinese labor force which may be available to assist in the
Facilities operations and report thereon to the Owner;
iv. Develop preliminary standards, qualifications, and position
description criteria for key personnel and positions which it
believes necessary to perform its duties under this Agreement:
v. Develop and provide to Owner its plans with respect to all
training required for all Chinese labor;
vi. Prepare and deliver to Owner a draft organization chart for
the full staffing of the Facilities, thought to be required;
vii. Develop and prepare its proposed preliminary, pre-commercial
and post-commercial operating budgets for the Facilities and
discuss all matters relating thereto for conclusion and
acceptance by Owner;
viii. Support Owner with one (1) trip to New York for a presentation
to bond rating agencies and cooperate with and assist Owner on
all matters, with information relating to Operator which may
be reasonably required, within the scope of its work to be
conducted pursuant to this Agreement, which may or does affect
Owner's ability to obtain construction and permanent financing
for the Facilities; and
ix. In the performance of the services provided pursuant to this
Section 2.17A., Operator may consult with and utilize Owner's
advisors and consultants and information, for assistance in
its preliminary legal and procedural analysis of the business
structure required for the conduct of operations. The cost of
the use of such outside consultants (whose use and scope of
services shall be pre-approved by Owner) will be borne by
Owner, except as required by Operator in the formation of
Operator's business unit. Owner makes no representation or
warranty to Operator with respect to the reliability or
accuracy of all such information, or advice, and Operator
shall make its own assessment and determination as to the
reliability and accuracy thereof.
B. NOT USED
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C. COMMERCIAL OPERATIONS PERIOD. After the Commercial Operation Date,
Operator will have complete on-site responsibility for the
operations and the maintenance of the Facilities. This includes
providing all (expatriate or local) plant management,
administration, supervision and staffing functions and activities as
are necessary. This responsibility will include the procurement of
materials, supplies, consumables and outside services, as per
approved budget.
The scope of services and activities required from Operator to meet
these responsibilities include, but are not limited to, those
described in the following sections.
(i) OPERATIONAL SERVICES. Operator's operations and maintenance
responsibilities shall include, but are not limited to, the
following:
(a) The continued providing and training of sufficient
qualified and competent personnel to operate and
maintain the Facilities;
(b) Operational activities necessary to produce and supply
reliable electrical energy to the customer in accordance
with the Power Agreement;
(c) Operational activities necessary for the supply of
thermal energy to the thermal hosts in accordance with
the thermal energy supply agreement during those hours
when electrical power is generated;
(d) The Facilities operation in compliance with all
environmental regulations and updates, including noise,
water intake, waste water discharge, ash and solids
disposal, and air emissions permits. This shall include
the timely submittal of periodic reports as required by
the permits;
(e) Fuel control including sampling, testing, unloading,
storage and accounting;
(f) The control of minimal waste water discharge from the
Facilities: and
(g) The safe and secure storage and control of all gases,
chemicals, lubricants and any other hazardous or
perishable consumables.
ii. MAINTENANCE SERVICES. Operator shall preserve the Facilities
in good mechanical, electrical and operating repair and
condition in accordance with Prudent Utility Practices.
Operator's maintenance responsibilities shall also include,
but are not limited to, the following:
(a) Providing continuous updates to the previously
implemented MMIS including the generation of
comprehensive monthly reports on all preventive,
planned, and/or deferred work orders associated with the
Facilities;
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(b) Developing short-term and long-term maintenance plans
for the Facilities in accordance with manufacturer's
requirements and prudent practices;
(c) The Facilities upkeep and maintenance, including
landscaping, roadways, buildings, and rubbish
collection; and
(d) The management of the spare parts and tool inventory
including a monthly activity summary. This
responsibility shall include performing an annual,
audited, physical count of all items retained on-site.
iii. ADMINISTRATIVE SERVICES. Operator shall be responsible for all
normal administrative and personnel related activities
relating to its employees, including benefits, bonuses,
scheduling and overtime.
In addition, Operator's responsibilities shall include, but
are not limited to, the following:
(a) The safety of all personnel and equipment at the
Facilities. This responsibility shall include compliance
with all ordinances, regulations, and local or national
legislation;
(b) The physical security of the Facilities and its
equipment, inventory, and personnel;
(c) The efficient operation of the Facilities to maximize
useful life of equipment, to avoid excessive fuel
consumption, to minimize downtime for repairs and forced
outages within the constraints of the Power Agreement
and thermal energy agreements;
(d) The coordination of fuel requirements for the Facilities
with the fuel supplier in accordance with the fuel
supply contract;
(e) All purchasing activities on-site, including the
purchase of all consumables, chemicals, spare parts,
equipment, equipment repairs, outside Operator services
and approved the Facilities modifications. Purchasing
activities shall include obtaining competitive quotes,
examination, purchase document control, expediting,
receiving, inspection and invoice approval. Monthly
purchase activity summaries will be required;
(f) The development of an on-site annual budget with regard
to purchased parts, services and administration cost for
approval by Owner at least two (2) months prior to the
budget year in question or such other time period as may
be required in the Power Agreement or any Loan
Documents;
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(g) The development of, revisions to, and management of
emergency systems and procedures in accordance with all
Power Agreements and local and national regulations;
(h) To use reasonable efforts to promote mutually beneficial
relationships with customer representatives, thermal
hosts, and fuel suppliers;
(i) To use reasonable efforts to promote public relations
relating to the Facilities and to maintain good
community relations including those with the city,
county and provincial authorities, and neighbors;
(j) Support of the Owner in the timely update,
re-application or renewal of all environmental or
operating permits that pertain directly to the operation
of the Facilities; and
(k) The development of an annual capital improvement plan
with draft plans and proposed budget implications.
D. NOT USED
E. NOT USED
F. Testing of the Facilities required by the Power Agreement.
G. Startup of the Facilities in connection with each dispatch
from the Utility.
H. Management and provision of all activities required for the
Facilities support and operation, under the direction of
Owner's Representative, including but not limited to:
community interface, fuel scheduling, and management of other
contracts and services necessary to support the Facilities.
I. Operation of the Facilities.
J. Management of all operation and maintenance requirements of
the Facilities.
K. Maintenance of the Facilities.
L. Furnishing electrical energy to the Utility, together with the
maintenance schedules and other records required by the
Utility under the Power Agreement.
M. NOT USED
N. Assist Owner in obtaining and renewing the necessary permits
and licenses of Section 3.05 when requested by Owner.
O. Submit a desired schedule of Scheduled Outages as defined
herein (including the duration of each outage) to Owner at
least four (4) weeks before Owner is required to supply same
to the Utility.
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P. Cooperate with the Utility and Owner in scheduling and
performing all scheduled maintenance outages, routine
maintenance and major overhaul outages in accordance with
Owner's obligations under the Power Agreement or as set forth
in any Loan Documents.
Q. Preparation and submission to Owner, for Owner's approval, of
an Annual Budget for the Facilities, at least ninety (90) days
before the beginning of each calendar year. Such budget shall
be consistent with the requirements of this Agreement and meet
the requirements of the Power Agreement or any Loan Documents.
R. Provide sufficient training to operating and maintenance
personnel to assure that their capabilities and qualifications
are maintained.
S. Cooperate with the Utility in scheduling and performing all
testing required under the Power Agreement.
T. Provide all other maintenance and operations services
necessary to the safe, efficient and reliable operation of the
Facilities.
SECTION III
SERVICES TO BE PERFORMED BY OWNER
From and after the Commencement Date, Owner shall be responsible for the
following:
3.01 OWNER'S REPRESENTATIVE. Owner shall provide a full-time Owner's
Representative to administer Owner's responsibilities under this Agreement, to
monitor the operation of the Facilities, and to provide direction on economic
and financial matters associated with all its responsibilities hereunder.
3.02 OFFICE SPACE, EQUIPMENT, AND ADMINISTRATIVE SERVICES. Owner shall
provide office and administrative space, administrative services and equipment
for Operator at the Facilities.
3.03 TOOLS, SPARE PARTS, EQUIPMENT AND CONSUMABLES. Owner will:
A. Provide written approval or give timely objections to the
lists of tools, spare parts, Equipment, and Consumables
identified by Operator pursuant to Section II.
B. Pay for approved supplies of tools, spare parts, equipment,
Consumables, and purchased parts, labor and services and
Reimbursable Costs required by Operator to perform its
responsibilities under this Agreement, and as provided for in
this Agreement.
3.04 UTILITIES. Owner will provide and pay for all utilities.
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3.05 PERMITS AND LICENSES. Owner will obtain necessary permits and
licenses, except those which are issued in the name of Operator or that Operator
is required to obtain under Section 11 above.
3.06 STAFFING SCHEDULES. Owner will provide written approval or give
timely objections for its obligation to give staffing schedule approval required
in Section 2.02.
3.07 MANUALS. Consistent with the needs of Operator for such material to
perform its obligations under this Agreement, Owner shall deliver, or cause to
be delivered to Operator, copies of operating and maintenance manuals for all
equipment installed in the Facilities and any and all additional documents
received from the EPC Contractor under the EPC Contract including, but not
limited to, as-built drawings of the Facilities, record books, vendor manuals
and operations and maintenance manuals.
3.08 NOT USED
3.09 PAYMENTS. Owner shall make payments to Operator in accordance with
Sections IV and V of this Agreement.
3.10 OTHER RESPONSIBILITIES. Owner will:
A. Provide and pay for all fuel required throughout the term of
this Agreement.
B. Pay or reimburse Operator all property or other taxes
(including, but not limited to, any business tax or VAT taxes)
related to the Facilities or its activities and operations but
not income taxes of Operator (except as provided in Section
4.04).
C. Provide all necessary documents in its possession, that
Operator needs to perform its obligations relating to the
operation and maintenance of equipment contained in the
Facilities under this Agreement. Owner and Operator shall
consult with each other to determine the obligations under
such documents for which Operator is responsible.
3.11 Owner shall, at all times, conform to all laws, ordinances, rules and
regulations applicable to it.
3.12 Owner has a responsibility to identify and provide Operator with all
relevant provisions in the Power Agreement and the Loan Documents and any
amendments thereto in a timely manner. To the extent that Owner does not notify
Operator of such amendments, Operator is not liable for compliance with such
amendments. Owner agrees to consult with Operator in the event that such changes
to the Loan Documents or Power Agreements is contemplated.
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SECTION IV
COMPENSATION
4.01 Owner shall pay for services provided by Operator during all periods
of service provided under this Agreement as follows:
A. OPERATIONS AND MAINTENANCE COSTS. Operator will manage and
control operations and maintenance costs according to a
predetermined budget that has been accepted by and developed
in conjunction with the Owner. All operations and maintenance
expenses will be administered by Operator and paid by Owner in
local currency or paid as a Reimbursable Cost.
B. LOCAL LABOR COSTS. Operator shall engage one or more Chinese
contractors to supply suitable operations and maintenance
personnel for the Facilities under direct contract with Owner.
All labor contract expenses shall be administered by Operator
and paid by Owner in local currency. In the event the Parties
direct-hire labor personnel, the Operator will recruit such
personnel under a direct employment contract with Owner.
C. NOT USED
D. OPERATOR'S US LABOR COSTS (WORK OUTSIDE OF US). All Operator's
United States labor (those employed and paid by Operator for
work performed outside the US) will be billed in US dollars to
Owner at a fixed multiplier of 2.1 on the hourly rate, plus an
additional amount sufficient to cover any duties, taxes,
incentives and other labor-related fees assessed on the income
of foreign nationals (which will be passed along by Operator
to its employees), for pre-approved work performed hereunder
outside of the United States. Reimbursement for individual
income taxes will be in accordance with Fluor Daniel's
International Assignment Policy Supplement 9, Section 9.5,
Expatriate Taxation Policy, effective April 1, 1996. Owner
will be notified of changes to this policy. Expenses
associated with pre-approved work performed will be billed at
cost. Travel and living expenses will be billed in US dollars
at actual cost with no markup in accordance with Operator's
standard travel policies. Payments by Owner to Operator for
such labor shall be in US currency.
E. EXPATRIATE CONTRACT LABOR COSTS. Expatriate contract labor
costs will be treated as normal operations and maintenance
expenses (summarized in 4.01A. above) and will be billed
through to Owner at actual cost with no markup, but with an
increase sufficient to cover any duties, taxes, incentives and
other labor-related fees assessed on the income of such
expatriate contract laborers for payment by Operator to such
laborers. Payments by Owner to Operator for such labor shall
be in U.S. or Chinese currency as directed by Operator.
F. PLANT GENERAL AND ADMINISTRATIVE EXPENSES. Plant site General
and Administrative (G&A) costs will be managed and controlled
according to a predetermined budget that has been accepted by
Owner. All G&A costs
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associated with plant operations will be administered by
Operator and paid for by Owner in local currency.
All labor costs (items A., B., D., E., and F. above) will be tracked
against a budget approved by Owner.
G. OPERATING FEE. In addition to the expense reimbursements
provided for above, an annual fee of Three Hundred
Seventy-Five Hundred Thousand and No/100 Dollars ($375,000 US
dollars) will be paid to Operator in equal monthly
installments beginning with the establishment of Commercial
Operations to operate and maintain the Facilities (the
"Operating Fee"). For the first calendar month, the monthly
installment of the Operating Fee shall be prorated based on
the number of days of the month after the Commercial
Operations Date. The Operating Fee and all dollar amounts
indicated in Section 4.01H.vi., vii., and viii. shall be
adjusted annually commencing on the first day of each year
subsequent to January 1, 1997, by the change in index values
of the (i) immediately preceding month of December; and (ii)
the next immediately preceding month of December, as specified
in the Consumer Price Index for All Urban Consumers, U.S. City
Average, Table 1, in the row titled "Services" under the
column heading "Unadjusted percent change to..." as published
in CPI Detailed Report for the immediately preceding December.
H. CONTRACT PRICE ADJUSTMENTS.
i. PEAK HOUR OUTPUT PRICE ADJUSTMENt. Subsequent to the
Commercial Operations Date, Operator's monthly
installment of the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the facility
energy output during Peak Hours (Peak Hours shall mean
the eight (8) hour period during each day designated as
"Peak Hours" by the Utility) as follows:
(a) For each Peak Hour period during each day that the
Facilities exceed 760,000 kWh of net energy
production, Operator will receive an increase in
the monthly installment of the annual Operating
Fee of $0.010/kWh for each kWh above 760,000 kWh
of net energy production during the Peak Hour
period for that day.
(b) For each Peak Hour period during each day that the
Facilities produces less than 800,000 kWh of gross
energy production, Operator's monthly installment
of the annual Operating Fee will be decreased by
$0.050/kWh for each kWh below 800,000 kWh of gross
energy production during the Peak Hour period for
that day. This provision (b) does not apply for
times when either unit is in a Scheduled Outage,
is not dispatched by the Utility or is unable to
produce electric energy due to a Force
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Majeure condition of the Facilities or the
Utility. In the event of a forced outage which may
be extended, the second (2nd) day of the outage
will be treated as a Scheduled Outage.
ii. NON-PEAK HOUR OUTPUT PRICE ADJUSTMENT. Subsequent to the
Commercial Operations Date, Operator's monthly
installment of the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the Facilities
energy output during Non-Peak Hours (Non-Peak Hours
shall mean the eight (8) hour period during each day
designated as "Non-Peak Hours" by the Utility") as
follows:
(a) For each Non-Peak Hour period during each day that
the Facilities exceeds 504,000 kWh of gross energy
production but is less than 560,000 kWh, Operator
will receive an increase in the monthly
installment of the annual Operating Fee of
$0.010/kWh for each kWh of energy production above
504,000 kWh up to a maximum of 16,000 kWh of gross
energy production during the Non-Peak Hour period
for that day.
(b) For each Non-Peak Hour period during each day that
the Facilities exceeds 560,000 kWh of gross energy
production, Operator monthly installment of the
annual Operating Fee will be decreased by
$0.010/kWh for each kWh above 560,000 kWh of gross
energy production during the Non-Peak Hour period
for that day.
iii. TROUGH HOUR OUTPUT PRICE ADJUSTMENT. Subsequent to the
Commercial Operation Date, Operator's monthly
installment of the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the Facilities
energy output during Trough Hours as follows, (Trough
Hour shall mean the eight (8) hour period during each
day designated as "Trough Hours" by the Utility):
(a) For each Trough Hour period during each day that
the Facilities exceeds 464,000 kWh of gross energy
production but is less than 480,000 kWh, Operator
will receive an increase in the monthly
installment of the annual Operating Fee of
$0.010/kWh for each kWh of energy production above
464,000 kWh up to a maximum of 16,000 kWh of gross
energy production during the Trough Hour period
for that day.
(b) For each Trough Hour period during each day that
the Facilities exceeds 480,000 kWh of gross energy
production, Operator's monthly installment of the
annual Operating Fee will be decreased by
$0.050/kWh for each kWh above 480,000 kWh of gross
energy production during the Trough Hour period
for that day.
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iv. HEAT RATE PRICE ADJUSTMENT. The Heat Rate Adjustment
will be based on the Base Heat Rate which shall be equal
to 1.035 times the Heat Rate (including process steam)
of the final Facilities test conducted by the EPC
Contractor averaged at 6OMW, 65MW and full output of the
Facilities. Subsequent to the Commercial Operations
Date, Operator's monthly installment of the annual
Operating Fee, described in Section 4.01G., will be
adjusted based on the Facilities' monthly Heat Rate as
follows:
(a) For each month that the Facilities' average Heat
Rate (including process steam) is less than Base
Heat Rate, Operator will receive an increase in
the monthly installment of the annual Operating
Fee of $0.003/kWh times the net energy produced
for the month in kWh times the difference between
the Base Heat Rate and the actual Heat Rate in
Btu/kWh the quantity divided by the Base Heat
Rate.
(b) For each month that the Facilities' average Heat
Rate (including process steam) is greater than the
Base Heat Rate plus 400 Btu/kWh, Operator will
receive an decrease in the monthly installment of
the annual Operating Fee of $0.003/kWh times the
net energy produced for the month in kWh times the
difference between the actual Heat Rate (including
process steam) in Btu/kWh and the Base Heat Rate
plus 400 Btu/kWh the quantity divided by the Base
Heat Rate plus 400 Btu/kWh.
v. OUTAGE MAINTENANCE DAYS PRICE ADJUSTMENT. Starting with
the second October 31 after the Commercial Operations
Date, Operator's December monthly installment of the
annual Operating Fee, described in Section 4.01G., will
be adjusted based on the Outage Days used by the
Operator in the preceding Annual Outage Period as
follows:
(a) For each day that each unit's Outage Days is less
than fifty-five (55) days in the preceding twelve
month Annual Outage Period, Operator will receive
an increase in the December monthly installment of
the annual Operating Fee of Ten Thousand and
No/100 Dollars ($10,000) times the number of
Outage Days (in full days and fractions thereof
less than fifty-five (55) for that annual period.
(b) For each day that each unit's Outage Days is
greater than fifty-five (55) days in the preceding
twelve month Annual Outage Period, Operator will
receive a decrease in the December monthly
installment of the annual Operating Fee of Ten
Thousand and No/100 Dollars ($10,000) times the
number of Outage Days (in full days and fractions
thereof greater than fifty-five (55) for that
annual period.
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For the period from Commercial Operation Date to the
first October 31, the base Outage Days of fifty-five
(55) days for determining the adjustments of the
provisions 4.01H.v.(a) and 4.01H.v.(b) above shall be
adjusted based on the number of days allowed to Owner by
the Utility. The Price Adjustment Fee arrangement as
noted in 4.01H.v.(a) and 4.01H.v.(b) above shall be
calculated at Ten Thousand and No/100 Dollars ($10,000)
per day.
vi. ENVIRONMENTAL COMPLIANCE PRICE ADJUSTMENTS. Subsequent
to the Commercial Operations Date, Operator's monthly
installment of the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the Operator's
compliance with applicable regulations and permits as
follows:
(a) Operator's monthly installment of the annual
Operating Fee will be increased by Five Thousand
and No/100 Dollars ($5,000) based on the
compliance of the Facilities' operations with all
applicable regulations and permits.
(b) Operator's monthly installment of the annual
Operating Fee will be decreased by Five Thousand
and No/100 Dollars ($5,000) based on violation of
any applicable regulations or permits due to the
fault of the Operator.
vii. PERSONNEL SAFETY PRICE ADJUSTMENTS. Subsequent to the
Commercial Operation Date, Operator's monthly
installment of the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the following:
(a) Operator's monthly installment of the annual
Operating Fee will be increased by Two Thousand
and No/100 Dollars ($2,000) based on no Lost Work
Days on-site for that month.
(b) Operator's monthly installment of the annual
Operating Fee will be decreased by Two Thousand
and No/100 Dollars ($2,000) based on any Lost Work
Days on-site for that month.
viii. MANAGEMENT EFFECTIVENESS AND PLANT APPEARANCE, PRICE
ADJUSTMENT. Subsequent to the Commercial Operation Date,
Operator's monthly installment of the annual Operating
Fee, described in Section 4.01G., may be increased by up
to Five Thousand and No/100 Dollars ($5,000) per month
based on the Owner's subjective assessment of Operator's
management effectiveness and the overall housekeeping
and general appearance of the Facilities.
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I. CONTRACT PRICE ADJUSTMENT LIMITATIONS
i. Should the total monthly contract price adjustments of
Section 4.02H. exceed Operator's monthly installment of
the Operating Fee, described in Section 4.01G., the
amount of such price adjustments in excess of the
Operating Fee installment shall be carried forward to
the next month for adjustment of that next month's
installment of the Operating Fee.
ii. Annually, starting with the first full twelve (12)
calendar month Annual Outage Period, should the total of
the twelve (12) months of contract price adjustments of
Section 4.02H. result in a total negative amount of more
than Five Hundred Thousand and No/100 Dollars
($500,000), Owner shall credit Operator on the next
invoice payment with the difference between Five Hundred
Thousand and No/100 Dollars ($500,000) and the total
negative amount, such that Operator's maximum exposure
for negative adjustments shall not exceed Five Hundred
Thousand and No/100 Dollars ($500,000) per annum.
iii. Should the period from Commercial Operation Date to the
first October 31 date be less than three hundred
sixty-five (365) days, the adjustments limitations of
Section 4.011.ii. above shall be prorated based on the
number of days between the Commercial Operation Date and
October 31 divided by three hundred sixty-five (365)
days.
iv. Price Adjustments shall be phased in on a pro-rata basis
during the interim period during which only one unit is
in commercial operation.
4.02 OPERATOR PROCUREMENT TO OWNER'S ACCOUNT. Operator may procure those
items and services which are considered Reimbursable Costs and are included in
the Approved Budget by issuing purchase orders to be paid directly by Owner on
Owner's purchasing and requisition forms. Operator shall supply a confirming
copy of the purchase order to Owner. For purchase orders in excess of the
equivalent of One Thousand and No/100 Dollars (US$1,000) or for any items not in
the Approved Budget, Operator is required to receive written authorization from
Owner's Representative prior to issuing purchase orders to be paid directly by
Owner on Owner's purchasing and requisition forms.
4.03 NOT USED
4.04 TAXES. Owner shall pay or reimburse all taxes or duties arising from
this Agreement, other than tax on Operator's income, as provided in Section
3.10B. If the People's Republic of China "deem" a profit to Operator based upon
payments relating to this Agreement in an amount in excess of the Operating Fee,
as adjusted pursuant to Section 4.01H., the deemed profit tax payable by
Operator on that excess amount shall be a Reimbursable Cost. Operator shall use
its best efforts to minimize the amount of any such "deemed" profit.
4.05 INVOICING. Operator will invoice monthly for all Reimbursable Costs
and Fees payable under this Agreement. Operator shall include in its invoice the
Operating Fee and the anticipated Reimbursable Costs payable under Section
4.01D, for the month following the invoice submission.
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With respect to other Reimbursable Costs and any Contract Price Adjustments
pursuant to Section 4.01H, Operator's invoice shall include amounts payable from
the preceding month. On a quarterly basis, Operator and Owner will reconcile
actual Reimbursable Costs under Section 4.01D with the projected amounts which
have been paid hereunder, and Operator's next invoice following such
reconciliation will be adjusted accordingly.
SECTION V
PAYMENT
5.01 PAYMENT OF MONTHLY COMPENSATION. The payment required by Section IV,
will be made on a calendar month basis. Operator shall submit its invoices by
the fifth day of the month. Owner shall pay the amount due to Operator on or
before the thirtieth (30th) day following the date the invoice is received by
Owner, provided that invoices are submitted in a timely manner to allow payment
in the applicable month in accordance with applicable loan requirements.
Invoices not timely submitted shall be paid within sixty (60) days. Operator
shall submit its billing together with copies of supporting invoices, vouchers,
receipts, and such other evidence of payment as Owner shall require.
5.02 PAYMENT OF TERMINATION PAYMENTS. Owner shall pay the amount due
pursuant to Section 7.02 to Operator on or before the thirtieth (30th) day
following the date the invoice for such amount is received by Owner. Operator
shall submit its billing together with copies of supporting invoices, vouchers,
receipts, and such other evidence of payment as Owner shall require.
5.03 PAYMENT DISPUTES. In the event of a dispute or question regarding any
invoice submitted by Operator, (i) all amounts not disputed or in question shall
be promptly paid as and when required by Section 5.01 above, (ii) an explanation
of the dispute shall be promptly transmitted by Owner to Operator, (iii) Owner
and Operator shall immediately seek to resolve the dispute or question, and (iv)
payment shall be made within ten (10) days of any remaining amount due when the
dispute is resolved.
5.04 AUDIT RIGHTS. Owner shall have the right to audit Operator's books
and records to verify that all reimbursable costs are properly charged to Owner.
No audit rights extend to the makeup of lump sum amounts, unit rates, fixed
percentages or multipliers as may be agreed upon between Owner and Operator.
5.05 INTEREST. If Owner should fail to pay Operator the amounts due and
payable hereunder, except to the extent such amounts may be in dispute, such
delinquent payments shall bear interest at an annual rate equal to one and
twenty-five hundredths (1.25) times the prime interest rate then currently
charged by the Chase Manhattan Bank in New York, New York prorated for the
period of arrears, but in no event shall such rate exceed the maximum legal rate
allowed by applicable usury laws. Payment of interest shall not excuse or cure
any default or delay in payment of amounts due.
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SECTION VI
TERM
6.01 TERM. This Agreement shall become effective as of the date of
execution of this Agreement, and shall continue in effect thereafter until the
tenth (10th) anniversary of the date of Commercial Operations unless otherwise
terminated as provided in this Agreement.
6.02 EXTENSION OF TERM. Owner and Operator may elect to extend such term
for two additional periods of five (5) years each. Any extension of the term of
this Agreement will be affected by mutual written agreement between the parties
after having given notice of the desire to so extend at least sixty (60) days
prior to the end of the then effective term. All of the terms and conditions of
this Agreement which are not modified or changed in any such written agreement
shall remain in full force and effect throughout any such extended term.
SECTION VII
TERMINATION
7.01 TERMINATION BY OWNER WITHOUT CAUSE. Owner shall have the right to
terminate this Agreement upon any termination of the Power Agreement. Any Lender
to the Facilities shall have the right to terminate this Agreement for
convenience should it declare an "Event of Default" under the Loan Documents
after any cure period or other ability of Owner or any other party to cure any
such default. In addition, Owner shall have the right to terminate this
Agreement for convenience or in the event that the Facilities are sold to a
third party who intends to operate the Facilities. In the event Owner gives a
written termination notice pursuant to the provision of this Section 7.01, this
Agreement shall terminate as of the date specified in such notice which shall be
no earlier than fifteen (15) days after the date the notice is given.
7.02 TERMINATION PAYMENTS. Upon termination pursuant to this Section VII,
Owner shall pay Operator: (i) all outstanding costs pursuant to Section IV
hereof; (ii) reasonable costs that may be incurred by Operator in support of the
termination of this Agreement, and (iii) reasonable severance costs resulting
from the termination of employment of Operator's employees. Payment of these
amounts will be in accordance with Section V.
In the event of termination for convenience pursuant to Section 7.01 or in
the event of termination pursuant to Sections 7.04A. and 7.04B., Owner shall
pay, in addition to the amounts above, monthly termination payments from the
date of termination through the original Term of this Agreement. The monthly
amounts for such payments shall be determined from the following schedule and
shall be in accordance with Section V:
A. Twenty-Five Thousand and No/100 Dollars ($25,000) per month from the
Commercial Operation Date through the twenty-fourth (24th) month
following the Commercial Operation Date;
B. Twenty Thousand and No/100 Dollars ($20,000.00) per month for the
twenty-fifth (25th) month through the forty-eighth (48th) month
following the Commercial Operation Date; and
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C. Fifteen Thousand and No/100 Dollars ($15,000) per month for the
forty-ninth (49th) month following the Commercial Operation Date
through the original Term of this Agreement.
Owner may pay at its sole option Operator these monthly termination
payments in a lump sum based on the net present value of the payment stream
discounted at a rate of twelve percent (12%) per annum.
7.03 TERMINATION BY OWNER FOR CAUSE. Owner may terminate this Agreement
upon written notice to Operator as provided for in Section 7.05 upon the
occurrence of any of the following:
A. Operator's failure to provide adequate qualified personnel to
perform its obligations under the Agreement.
B. Repeated failure of the Facilities to produce adequate thermal or
electrical energy to enable Owner to meet its obligations to the
Utility to the extent such failure was in Operator's control.
C. Outage Days for either unit which when added with the remaining
Scheduled Annual Overhaul Outages for that unit during the Annual
Outage Period exceed forty-five (45) days on or before May 1 of any
year, or exceed fifty (50) days on or before August 1 of any year,
or exceed fifty-five (55) days at any time after August 1 of any
year until the end of the applicable Annual Outage Period; provided,
however, that in the case of Annual Outage Periods during which
there is a planned major boiler/turbine overhaul during the last two
(2) months of the Annual Outage Period, Operator may, within five
(5) days after the applicable maximum Outage Days described above
occurs, request Owner to seek the approval of the Utility to
reschedule such maintenance in a manner that will allow Operator to
avoid the termination provisions of this Section. In the event Owner
is able to reschedule such maintenance with the Utility within
twenty-five (25) days after receipt of the request of Operator, the
termination shall not take effect unless Operator thereafter exceeds
the maximum number of Outage Days using the revised Scheduled Annual
Overhaul Outages. In the event Owner is unable to reschedule such
maintenance within such twenty-five (25) day period, after using
reasonable efforts to do so, Owner may terminate this Agreement.
D. Failure of the Operator to perform in any material respect any
service or obligation to be performed by it hereunder or any
representation or warranty shall prove to be incorrect in any
material respect.
E. The appointment of a receiver, liquidator or trustee for Operator by
a court of competent jurisdiction or an adjudication of bankruptcy
or insolvency by any such court or the filing by Operator of a
petition seeking an adjudication of bankruptcy or insolvency.
F. Continuance of a Force Majeure by Operator for more time than that
allowed in Section 12.01.
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7.04 Termination By Operator For Cause. Operator may terminate this
Agreement upon written notice to Owner as provided for in Section 7.05 upon the
occurrence of any of the following:
A. Failure to pay undisputed amounts due to Operator under this
Agreement in accordance with Section V.
B. Failure of Owner to perform in any material respect any service or
obligation to be supplied or performed by it or any representation
of warranty shall prove to be incorrect in any material respect.
C. Failure of Owner to obtain the Facilities Funding Date by June 30,
1997:
D. Continuance of a Force Majeure by Owner for more time than that
allowed in Section 12.01.
7.05 WRITTEN NOTIFICATION OF TERMINATION. In the event a written
termination notice is given pursuant to Sections 7.03A., 7.03D. or 7.04B., such
notice shall set forth the circumstances providing the basis for such
termination and the Party which receives such notice shall have thirty (30) days
to remedy such condition. In the event such circumstance is not corrected by the
Party receiving such notice, or the Party receiving such notice has not taken
substantive action acceptable to the other Party in its sole discretion to
correct the circumstances by the end of such thirty (30) day period, this
Agreement shall terminate.
7.06 TERMINATION PROCEDURE. Neither Party may terminate this Agreement
except as provided in this Section VI I. Operator shall, in the event of
termination, take all reasonable steps necessary to assure an orderly transfer
of operation and maintenance responsibility to Owner or to Owner's designee
including, without limitation, the delivery of all of the following to Owner or
to any such designee:
A. All operation, maintenance or other records, manuals and procedures
associated with the Facilities.
B. All tools, Consumables, spare parts and equipment associated with
the Facilities.
C. At the option of Owner or such designee, assignments to Owner or
such designee, in form reasonably satisfactory to Owner or such
designee, of any agreements between Operator and third parties
relating to the performance of the obligations of Operator under
this Agreement.
7.07 OWNER CURE OF OPERATOR'S DEFAULT. In the event of a default by
Operator in its obligations hereunder, Owner may (but shall not be required to)
cure such default and may charge Operator any additional incremental costs
incurred by Owner to cure such default. The exercise by Owner of this right
shall not waive any other rights of Owner hereunder.
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SECTION VIII
INSURANCE AND INDEMNIFICATION
8.01 INSURANCE. Without limiting any of the obligations or liabilities of
the Operator,Operator shall at all times throughout the term of this Agreement
and any renewal thereof, carry and maintain, or cause to be maintained, at its
own expense, insurance with at least the minimum insurance coverage set forth
below and such other additional insurance as may reasonably be required from
time-to-time by the Owner. All insurance carried and maintained pursuant to this
Agreement shall be with insurers, and shall be in such form as shall be
satisfactory to the Lender.
A. Operator shall carry and maintain or cause to be maintained worker's
compensation insurance (or other similar or equivalent social
insurance) written in accordance with the governing insurance laws
of the People's Republic of China and employers' liability coverage
in an amount not less than $1,000,000 per occurrence in the annual
aggregate. The employers' liability coverage shall not contain an
occupational disease exclusion.
B. Operator shall carry and maintain or cause to be maintained
comprehensive automobile liability insurance covering all owned,
non-owned and hired vehicles. Such coverage shall be written in an
amount not less than $1,000,000 combined single limit per occurrence
in the annual aggregate.
C. Owner shall provide a Contractor's All Risk (CAR) insurance policy
for the Facilities covering the general liability and builder's risk
exposure. The limit of liability insurance will be $90,000,000 and
Owner, Operator, Subcontractors, and Financing Entities will be
named insureds.
D. Following Final Acceptance, Owner shall procure and maintain all
risk property insurance (including boiler and machinery and business
interruption insurance) naming Operator as an additional insured and
providing a waiver of subrogation in favor of Operator and
designated Subcontractors. Subject to Owner's approval, such
insurance may also include such other Persons as may be requested by
Operator as additional insureds.
E. Commercial General Liability Insurance. Owner shall provide coverage
for Owner and Operator against claims for third party bodily injury
(including death) and third party property damage. Such insurance
shall provide coverage for products - completed operations, blanket
contractual, explosion, collapse and underground coverage, broad
form property damage and personal injury insurance. The policy will
provide a combined single limit of liability of $20,000,000 per
occurrence and in the aggregate for bodily injury and property
damage.
F. Owner shall furnish Operator and in turn Operator shall furnish
Owner with evidence of the insurance required hereunder, in the form
of insurance certificates. All such insurance certificates shall
represent that the policies may
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not be canceled or changed with respect to the requirements of this
Section 8.01 without thirty (30) days prior written notice to
Operator or its permitted assigns.
G. All deductibles or self-insured retentions under its respective
policies shall be the sole responsibility of the Operator.
H. Any insurance carried and maintained in accordance with this
Agreement shall be endorsed to provide that:
i. Owner and any Lender to the Facilities, shall be named as
additional insureds with respect to insurance carried pursuant
to items A. employers liability (only if possible) and B. Any
obligation imposed upon the Operator (including the liability
to pay premiums) shall be the sole obligation of the Operator
and not that of the Owner or Lender;
ii. The interest of the Owner and any Lender to the Facilities
shall not be invalidated by any action or inaction of the
Operator or any other person and all policies shall insure the
Owner and Lender regardless of any breach or violation by the
Operator or any other Person of any warranties, declarations,
or conditions in such policies;
iii. The insurer thereunder waives all rights of subrogation
against the Owner, any Lender to the Facilities, and the
Utility, any right of set off and counterclaim and any other
right to deduction due to outstanding premium, whether by
attachment or otherwise;
iv. Such insurance shall be primary without right of contribution
of any other insurance carried by or on behalf of the Owner,
any Lender, and the Utility with respect to their interests as
such in the Facilities;
v. Inasmuch as such policies are written to cover more than one
insured, all terms, conditions, insuring agreements and
endorsements (other than the limits of liability) shall
operate in the same manner as if there were a separate policy
covering each insured; and
vi. If such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any substantial change is
made in the coverage that affects the interests of the Owner,
any Lender, and the Utility, such cancellation or change shall
not be effective as to the Owner, such Lender, and the
Utility, until thirty (30) days after receipt by the Owner,
Lender, and the Utility of written notice sent by registered
mail from such insurer of such cancellation or change;
provided, however, that such thirty (30) day period shall be
reduced to ten (10) days in the case where cancellation
results from the nonpayment of premiums.
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J. On or before the execution of this Agreement and annually
thereafter, Operator shall arrange for furnishing Owner and third
party for which Owner makes written request with approved
certification of all required insurance. Such certification shall be
executed by each insurer or by an authorized representative of each
insurer. Such certification or notice, as the case may be, shall
identify insurers, the type of insurance, the insurance limits and
the policy term and shall specifically list the special endorsements
in Section 8.01 D. above. Operator will furnish Owner and any third
party with copies of all insurance policies, binders, and cover
notes or other evidence of such insurance relating to the Facilities
in the event of a claim.
K. Concurrently with the furnishing of the certification referred to in
item J. above, Operator will furnish Owner and any third party at
the request of Owner with a report of each insurer or insurance
broker stating that all premiums then due from the Operator have
been paid and that in the opinion of such insurer or insurance
broker, the insurance then carried and maintained with respect to
the Facilities is in accordance with the terms of this Agreement.
Furthermore, Operator will cause an insurer or insurance broker to
advise Owner and any third party promptly in writing of any default
in the payment of any premiums or any other act or omission on the
part of the Operator or any other person of which such broker has
actual knowledge which might invalidate or render unenforceable, in
whole or in part, any insurance provided hereunder. Owner and/or
such third party may, at their sole option, obtain such insurance if
not obtained by the Operator and, in such event, Operator shall
reimburse Owner and/or such third party upon demand for the cost
thereof.
8.02 RISK OF LOSS. Owner shall bear the risk of physical loss or damage to
the Facility, including all materials, equipment and supplies (including
temporary materials, equipment and supplies) purchased for permanent
installation in or use during construction of the Facility, regardless of
whether Owner has title thereto. Operator and Subcontractors shall have no
liability at any time for loss or damage to property of Owner, or in custody of
Owner, and Owner releases Operator and their Subcontractors there from. Operator
and their Subcontractors shall also have no liability for any loss of, or damage
to the Facility, as it is the intent of the Parties to rely on the proceeds of
Owner's insurance as satisfaction for any loss or damage to the Facility, and
Owner releases Operator and their Subcontractors for any such loss or damage.
8.03 INDEMNIFICATION.
A. Subject to the scope and limits of the insurance coverages listed in
Section 8.01 above; Operator agrees to defend and indemnify Owner,
any Lenders, and the Utility and their respective directors,
officers and employees (collectively "Indemnitee") against, and hold
them harmless from any and all claims, suits, liabilities and legal
expenses (collectively "Claims") resulting from or in connection
with Operator's performance, negligent performance, or
non-performance of its obligations hereunder except where such
Claims were caused by the sole negligence or willful misconduct of
an indemnitee, provided that Operator shall be promptly notified in
writing so such claim or suit brought against such indemnitee and
shall be permitted to participate in the defense thereof.
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B. Subject to the scope and limits of the insurance coverages listed in
Section 8.01 above; Owner agrees to defend and to indemnify Operator
and its directors, officers and employees (collectively "Operator
Indemnitee") against, and to hold them harmless from any and all
Claims, resulting from or in connection with Owner's performance,
negligent performance, or non-performance of its obligations
hereunder, except where, such claims were caused by the sole
negligence or willful misconduct of the Operator Indemnitee,
provided that the same notification to, and opportunity to
participate, specified in Section 7.05A. above is afforded to Owner.
C. Owner agrees to defend and to indemnify Operator Indemnitees against
and to hold them harmless from any and all claims, resulting from or
in connection with Operator indemnitee acting under the EPC
Contractor's supervision and direction, the EPC's Contractor's
performance, negligent performance or non-performance of its
obligations pursuant to Section 2.02, except where such claims where
caused by Operator's Indemnitee's failure to comply with the
directions given by EPC Contractor and/or the sole negligence or
willful misconduct of Operator's indemnitee.
D. Indemnities against, releases from, assumptions of, and limitations
on liability expressed in this Agreement, as well as waivers of
subrogation rights, shall apply even in the event of the fault,
negligence or strict liability of the Party indemnified or released
or whose liability is limited or assumed or against whom rights of
subrogation are waived and shall extend to the partners of each
Party, their Affiliates, and their respective officers, directors,
employees, and agents.
8.04 ADDITIONAL INSURED. Any Lender and the Utility shall be named as an
additional insured under the foregoing policies of insurance.
8.05 PRE-EXISTING CONTAMINATION. Anything herein to the contrary
notwithstanding, title to, ownership of, and legal responsibility and liability
for any and all pre-existing contamination shall at all times remain with Owner.
"Pre-existing contamination" is any hazardous or toxic substance present at the
site or sites concerned which was not brought onto such site or sites by
Operator. Owner agrees to release, defend, indemnify and hold Operator harmless
from and against any and all liability which may in any manner arise in any way
directly or indirectly caused by such pre-existing contamination except if such
liability arises from Operator's gross negligence or willful misconduct.
8.06 DAMAGE LIMITATION. Except as expressly provided herein, Operator nor
Owner shall have liability to the other party hereunder for indirect, incidental
or consequential damages, including, without limitation, loss of revenues,
liability for loss of use of the Facility or existing property, loss of profits,
loss of product or business interruption, howsoever caused, including breach of
contract, tort (including negligence), strict liability or otherwise.
SECTION IX
PERMITS AND LICENSES
9.01 OWNER PERMITS AND LICENSES. Owner shall be responsible for obtaining
and maintaining all permits, approvals and licenses, required to be in the name
of Owner, necessary for the operation and maintenance of the Facilities (unless
specifically determined to be within the scope of
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work undertaken by Operator). Operator shall cooperate with Owner in obtaining
and maintaining such permits and licenses and in preparing reports required
thereunder.
Operator shall promptly advise Owner of any required permits and licenses or
renewals of which it becomes aware.
9.02 OPERATOR PERMITS AND LICENSES. Operator shall be responsible for
obtaining and maintaining all permits, approvals and licenses required to be in
the name of Operator and otherwise required to be obtained by Operator in the
performance of his duties hereunder.
SECTION X
INDEPENDENT CONTRACTOR
At all times, Operator shall perform the requirements of this Agreement as an
independent contractor to the Owner. Operator shall have full responsibility for
the control and direction of its employees, servants and agents. Operator shall
be fully and solely responsible for the payment of such employees, servants and
agents and for the payment of all obligations incurred by Operator in performing
the requirements of this Agreement. This Agreement is not intended to and shall
not create a partnership of any kind or type. Except for as provided in Section
2.08, Operator shall not be an agent for and may not bind Owner. Owner shall not
be an agent for and may not bind Operator.
SECTION XI
COORDINATION AND ACCESS
11.01 ACCESS. Owner shall provide Operator and its employees, agents, and
subcontractors with full and free access to the Facilities at all times to
perform its obligations under this Agreement. Operator shall furnish Owner with
a list of employees engaged in operation and maintenance of the Facilities and
shall inform Owner in writing of all changes thereto. Operator, its employees,
agents and subcontractors shall comply with all safety and other requirements
established by Operator and Owner in connection with such access.
11.02 COORDINATION; REQUIRED LEVEL OF PERFORMANCE. Operator's personnel
will interface with Owner's Representative and with appropriate representatives
of the Utility. Operator shall accept daily instructions from the Utility, steam
purchasers, and Owner as to projected requirements, subject to the design limits
of the Facilities. In the event of any interruption of the operation of the
Facilities or in the event Operator is unable to operate the Facilities so as to
meet the such requirements of the Utility, steam purchasers, and Owner, Operator
shall immediately notify Owner of the circumstance and shall exert its best
efforts to restore the Facilities to its required operating level.
SECTION XII
FORCE MAJEURE
12.01 FORCE MAJEURE. Neither Party shall be responsible or liable for or
subjected to a termination of this Agreement for or deemed in breach of this
Agreement as a result of any delay or deficiency in the performance of its
obligations hereunder to the extent that such delay or deficiency is
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due to circumstances beyond its reasonable control. "Force Majeure Event" shall
mean any event that is not foreseeable and for which the damages caused by the
event are not reasonably preventable by the Party declaring Force Majeure and
cannot be overcome such that it adversely affects one Party's performance of its
obligations under this Agreement, including, without limitation, unusually
severe weather conditions (i.e., lightening, hurricane or typhoon); any natural
disasters such as fire or earthquakes, any labor difficulty not involving
employees of any parties hereto, any labor difficulty involving employees of
parties hereto to the extent such employees are members of a labor union and
such labor difficulty is in violation of a labor contract or in violation of
applicable laws; any labor difficulty involving employees of parties hereto, not
caused by the act or the failure to act on the part of the relevant party
hereto, to the extent such employees are in the process of becoming members of a
labor union; war; inability to obtain fuel for the Facilities; riots;
requirements, actions or failures to act on the part of governmental authorities
preventing performance; any modifications or changes in law, regulations or
rules made by the government of The People's Republic of China or any other
local government or their agencies which directly or indirectly affect either
Parties' performance of its obligations under this Agreement; inability despite
due diligence to obtain required licenses or approvals; accident; fire; damage
to or breakdown of necessary facilities; or transportation delays or accidents
(such causes hereinafter called "Force Majeure"); provided that:
A. The non-performing party shall give the other party written notice
within a reasonable time after the discovery of the Force Majeure
describing the particulars of the occurrence;
B. The suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure but under no
circumstances shall the Force Majeure exceed one hundred and eighty
(180) days; however, if such Force Majeure is declared by Operator
and results in the inability of the Facilities to furnish Dependable
Capacity to the Utility as required by the Power Agreement;
C. The Party with a deficiency in its performance uses its best efforts
to remedy such deficiency and to mitigate the effect of the Force
Majeure Event. If the Force Majeure Event is labor related, Operator
shall use best efforts to hire new employees or enter into new
subcontracts;
D. When the non-performing Party is able to resume performance of its
obligations under this Agreement that Party shall give the other
Party written notice to that effect;
E. If Operator declares Force Majeure, Owner shall have the immediate
right to enter the site at Owner's discretion to operate and
maintain the Facilities until such time as the Force Majeure is
resolved; and
F. The Force Majeure shall not excuse failure to apply money
obligations nor shall it excuse any deficiency in performance to the
extent caused by any negligent or intentional act, error, or
omission, or failure to comply with any law, rule, regulation, order
or ordinance.
12.02 EXTENSION OF AGREEMENT BY FORCE MAJEURE. Except as otherwise
provided, in no event will any condition of Force Majeure extend this Agreement
beyond its stated Term.
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SECTION XIII
ARBITRATION
Any unresolved dispute that may arise between the Parties regarding this
Agreement shall be settled by arbitration. The arbitration shall be conducted in
accordance with the Commercial Rules of the American Arbitration Association.
Venue for any arbitration proceedings shall be in Dallas, Texas. In such
proceedings, the arbitrator shall have the authority to include in his award
reimbursement of attorney fees and costs to the prevailing Party. Such award
shall be final and binding upon the parties and may be entered and enforced in
any court of appropriate jurisdiction.
SECTION XIV
OPERATOR AND OWNER REPRESENTATIONS AND WARRANTIES
14.01 REPRESENTATIONS AND WARRANTIES OF OPERATOR. Operator represents and
warrants, as of the date hereof, as follows:
A. It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, is duly qualified to
do business in and is in good standing in the State of Nevada and
shall be qualified to do business in the People's Republic of China
within one hundred twenty (120) days after Notice of Proceed to the
Commercial Operation Date, and in any other jurisdiction where it is
required to be so qualified;
B. It has taken all necessary action to authorize the execution,
delivery and performance of its obligations under this Agreement,
which action has not been superseded or modified, and this Agreement
constitutes the legal, valid and binding obligation of Operator,
enforceable in accordance with its terms;
C. The execution, delivery and performance of this Agreement do not
violate (i) its articles of incorporation or by-laws or any
resolution of its Board of Directors or other committees charges
with the governance of its affairs, (ii) any contract to which it
or, to the best of its knowledge, any of its Affiliates is a party
or (iii) any law, rule, regulation, order writ, judgment,
injunction, decree or determination affecting Operator or any of its
properties;
D. It has not filed any petition for relief under the bankruptcy laws
of the United States of America, or any other sovereign nation has
not made nor is making an assignment for the benefit of creditors,
initiated nor been the subject of any proceeding seeking to have a
receiver or trustee appointed to liquidate or manage its affairs,
and none of its properties is subject to the jurisdiction of any
bankruptcy court of the United States of America or any receivership
proceeding;
E. No litigation is pending or, to its knowledge, threatened which
seeks to restrain it from performing its obligations hereunder or
the adverse outcome of which would materially affect its business or
its ability to perform its obligations hereunder;
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F. No authorization or approval or other action by, and notice to or
filing with, any government agency or regulatory body is required
for the due execution, delivery and performance by Operator of this
Agreement which have not been obtained;
G. It or one of its Affiliates is experienced in the operation,
maintenance and repair of electrical generating facilities, has
complied with the provisions of all applicable laws, including,
without limitation, environmental laws, respecting the operation of
such facilities and has not been and is not currently subject to any
judgment or settlement of any claim imposing significant liability
on it for noncompliance with law or mismanagement in its operation
of any electric power generating facility; and
H. It is familiar with the terms of the Power Agreement and steam sales
agreements if Operator is to operate the steam sales agreements
which affect or relate to the operation of the Facilities.
14.02 REPRESENTATIONS AND WARRANTIES OF OWNER. Each of Tangshan Panda,
Tangshan Pan-Western, Tangshan Cayman, and Tangshan Pan-Sino represents and
warrants, as of the date hereof, as follows:
A. It is a foreign joint venture company duly organized, validly
existing and in good standing under the laws of the People's
Republic of China;
B. It has taken all necessary action to authorize the execution,
delivery and performance of its obligations under this Agreement,
which action has not been superseded or modified, and this Agreement
represents the valid and binding obligation of Owner, enforceable in
accordance with its terms.
C. The execution, delivery and performance of this Agreement do not
violate (i) its Joint Venture Contracts, Articles of Association, or
by-laws or any resolution of its Board of Directors or other
committees charges with the governance of its affairs, (ii) any
contract to which it is a party or (iii) any law, rules, regulation,
order, write, judgment, injunction, decree or determination
affecting Owner or any of its properties;
D. It has not filed any petition for relief under the bankruptcy laws
of the United States of America or any other sovereign nation, has
not made nor is making an assignment for the benefit of creditors,
has not initiated nor been the subject of any proceeding seeking to
have a receiver or trustee appointed to liquidate or manage its
affairs, and none of its properties is subject to the jurisdiction
of any bankruptcy court of the United States of America or any
receivership proceeding
E. No litigation is pending or, to its knowledge, threatened which
seeks to restrain the performance of its obligations hereunder or
the adverse outcome of which could materially affect its business or
its ability to perform its obligations hereunder; and
F. No authorization or approval or other action by, and notice to or
filing with, any government agency or regulatory body is required
for the due execution, delivery and performance by Operator of this
Agreement which have not been obtained.
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All notices, approvals, consents, requests and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered to the other Party by registered, certified, or express mail, return
receipt requested, postage prepaid, or by telecopy, addressed as follows:
If to Operator:
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
2225 East Flamingo Road, Suite 307
Las Vegas, Nevada 89119
ATTN: Vice President, Operations and Maintenance
DUKE/FLUOR DANIEL
One Coliseum Centre
2300 Yorkmont Road
Charlotte, North Carolina 28217
ATTN: Vice President, Operations and Maintenance
If to Owner:
Tangshan Panda Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Pan-Western Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Cayman Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Pan-Sino Heat Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
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Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
ATTN: Director of Operations
Either Party may change or augment their above address by written
notice given as provided herein.
SECTION XVI
APPLICABLE LAW
16.01 CHOICE OF LAW. This Agreement shall be deemed to have been made in
Dallas, Texas and to be performed in China. It shall be construed in accordance
with the laws of the State of Texas without application of its conflicts of laws
provisions.
16.02 CERTAIN LEGAL REPRESENTATIONS AND UNDERTAKINGS. Each of Operator and
Owner represent, undertake and warrant that it will not engage in and that no
funds shall be used directly or indirectly for any illegal payments or
activities under the laws of The People's Republic of China or of the United
States of America.
Payments made to any person shall not be used for any improper or unlawful
purposes, including any form of comical bribe, kickback, or influence payment.
Without limiting the generality of the foregoing, it is expressly understood
that neither Operator nor Owner shall, directly or indirectly, give, pay, offer,
promise nor authorize the giving or payment of, any money or anything of value
to any officer or employee of any government or any department, agency, or
instrumentality thereof, to any person acting in an official capacity for or on
behalf of any government or any department, agency or instrumentality, to any
political party official, or to any candidate for political office for the
purpose of influencing any act or decision in order to assist the Partnership in
obtaining, retaining or directing business to the Partnership, or any other
person or entity. No party shall establish or maintain any undisclosed or
unrecorded funds or assets nor falsify or cause the making of any artificial
entries in any books or records in connection with any services performed under
this Agreement.
In addition to the foregoing provisions, each of Operator and Owner
expressly undertake that in connection with any inspection or audit of the
records of either party, to insure compliance with the provisions hereof, the
audited party shall cooperate fully with the auditing party or its designee,
shall refrain from making any false or misleading statements, and shall not omit
to state, or cause any person to omit to state, any material facts necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
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SECTION XVII
NON-WAIVER
The failure of Owner or of Operator to enforce any of the terms and
conditions or to exercise any right or privilege under this Agreement shall not
be construed as waiving any such term or condition or right or privilege and the
same shall continue and remain in force and effect as if no such failure to
enforce or exercise has occurred. No waiver shall be valid unless so stated in
writing.
SECTION XVIII
TITLE
Title to all tools, equipment, supplies and parts purchased by Operator
and of all reports, record logs and documentation prepared by Operator pursuant
to this Agreement shall pass directly upon payment by Owner. Said tools,
equipment, supplies and parts shall be and become the property of Owner free of
all liens and encumbrances except as provided for in Section 2.14
SECTION XIX
ASSIGNMENT
Operator may not assign either its rights or duties under this Agreement
without the prior written consent of Owner and Lender which shall not be
unreasonably withheld. Operator shall execute all consents to assignment
reasonably required by Lenders to the Facilities.
SECTION XX
MISCELLANEOUS
20.01 CONFIDENTIALITY. All Proprietary Information of a Party (the
"Transferred") which is \disclosed to or otherwise received or obtained by the
other Party (the "Transferee") incident to this Agreement is disclosed, and
shall be held, in confidence, and the Transferee shall not publish or otherwise
disclosed any Proprietary Information to any person for any reason or purpose
whatsoever or use any Proprietary Information for its own purposes or for the
benefit of any person, without the prior written approval of the Transferor for
a period of eight (8) years from the date of receipt of such Proprietary
Information; provided, however, that the Proprietary Information may be
disclosed to any prospective financier of the Facilities for purposes of
obtaining financing for the development, construction, operation or maintenance
of the Facilities;and, provided further that nothing herein shall limit the
right of the Transferee to provide any Proprietary Information to any court or
governmental authority having jurisdiction over or asserting a right to obtain
such information, provided that (i) such court or governmental authority orders
that such Proprietary Information be provided, and (ii) the Transferee promptly
advises the Transferor of any request for such information by such governmental
authority and cooperates in giving the Transferor an opportunity to present
objections, requests for limitation, and/or requests for confidentiality or
other restrictions on disclosure or access, to such court or governmental
authority.
The term "Proprietary Information" means all written information which has
been or is disclosed by the Transferor, or by an affiliate, officer, employee,
agent, representative, consultant, contractor, subcontractor or partner of the
Transferor, or which other becomes known to the Transferee
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or other party in a confidential relationship with the Transferee, and which (x)
relates to matters such as patents, trade secrets, research and development
activities, draft or final contracts or other business arrangements, books and
records, budgets, cost estimates, pro forma calculations, engineering work
project, environmental compliance, pricing information, operations and
maintenance procedures, private processes and other similar information, as they
may exist from time-to-time, or (y) the Transferor expressly designates in
writing to be confidential. However, Proprietary Information shall exclude:
A. Information that, at the time of disclosure hereunder is in the
public domain, other than any such information which entered the
public domain by breach of this Agreement or in violation of
applicable law;
B. Information that, after disclosure hereunder, enters the public
domain, other than information that entered the public domain by
breach of this Agreement or any other agreement, or in violation of
applicable law;
C. Information, other than that obtained from third parties, that prior
to disclosure hereunder, was already in the recipient's possession,
either without limitation on disclosure to others or subsequently
becoming free of such limitation;
D. Information obtained by the recipient from a third party having an
independent right to disclose the information; or
E. Information that is obtained through independent research without
use of or access to the Property Information.
20.02 JOINT SEVERAL LIABILITY. Tangshan Panda, Tangshan Pan-Western,
Tangshan Cayman, and Tangshan Pan-Sino, shall be jointly and severally liable
for the obligations under this Agreement.
20.03 AMENDMENTS. All amendments to this Agreement must be written and
must be signed by both parties hereto. Owner shall give Operator written notice
of any relevant amendments to the Loan Documents in a timely manner. If an
amendment or sub-agreement to the Power Agreement, or an amendment to the Loan
Documents materially adversely affects the performance of the Parties to this
Agreement, the Parties shall negotiate in good faith to amend this Agreement
accordingly, including, but not limited to, appropriate modifications to the
Contract Price Adjustments and Terminations for Default provisions, however,
such amendment(s) shall preserve the rights of the Parties hereto.
20.04 INVALIDITY. If any provision of this Agreement shall be found to be
invalid by any court of competent jurisdiction, such finding shall not
invalidate any other provision hereof.
20.05 SUCCESSORS & ASSIGNS. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and upon their respective
successors and assigns.
20.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties as to the subject matter of this Agreement and
merges and supersedes all prior agreements, commitments, representations, and
discussion between the Parties pertaining to the subject matter of this
Agreement.
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20.07 SURVIVAL. The provisions of this Agreement which by their nature are
intended to survive the cancellation, completion or termination of the Agreement
shall continue as valid and enforceable commitments of the Parties
notwithstanding any such cancellation, completion or termination.
20.08 WAIVER OF CONSUMER RIGHTS. The Parties HEREBY WAIVE THEIR RIGHTS
under the Deceptive Trade Practices Consumer Protection Act, Section 17.41 et
seq., Business and Commerce Code, a law that gives consumers special rights and
protections. After both Parties have consulted with attorneys of their own
selection, they voluntarily consent to this waiver.
20.09 LIMITATIONS APPLICATION. Neither Party makes any representations,
covenants, warranties or guarantees, express or implied, other than expressly
set forth herein. The Parties' rights, liabilities, responsibilities and
remedies with respect to the Services, whether in contract or otherwise, shall
be exclusively those expressly set forth in this Agreement.
20.10 THIRD PARTY BENEFICIARIES. Excluding rights any lenders to the
Facilities, this Agreement is not intended to create any third party beneficiary
or rights.
20.11 NOT USED
20.12 COUNTERPARTS. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original but all of which
taken together shall be deemed a single instrument.
Executed on the first day above-written.
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
By: /s/ MICHAEL J. EPPRECHT
Name: Michael J. Epprecht
Title: Vice President
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
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TANGSHAN CAYMAN HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
TANGSHAN PAN-SINO HEAT COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
43
EXHIBIT 10.94.02
SECOND AMENDED AND RESTATED
ON-SHORE
OPERATION AND MAINTENANCE AGREEMENT
CONSTRUCTION PHASE
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.
TANGSHAN PAN-WESTERN HEAT AND POWER CO.. LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
<PAGE>
SECOND AMENDED AND RESTATED
ON-SHORE
OPERATION AND MAINTENANCE AGREEMENT
CONSTRUCTION PHASE
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.,
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
RECITALS:
THIS AMENDED AND RESTATED OPERATION AND MAINTENANCE AGREEMENT is made and
entered into on the 1st day of January, 1998, by and between Tangshan Panda Heat
and Power Co., Ltd., a Chinese Joint Venture company ("Tangshan Panda"),
Tangshan Pan- Western Heat and Power Co., Ltd., a Chinese Joint Venture company
("Tangshan Pan- Western"), Tangshan Cayman Heat and Power Co., Ltd., a Chinese
Joint Venture company ("Tangshan Cayman") and Tangshan Pan-Sino Heat Co., Ltd.,
a Chinese Joint Venture company ("Tangshan Pan-Sino") (collectively, hereinafter
referred to as "Owner"), and Duke/Fluor Daniel International Services, a general
partnership formed in the State of Nevada by Duke Coal Project Services Pacific,
Inc., a Nevada corporation, and Fluor Daniel Asia, Inc., a Delaware corporation,
(hereinafter referred to as "Operator"), individually referred to hereinafter as
"Party" and collectively as "Parties."
WHEREAS, Duke Coal Project Services Pacific, Inc. entered into a
Partnership Agreement dated September 1, 1994 with Fluor Daniel Asia, Inc. to
form the partnership to be known as Duke/Fluor Daniel International Services;
WHEREAS, Owner and North China Power Group Company, a Chinese company (the
"Utility") entered into an Electric Energy Purchase and Sales Agreement dated
September 22, 1995, pursuant to which Owner intends to construct and operate two
nominal 5OMW coal-fired electric and thermal energy cogeneration power
generation stations (collectively, the "Facilities") in Luannan County near the
city of Gujiaying, Hebei Province, the People's Republic of China and pursuant
to which Owner will sell and the Utility will purchase electrical energy
produced by the Facilities and Owner shall sell steam and heat to local
businesses;
WHEREAS, Owner and Harbin Power Engineering Company, Limited, a Chinese
company (the "EPC Contractor") have entered into a turnkey Engineering,
Procurement and Construction Agreement dated April 24, 1996 (the "EPC Contract")
a copy of which has previously been furnished to Operator pursuant to which the
EPC Contractor thereunder will design, construct, test and startup the
Facilities:
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WHEREAS, Owner desires to have Operator provide pre-commercial and
post-commercial operation and maintenance services at the Facilities and
Operator desires to provide such services;
WHEREAS, Owner and Duke/Fluor Daniel International Services, Inc. entered
into the Operation and Maintenance Agreement dated June 26, 1996 and where
Duke/Fluor Daniel International Services, Inc. was characterized incorrectly as
a Nevada corporation; and
WHEREAS, the Operation and Maintenance Agreement dated June 26, 1996 was
superseded by an Amended and Restated Operation and Maintenance Agreement dated
as of March 6, 1997;
WHEREAS, the parties have allocated the services to be provided into four
separate contracts; two of which relate to off-shore services, one during the
Construction Phase and one during the Commercial Operations, and two of which
relate to on-shore services, one during the Construction Phase and one during
the Commercial Operations; and
WHEREAS, the parties have agreed that the Amended and Restated Agreement
of March 6, 1997, is superseded by the four Agreements described above, one of
which is this Second Amended and Restated On-shore Operation and Maintenance
Agreement, Construction Phase, dated as of the date first written above.
NOW, THEREFORE, in consideration of the foregoing and of the premises
hereinafter contained, Owner and Operator agree as follows:
SECTION I
DEFINITIONS
Whenever the following terms appear in this Agreement, they shall have the
following meanings:
"Affiliate" shall mean, with respect to any corporation, a corporation
which controls, is controlled by, or is under common control with such
corporation or successor thereto.
"Agreement" shall mean this Operation and Maintenance Agreement made and
entered into on the date set forth above by and between Tangshan Panda Heat and
Power Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd., Tangshan Cayman
Heat and Power Co., Ltd., Tangshan Pan-Sino Heat Co., Ltd., and Duke/Fluor
Daniel International Services.
"Annual Budget" shall mean the budget of all costs and expenses
anticipated to be incurred by Operator to meet its obligations under this
Agreement during any calendar year, or part thereof.
"Annual Fee" shall mean the amount payable to Operator pursuant to Section
4.03.B(ii).
"Annual Outage Period" shall mean the annual period from November 1
through October 31 each year.
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"Approved Budget" shall mean the annual budget prepared and submitted by
Operator pursuant to Section 2.17 hereof, which has been approved by Owner.
"Authorization To Proceed" shall mean Owners' written notice to Operator
to commence the work required by this Agreement.
"Claims" shall have the meaning given such term in Section 8.03A. hereof.
"Commencement Date" shall mean the calendar date upon which Operator is to
commence the work required by this Agreement as specified in the Authorization
to Proceed.
"Commercial Operation Date" shall mean the date upon which Owner's
Facilities start regular delivery of their electric energy delivered to the
Utility's Grid which shall be determined by the Utility and Owner after approval
of 72 hour full-load testing operation by both the generation units of Owner's
Facilities.
"Consumables" shall have the meaning set forth in Section 2.07 hereof.
"EPC Contract" shall mean the Turnkey EPC Contract between Owner and EPC
Contractor relating to the design, procurement, construction, testing and
starting up of the Facilities as the same may be amended, supplemented or
modified from time-to-time.
"EPC Contractor" shall mean Harbin Power Engineering Company Limited, a
Chinese company.
"Facilities" shall mean two nominal 50 MW coal-fired electric and thermal
energy cogeneration power stations and steam and hot water distribution systems
to be built by Owner in Luannan County near the city of Gujiaying in Hebei
Province, The People's Republic of China to supply electrical energy to the
Utility and thermal energy to a number of Chinese companies in Luannan County
and all equipment contained therein and parts thereof. It shall include, without
limitation, the fuel receiving and storage facility, all fuel delivery equipment
from the fuel storage facility to the balance of the Facility, interconnection
facilities to interconnect disconnect switch with the Utility (that is on the
high side of Owner's step-up transformer) and other auxiliary equipment and
systems described in the EPC Contract. It shall also include the steam and hot
water distribution systems, including, without limitation, piping, heat
exchangers, valves, controls, and insulation, to be built under separate
contracts, up to the interconnect point at each individual customer.
"Facilities Funding Date" shall mean the date upon which the initial loans
are made by the Lenders to Owner.
"Heat Rate" shall mean the net electrical output divided into the thermal
input expressed in British Thermal Units Per Kilowatt Hours (BTU/kWh) at a
specific process steam flow and condition.
"Indemnitee" shall have the meaning set forth in Section 8.03A. hereof.
"Lender" and "Lenders" shall mean Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
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"Loan Documents" shall mean the relevant documentation executed between
the Lender(s) and Owner for the financing of the Facilities and any other
financing documents as may be amended from time-to-time, excerpts of which are
attached hereto as Exhibit C.
"Lost Work Day" shall mean any employee lost work day resulting from an
on-the-job injury or illness.
"Net Facilities Output" shall mean the power output of the Facilities in
Kilowatts (kW) measured at the high voltage side of the main power transformer.
"Notice to Proceed for the EPC Contract" shall mean a written notice from
Owner to the EPC Contractor directing the EPC Contractor to commence the
performance of the EPC Contract Work.
"Operator" shall mean Duke/Fluor Daniel International Services.
"Owner" shall mean collectively Tangshan Panda Heat and Power Co., Ltd., a
Chinese Joint Venture company, Tangshan Pan-Western Heat and Power Co., Ltd., a
Chinese Joint Venture company, Tangshan Cayman Heat and Power Co., Ltd., a
Chinese Joint Venture company, and Tangshan Pan-Sino Heat Co., Ltd., a Chinese
Joint Venture company.
"Owner's Account" or "Account of Owner" shall have the meaning set forth
in Section 4.02 of this Agreement.
"Owner's Representative" shall have the meaning set forth in Section 3.01
of this Agreement.
"Outage" shall mean any interruption of required (dispatched) electric
energy deliveries (as set forth in Sections 2.1 and 2.2 of the Electric Energy
Purchase and Sales Agreement) to the Utility's Grid by Owner's Facilities.
"Outage Days" shall mean the cumulative elapsed outage time of any type
for each 50 MW unit of the Facilities calculated for each Annual Outage Period.
Outage Days will be calculated on an actual time elapsed basis. (For example,
twenty-four (24)one (1) hour outages shall be equal to one (1) day). Outage Days
do not include the time when the Utility dispatches the unit(s) off-line or the
Utility is unable to accept electrical energy due to Force Majeure conditions.
"Plant Manager" shall mean Operator's on-site employee responsible for the
operation and maintenance of the Facilities.
"Power Agreement" shall mean the Electric Energy Purchase and Sales
Agreement, and the General Interconnection Agreement, both dated as of September
22, 1995, the Supplemental Agreement dated February 10, 1996 and the technical
interconnect dispatch agreement (to be executed prior to the Commercial
Operation Date), relevant excepts of which are attached hereto as Exhibit A, all
between Owner and the Utility.
"Prudent Utility Practices" shall mean those practices generally followed
by the United States electric utility industry with respect to the operation and
maintenance of electric generating facilities (including, but not limited to,
the operation and safety practices generally followed by the electric utility
industry), to the extent reasonably possible, unless otherwise directed in
writing by Owner or
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otherwise required for financing of the Facilities. Operator will not be
responsible, however, for any failure to comply with those standards, or
portions thereof, where that failure is caused or necessitated by differences
between Chinese Prudent Utility Practices (or the like) and those of the United
States, or by workforce or industry customs in China that make compliance by
Operator with United States Prudent Utility Practices imprudent or impractical.
"Reimbursable Costs" or "Reimbursable Cost" shall mean all reasonable and
actual direct costs properly incurred.
"Scheduled Commercial Operation Date" shall mean the expected date which
the Facilities achieve Commercial Operation Date which is estimated to be
November 1, 1998. Owner may change the Scheduled Commercial Operation Date by
giving two hundred and forty (240) days prior written notice to Operator.
"Scheduled Annual Overhaul Outages" shall mean those planned outages of
the Facilities applied for by the Operator and approved and scheduled by the
Utility annually in advance of the November 1 to October 31 annual period.
"Scheduled Outage" shall mean those times the unit(s) are scheduled
off-line by the Utility or Operator's request in advance such that they are not
dispatched to produce electric energy by the Utility.
"Site" shall mean that real property upon which the Facilities are
located.
"Utility" shall mean North China Power Group Company, a Chinese company
organized under the laws of China.
"$" shall mean United States Dollars.
SECTION II
SERVICES TO BE PERFORMED BY OPERATOR
Operator will provide all operation and maintenance services necessary for
the efficient, sound and effective operation of the Facilities so as to enable
the Facilities to satisfy the requirements set forth in the Power Agreement,
attached as Exhibit A hereto and which may be amended from time-to-time, and to
maintain the Facilities in good mechanical and operating repair and condition
all in accordance with Prudent Utility Practices. Without limiting the
generality of the foregoing, Operator shall do the following:
2.01 Personnel. Operator shall recruit and train, in a manner consistent
with Prudent Utility Practices, competent qualified personnel to operate and
maintain the Facilities including, without limitation, the following:
A. A Plant Manager, assigned to the Facilities full time, to manage
on-site operations and maintenance, which individual shall be
approved in writing by Owner.
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B. Additional full time on-site personnel as needed.
C. Additional engineering support, operations, maintenance, and
management personnel not located full time at the Facilities, as
needed to perform the requirements of this Agreement.
Without limiting the generality of the foregoing, Operator will arrange to
(i) staff the Facilities during all hours; (ii) provide those full time on-site
personnel identified and agreed to by Operator and Owner. Operator shall submit
the qualifications of full-time, on-site management and key supervisory
personnel hired for review and approval by Owner, and such personnel shall be
acceptable to Owner at all times. Owner's approval or acceptance of any such
personnel shall not be construed as or imply Owner's acceptance of the conduct,
performance or qualifications of such personnel nor result in any waiver of
Operator's duties and responsibilities for providing personnel as required for
its performance or for responsibility for compliance with any standard or other
duty of performance hereunder and as required by the Power Agreement and the
Loan Documents. Personnel other than on-site management and key supervisory
positions shall be recruited, trained supervised, administered and directed by
Operator, but shall be directly employed under contract with Owner or one of its
affiliates or subsidiaries.
2.02 INITIAL STAFFING, STARTUP AND TESTING. After receiving Authorization
to Proceed, Operator shall prepare a hiring schedule for the personnel
identified and agreed to by Operator and Owner. After review and written
approval of the hiring schedule by Owner, Operator shall cause the commencement
of initial hiring of personnel. Operator shall adjust the hiring schedule, as
requested by Owner in writing, in accordance with changes in the construction,
startup, and Commercial Operation Date, and shall obtain Owner's review and
approval of such changes.
Operator shall provide capable operating personnel to assist in initial
training, startup and testing of the Facilities under the direction and
supervision of the EPC Contractor. It is understood that Owner is obligated to
pay for Operator's services during startup and testing as provided herein but
that total supervision and direction of all startup and testing activities
(including those of Operator) shall be furnished by the EPC Contractor who will
have care, custody and control of the Facilities prior to Commercial Operation
Date of the Facilities.
2.03 OPERATION AND MAINTENANCE. Operator shall prepare to operate and
maintain the Facilities, seven (7) days a week, twenty-four (24) hours per day,
in accordance with Prudent Utility Practices, manufacturers' recommendations as
applicable, and as required by the Power Agreement attached hereto as Exhibit A,
or Loan Documents as may be amended relating to the Facilities and this
Agreement. The Operator will operate the Facilities in a manner to maximize the
useful life of the equipment, to avoid excessive fuel consumption, to minimize
downtime for repairs, and to avoid forced outages, in a manner consistent with
that of a prudent owner maintaining its own facility for its own account.
Operator shall consult with Owner in order to clarify its obligations in the
event that any conflict exists in these obligations under this Agreement.
Operator shall be solely responsible for the operation and maintenance of the
Facilities hereunder but will follow the directions of Owner with respect to
financial or economic matters as long as compliance with such directions will
not materially and adversely affect the operation and maintenance of the
Facilities nor its performance as required hereunder after comparison of the
relative benefits and detriment of incurring any cost and the relative effect on
operations if such cost were not incurred.
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2.04 TOOLS.
A. Operator shall review the tool list developed by the EPC Contractor
pursuant to the EPC Contract, and shall identify and prepare a list
of recommended tools required to adequately perform the requirements
of this Agreement. Said list will be submitted to Owner in one or
more increments and shall be modified or supplemented throughout the
term of this Agreement by agreement of the Parties as necessary to
permit the timely acquisition thereof. The initial list of such
tools shall, in no event, be submitted to Owner later than one
hundred eighty (180) days prior to the Scheduled Commercial
Operation Date.
B. The initial supply of tools identified on the list described in
Section 2.04A. above shall be subject to the written approval of the
Owner and will be procured by Operator to Owner's account as
provided in Section IV of this Agreement or as a Reimbursable Cost.
Operator shall promptly notify Owner in writing of tools that were
not approved that could impact its obligations and duties hereunder.
C. Operator shall be responsible for annually, or as otherwise
reasonably requested by Owner in writing, preparing and presenting
to Owner an accurate reconciliation of the Facilities' tool
inventory.
D. Operator shall be responsible for the use, management, control,
care, and custody of the Facilities' tools.
E. Operator shall repair or replace tools as required, as a
Reimbursable Cost or to the Account of Owner, as provided in Section
IV.
F. Operator shall periodically, and no less frequently than annually,
review the Facilities tools, and make recommendations to Owner for
additional tools that would improve the Facilities operations.
2.05 SPARE PARTS.
A. Operator shall review the spare parts list developed by the EPC
Contractor pursuant to the EPC Contract, and shall identify and
prepare a list of recommended spare parts required to adequately
perform the requirements of this Agreement. Said list will be
submitted to Owner in one or more increments and shall be modified
or supplemented throughout the term of this Agreement by agreement
of the Parties as necessary to permit the timely acquisition
thereof. The initial list of such spare parts shall, in no event, be
submitted to Owner later than one hundred eighty (180) days prior to
the Scheduled Commercial Operation Date. Spare parts will be
determined with reference to generally accepted practices in the
industry and with reference to manufacturer's recommendations.
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B. The initial supply of spare parts identified on the list described
in Section 2.05A. above shall be subject to the written approval of
the Owner and will be procured by Operator for Owner's account as
provided in Section IV of this Agreement or as a Reimbursable Cost.
C. Operator shall, subsequent to submitting the initial list of spare
parts described in Section 2.05A. above be responsible for
procuring, for Owner's account as provided in Section IV hereof or
as a Reimbursable Cost, replacements for said listed spare parts as
necessary.
D. Operator shall be responsible for the use, care, custody, management
and control of said spare parts.
E. Operator shall be responsible for annually, or as otherwise
reasonably requested by Owner in writing, performing and presenting
to Owner an accurate reconciliation of the Facilities' spare parts
inventory.
F. Operator shall be responsible for establishing proper and effective
on-site warehousing and inventory controls for such spare parts. The
inventory control system is to be coupled to an Owner approved plant
maintenance management information system.
G. Operator shall procure additional parts subject to Owner's written
approval or replacement parts to maintain inventory at levels to
support Facilities requirements, as a Reimbursable Cost or to the
Account of Owner as provided for in Section IV.
2.06 EQUIPMENT.
A. Operator shall identify and prepare a list of recommended machinery,
equipment, office furnishings, computers, and software (the
"Equipment") required to adequately perform the requirements of this
Agreement. Said list will be submitted to Owner in one or more
increments and shall be modified or supplemented throughout the term
of this Agreement by agreement of the Parties as necessary to permit
the timely acquisition thereof. The initial list of such Equipment
shall, in no event, be submitted to Owner later than one hundred
eighty (180) days prior to the Scheduled Commercial Operation Date.
B. The Equipment identified on the list of such Equipment described in
Section 2.06A. above shall be subject to the written approval by
Owner and shall be procured by Operator for Owner's Account as
provided in Section IV or as a Reimbursable Cost. Operator shall
promptly notify Owner in writing of the Equipment that was not
approved that could impact Operator's obligations and duties
hereunder.
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C. Operator shall periodically review the Equipment required to perform
under this Agreement and make recommendations to Owner of
modifications or additions to the Facilities equipment throughout
the term of this Agreement that would improve or enhance the
Facilities operations.
D. NOT USED
E. Operator shall, when approved in advance by Owner in writing,
procure and install additional Equipment as a Reimbursable Cost or
to the Account of Owner as provided for in Section IV.
2.07 CONSUMABLES AND OTHER MATERIALS.
A. Operator shall identify those consumable, expendable, and other
materials and supplies ("Consumables") necessary to perform the
requirements of this Agreement. Said Consumables will be identified
to Owner throughout the term of this Agreement as necessary to
permit the timely acquisition thereof. The initial list of such
Consumables shall, in any event, be identified and submitted to
Owner in writing no later than one hundred eighty (180) days prior
to the Scheduled Commercial Operation Date.
B. Operator shall use, manage, care for, control and maintain
Consumables as required to support the needs of the Facilities, and
procure Consumables, as Reimbursable Costs or to Owner's Account as
provided in Section IV, throughout the term of this Agreement.
2.08 PURCHASED PARTS, LABOR AND SERVICES. Operator shall identify and
procure, as Reimbursable Costs or for the account of Owner as provided for in
Section IV, parts other than spare parts and labor and services throughout the
term of this Agreement as necessary to perform the requirements of this
Agreement. This will include procurement for the services of equipment
manufacturer's personnel, or personnel trained and qualified to provide
equivalent services, to perform manufacturer's recommended service procedures
when deemed necessary. Without limitation, Operator, in its capacity as Owner's
agent, shall procure as a Reimbursable Cost third-party contracts to clean up
and remove hazardous waste and solid waste, except to the extent such waste
arises out of the negligence or fault of Operator or pursuant to Section 2.16.
Any maintenance or repair which can reasonably be performed by regular full time
on-site personnel, provided pursuant to Section 2.01 above, shall be performed
by them.
2.09 NOT USED
2.10 OPERATING, MAINTENANCE AND SAFETY PLANS AND PROCEDURES. Using the
operations and maintenance manuals supplied to Owner by the EPC Contractor
pursuant to the EPC Contract as supplemented by Operator's standard procedures
developed for like facilities, Operator shall develop (and furnish copies to
Owner for review and approval in writing) necessary, specific and fully
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integrated operating, maintenance and safety plans and procedures including,
without limitation, the following (each of which shall satisfy the requirements
set forth in the Power Agreement):
A. Startup, operating, dispatching and shutdown procedures for the
Facilities equipment and systems including appropriate periodic
checks of and/or for water quality and treatment requirements, fluid
or gaseous leaks, improper temperatures, excessive noise and
vibrations, proper pressures and liquid levels, emission levels and
other pertinent operating information indicative of the equipment
condition.
B. Periodic maintenance plans identifying schedules and procedures for
the equipment lubrication, packing and seal checks, filter checks
and services, and electrical and control system checks.
C. Plans and procedures for long-term maintenance and overhaul of the
Facilities' equipment.
D. Plans and procedures for as-needed repairs and overhauls.
E. Plans and procedures for emergency service and repairs as needed,
twenty-four (24) hours a day, each day of the year. Such procedures
will provide for expedited service and repairs; for the availability
of Operator's management personnel, in connection with such
services, on a twenty-four (24) hours a day, each day of the year
basis; for notification of and expediting the availability of
factory or service personnel when necessary repairs are beyond the
capabilities of on-site personnel, and for the immediate
notification of Owner of any emergency event or condition, of
anticipated corrective actions to be taken and of anticipated
service and repair times and cost consequences.
F. Procedures for identifying, acquiring and maintaining required spare
parts to ensure that the Facilities has an adequate inventory of
spare parts, in accordance with Section 2.05 of this Agreement
including a critical spare parts analysis which will identify key
parts that may require over-stocking for the purpose of increased
plant availability.
G. Procedures for notice to and approval by Owner of any alterations or
capital improvements to the Facilities, so that no alterations or
capital improvements to the Facilities will be made without the
written consent of Owner.
Operator will, without limitation, provide in such plans and procedures
for visual, mechanical or instrumental inspection as necessary in order to
provide early detection of required adjustments, repairs or replacements so that
required adjustments, repairs or replacements can be scheduled with minimum
interference to the Facilities operations insofar as possible. Such procedures
will be consistent with applicable manufacturer's recommendations, will provide
for the services of factory representatives and/or outside consultants where
appropriate and will provide for orderly shutdowns and minimum interference with
operations. Such procedures will be reviewed as required and in no event less
frequently than annually with a copy of the review provided to Owner. No
alterations to the Facilities shall, in any event, be made without the prior
written approval of Owner.
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2.11 RECORDS. Operator shall keep and maintain maintenance and operation
records for the Facilities and for the equipment therein. Such records shall
satisfy the requirements set forth in the Power Agreement and Lenders'
requirements under Loan Documents and shall include, without limitation: the
logging of daily exception reports; daily Operator's logs; a record of all
maintenance and repairs performed; copies of all plans and procedures developed
pursuant to Section 2. 1 0 above or otherwise; emissions and compliance reports;
equipment and instrument calibration records; fuel consumption records; and
electricity production, consumption and delivery records. All records shall be
made available for examination by Owner, the Utility (where required by the
Power Agreement) or Lender (where required by the Loan Documents) during normal
working hours
2.12 REPORTS. Operator shall prepare and furnish a monthly operations
report within ten (10) business days following the close of each calendar month,
including the following:
A. Identification of maintenance and shutdowns planned for the
succeeding twelve (12) months.
B. Any significant personnel issues including hiring, disciplinary
action or lost time due to injuries.
C. Such other matters as may be reasonably requested by Owner in
writing.
Operator shall also provide all notices and reports required in connection
with the operation and maintenance of the Facilities by applicable permits, laws
and regulations and the Power Agreement and Loan Documents relating to the
Facilities within the times required. Owner shall be responsible, pursuant to
Section 3.10C., for providing those documents which identify all required
notices relating to the operation and maintenance of equipment contained in the
Facilities that are required by this Section 2.12 and Operator will cooperate
with Owner in the identification and obtaining of all such documents.
2.13 GOVERNMENTAL, REGULATORY, UTILITY AND SAFETY REQUIREMENTS. Operator
shall prepare to operate and maintain the Facilities in compliance with all
applicable laws, permits, approvals, ordinances, rules, regulations and orders
of central, provincial, city, county and local governmental authorities.
Operator shall also comply with all safety and other rules and regulations
reasonably established in writing by Owner with respect to the Facilities and
with all safety and other rules and regulations established by the Utility with
respect to interconnection delivery facilities and with respect to property
owned by or leased from the Utility. In the event that such requirements change
during the term of the Agreement, and such changes require additional costs of
Operator, these additional costs shall be mutually determined by Owner and
Operator and reimbursed to Operator by Owner as Reimbursable Costs. In the event
such changes require alteration to the Facilities, Owner shall be responsible
for the costs of such alterations.
2.14 LIENS AND ENCUMBRANCES. Operator shall keep all real property and all
personal property and equipment associated with or part of the Facilities free
and clear of all liens and encumbrances caused by an action or failure to act by
Operator or any of its consultants, suppliers or subcontractors in the
performance of its obligations under this Agreement, including, without
limitation, failure by Operator to pay, when due, any bill or charge for labor
or services performed or materials or equipment furnished for use in connection
with this Agreement. Contractor shall immediately notify Owner in writing of any
such liens or encumbrances. Nothing herein contained
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shall require Operator to pay any claims for labor, materials or services which
Operator, in good faith disputes and which Operator, at its own expense, is
currently and diligently contesting; provided, however, that Operator shall, not
later than thirty (30) days after notice of the filing of any claim of lien that
is disputed or contested by Operator, post a surety bond sufficient to release
said claim of lien in accordance with the relevant laws and approvals of the
People's Republic of China or other relevant laws.
2.15 NOT USED
2.16 NOT USED
2.17 SCOPE OF WORK. Operator shall perform, throughout the term of this
Agreement, all services described in this Agreement. Such services shall be
performed and supplied in connection with, but not limited to, the following:
A. Prior to and until such time as construction of the Facilities is
commenced pursuant to funding from non-affiliated third party
lenders to the Facilities, Operator will:
i. Develop a written plan for the conduct of its responsibilities
under this Agreement and form, or be prepared to immediately
form, a business entity appropriate for the conduct of its
responsibilities under this Agreement and in accordance with a
written business plan to be agreed to by the Owner;
ii. Provide a preliminary review and consult with Owner regarding
all plant design specifications, paying particular attention
to designs which affect the Facilities operations and
operability, and submit a written assessment thereof to Owner
for its review;
iii. Conduct a preliminary assessment of the available local
Chinese labor force which may be available to assist in the
Facilities operations and report thereon to the Owner;
iv. Develop preliminary standards, qualifications, and position
description criteria for key personnel and positions which it
believes necessary to perform its duties under this Agreement:
v. Develop and provide to Owner its plans with respect to all
training required for all Chinese labor;
vi. Prepare and deliver to Owner a draft organization chart for
the full staffing of the Facilities, thought to be required;
vii. Develop and prepare its proposed preliminary, pre-commercial
and post-commercial operating budgets for the Facilities and
discuss all matters relating thereto for conclusion and
acceptance by Owner;
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viii. Support Owner with one (1) trip to New York for a presentation
to bond rating agencies and cooperate with and assist Owner on
all matters, with information relating to Operator which may
be reasonably required, within the scope of its work to be
conducted pursuant to this Agreement, which may or does affect
Owner's ability to obtain construction and permanent financing
for the Facilities; and
ix. In the performance of the services provided pursuant to this
Section 2.17A., Operator may consult with and utilize Owner's
advisors and consultants and information, for assistance in
its preliminary legal and procedural analysis of the business
structure required for the conduct of operations. The cost of
the use of such outside consultants (whose use and scope of
services shall be pre-approved by Owner) will be borne by
Owner, except as required by Operator in the formation of
Operator's business unit. Owner makes no representation or
warranty to Operator with respect to the reliability or
accuracy of all such information, or advice, and Operator
shall make its own assessment and determination as to the
reliability and accuracy thereof.
B. PRE-COMMERCIAL OPERATIONS PERIOD. Subsequent to the Facilities
Funding Date and prior to the Commercial Operation Date (as defined
in the Power Agreement), Operator will assist Owner in specifying
and procuring tools, spare parts, chemicals, etc., and will provide
operating personnel to assist in startup and testing of the
Facilities under the direction and supervision of the EPC
Contractor. These services will be performed by Operator in
accordance with this Agreement and the schedules and budgets that
are established by Operator and approved by Owner, and will include
providing all management, administration, supervision and staffing
functions required to mobilize and provide the personnel capable of
assisting the EPC Contractor during startup and testing and also
technically capable of operating the Facilities upon commencement of
operations following the Commercial Operations Date. In addition,
Operator shall monitor any services previously required to be
provided, and amend or revise or update all information as required
in order to maintain a current and correct account thereof; and
perform the following generally described duties all in accordance
with the terms of this Agreement:
i. ADMINISTRATIVE SERVICES. Operator shall be responsible for all
normal administrative and personnel related activities with
respect to Operator's personnel, including benefits, bonuses,
scheduling and overtime. In addition, Operator's
administrative responsibilities shall include, but are not
limited to, the following:
(a) The development of the Facilities safety procedures
including, but not limited to, electrical
lock-out/tag-out procedures, closed vessel entry
procedures, hazardous materials control plan, spill
prevention plan, fire prevention plan, etc.;
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(b) All customary purchasing activities on-site, including
the purchase of all consumables, chemicals, spare parts,
equipment, tools and miscellaneous equipment needed
prior to Commercial Operations. Purchasing activities
shall include, without limitation, obtaining competitive
quotes, examinations, purchase document control,
warranty tracking, receiving and inspection and invoice
approval. Monthly purchase summaries shall be provided
to Owner within twenty (20) days from the last day of
each month;
(c) The development of an on-site budget to provide for all
customary operation and maintenance functions in
accordance with Prudent Utility Practices including,
among other things, initial spare parts, consumables,
maintenance overhauls, tools, equipment, etc. This
budget shall be submitted to Owner for approval prior to
any commitment of funds;
(d) The review and comment by Operator's management and
supervisory personnel of the startup and testing
activities prior to and during performance testing by
the EPC Contractor, subject to Owner's ultimate
responsibility for the results of such startup and
testing activities;
(e) The review and comment by Operator's management and
supervisory personnel of all mechanical and electrical
one line drawings to assure plant operability and
maintainability concerns are addressed by the EPC
Contractor, subject to Owner's ultimate responsibility
for any errors or omissions by the EPC Contractor; The
review and comment by Operator's management and
supervisory personnel of the adequacy of vendor training
programs and how these are scheduled to fit in with the
Operator's overall training program;
(g) The development of operating procedures for all
customary aspects of the plant's operations and
maintenance, including but not limited to: day-to-day
operations and maintenance, dispatch protocol, delivery
and receipt of fuels, water treatment, consumables and
hazardous materials, etc.:
(h) Making reasonable efforts to promote the public
relations of the Facilities and to maintain good
community relations including those with the city,
county and provincial authorities, customer
representatives, lending institution personnel and
approves site visitors;
(i) The identifying and preparing of lists of recommended
office equipment and furnishings to adequately perform
administrative activities; and
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j) Providing Owner's on-site plant manager and Owner's
engineering representatives with as needed assistance
during the startup and testing of the Facilities.
ii. TRAINING. Operator will provide training services in
conjunction with those of the EPC Contractor which will fully
familiarize its personnel and subcontractor personnel with all
the Facilities systems operation and maintenance requirements
based on Operator's assessment of available local Chinese
labor skills. Such training will consist of, among other
things, combined classroom instruction and field walk-downs
for the operations and maintenance personnel, as well as any
specialized training required for Chinese labor. These
training sessions will be conducted prior to the commencement
of startup activities on the plant so that Operator's staff
can get hands-on experience during the startup, check-out and
commissioning and testing of the Facilities' systems. Each
session should be based on the operating and maintenance data
and information contained in the Plant Manual(s) to be
prepared by the EPC Contractor's staff. The Plant Manual(s)
will be made available to Operator on a schedule that will
support the development of a training program prior to
startup. A preliminary list of systems expected to be covered
in such materials is presented below:
Ash Handling & Disposal
HVAC
Chemical Feed
Lighting
Circulating Water
Main Steam
Coal Handling
Plant Drains
Compressed Air
Plant Water
Condensate Storage & Transfer
Sample System
Cooling Water
Steam Generator
DCS/Controls
Steam Turbine & Auxiliaries
Feedwater
UPS
Fire Protection
Water Treatment
Fuel Oil
110 kV System
Fuel Unloading, Handling & Preparation
125 Vdc Heat Trace
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iii. OPERATING SERVICES. Operator's operating responsibilities
prior to the Commercial Operation Date will include, but are
not limited to, the following:
(a) The hiring and mobilization on-site in a timely manner
of qualified and competent (expatriate or local) plant
management, supervision, operations and maintenance
personnel ready to be trained;
(b) Providing trained operations and maintenance personnel
to assist in startup and testing of the Facilities under
the direction and supervision of the EPC Contractor; and
(c) The development and preparation of lists of consumables,
expendables and other materials and supplies necessary
to operate the plant.
iv. MAINTENANCE SERVICES. Operator's maintenance responsibilities
prior to the Commercial Operation Date shall include, but are
not limited to, the following:
(a) The development and implementation of an Owner approved
maintenance management information system (MMIS) in time
to support the commencement of system hand-over (in some
cases, this may occur prior to Final Acceptance);
(b) The developing of initial short-and long-term
maintenance plans for the Facilities in accordance with
manufacturer requirements prior to the Commercial
Operation Date;
(c) The preparation of lists of recommended spare parts
required to adequately operate and maintain the
Facilities in a reliable manner to meet the requirements
of the Power Agreement after the Commercial Operation
Date;
(d) The setting up and organizing of an inventory control
system which is coupled to the MMIS prior to the
Commercial Operation Date; and (e) The organizing,
stocking and management of the plant spare parts,
consumables, and tools inventory.
C. NOT USED
D. Preparation of the Facilities for the Commercial Operation Date
including, without limitation, the following:
i. Review engineering drawings; provided however, such
review shall not give Operator any responsibility for
the design of the Facilities;
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ii. Participate with Owner in design review meetings, in
construction reviews, in the development of training
programs and in development of the Facilities checkout
and startup procedures; and
iii. Provide and train qualified Operator personnel.
E. Testing and acceptance of the Facilities from the EPC Contractor
including: (i) review of turnover packages, (ii) system walk-downs;
and (iii) assistance in developing punchlists.
F. Testing of the Facilities required by the Power Agreement. Operator
shall provide trained and qualified operating personnel to assist in
the startup and testing of the Facilities under the direction and
supervision of the EPC Contractor prior to the Commercial Operation
Date of the Facilities.
G. Startup of the Facilities in connection with each dispatch from the
Utility.
H. Management and provision of all activities required for the
Facilities support and operation, under the direction of Owner's
Representative, including but not limited to: community interface,
fuel scheduling, and management of other contracts and services
necessary to support the Facilities.
I. NOT USED
J. Management of all operation and maintenance requirements of the
Facilities.
K. Maintenance of the Facilities.
L. Furnishing electrical energy to the Utility, together with the
maintenance schedules and other records required by the Utility
under the Power Agreement.
M. NOT USED
N. Assist Owner in obtaining and renewing the necessary permits and
licenses of Section 3.05 when requested by Owner.
O. Submit a desired schedule of Scheduled Outages as defined herein
(including the duration of each outage) to Owner at least four (4)
weeks before Owner is required to supply same to the Utility.
P. Cooperate with the Utility and Owner in scheduling and performing
all scheduled maintenance outages, routine maintenance and major
overhaul outages in accordance with Owner's obligations under the
Power Agreement or as set forth in any Loan Documents.
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Q. Preparation and submission to Owner, for Owner's approval, of an
Annual Budget for the Facilities, at least ninety (90) days before
the beginning of each calendar year. Such budget shall be consistent
with the requirements of this Agreement and meet the requirements of
the Power Agreement or any Loan Documents.
R. Provide sufficient training to operating and maintenance personnel
to assure that their capabilities and qualifications are maintained.
S. Cooperate with the Utility in scheduling and performing all testing
required under the Power Agreement.
T. Provide all other maintenance and operations services necessary to
the safe, efficient and reliable operation of the Facilities.
SECTION III
SERVICES TO BE PERFORMED BY OWNER
From and after the Commencement Date, Owner shall be responsible for the
following:
3.01 OWNER'S REPRESENTATIVE. Owner shall provide a full-time Owner's
Representative to administer Owner's responsibilities under this Agreement, to
monitor the operation of the Facilities, and to provide direction on economic
and financial matters associated with all its responsibilities hereunder.
3.02 OFFICE SPACE, EQUIPMENT, AND ADMINISTRATIVE SERVICES. Owner shall
provide office and administrative space, administrative services and equipment
for Operator at the Facilities.
3.03 TOOLS, SPARE PARTS, EQUIPMENT AND CONSUMABLES. Owner will:
A. Provide written approval or give timely objections to the
lists of tools, spare parts, Equipment, and Consumables
identified by Operator pursuant to Section II.
B. Pay for approved supplies of tools, spare parts, equipment,
Consumables, and purchased parts, labor and services and
Reimbursable Costs required by Operator to perform its
responsibilities under this Agreement, and as provided for in
this Agreement.
3.04 UTILITIES. Owner will provide and pay for all utilities.
3.05 PERMITS AND LICENSES. Owner will obtain necessary permits and
licenses, except those which are issued in the name of Operator or that Operator
is required to obtain under Section 11 above.
3.06 STAFFING SCHEDULES. Owner will provide written approval or give
timely objections for its obligation to give staffing schedule approval required
in Section 2.02.
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3.07 MANUALS. Consistent with the needs of Operator for such material to
perform its obligations under this Agreement, Owner shall deliver, or cause to
be delivered to Operator, copies of operating and maintenance manuals for all
equipment installed in the Facilities and any and all additional documents
received from the EPC Contractor under the EPC Contract including, but not
limited to, as-built drawings of the Facilities, record books, vendor manuals
and operations and maintenance manuals.
3.08 TRAINING. Owner shall cause the EPC Contractor to provide training to
the employees of Operator in the startup and operation of the Facilities and any
and all related machinery and equipment to the extent set forth in Section 3.02
of the EPC Contract provided Operator has made such employees available to the
EPC Contractor as provided in Section 11.
3.09 PAYMENTS. Owner shall make payments to Operator in accordance with
Sections IV and V of this Agreement.
3.10 OTHER RESPONSIBILITIES. Owner will:
A. Provide and pay for all fuel required throughout the term of this
Agreement.
B. Pay or reimburse Operator all property or other taxes (including,
but not limited to, any business tax or VAT taxes) related to the
Facilities or its activities and operations but not income taxes of
Operator (except as provided in Section 4.04).
C. Provide all necessary documents in its possession, that Operator
needs to perform its obligations relating to the operation and
maintenance of equipment contained in the Facilities under this
Agreement. Owner and Operator shall consult with each other to
determine the obligations under such documents for which Operator is
responsible.
3.11 Owner shall, at all times, conform to all laws, ordinances, rules and
regulations applicable to it.
3.12 Owner has a responsibility to identify and provide Operator with all
relevant provisions in the Power Agreement and the Loan Documents and any
amendments thereto in a timely manner. To the extent that Owner does not notify
Operator of such amendments, Operator is not liable for compliance with such
amendments. Owner agrees to consult with Operator in the event that such changes
to the Loan Documents or Power Agreements is contemplated.
SECTION IV
COMPENSATION
4.01 Owner shall pay for services provided by Operator during all periods
of service provided under this Agreement as follows:
A. OPERATIONS AND MAINTENANCE COSTS. Operator will manage and
control operations and maintenance costs according to a
predetermined budget that has been accepted by and developed
in conjunction with the Owner. All
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operations and maintenance expenses will be administered by
Operator and paid by Owner in local currency or paid as a
Reimbursable Cost.
B. LOCAL LABOR COSTS. Operator shall engage one or more Chinese
contractors to supply suitable operations and maintenance
personnel for the Facilities under direct contract with Owner.
All labor contract expenses shall be administered by Operator
and paid by Owner in local currency. In the event the Parties
direct-hire labor personnel, the Operator will recruit such
personnel under a direct employment contract with Owner.
C. NOT USED
D. OPERATOR'S US LABOR COSTS (WORK OUTSIDE OF US). All Operator's
United States labor (those employed and paid by Operator for
work performed outside the US) will be billed in US dollars to
Owner at a fixed multiplier of 2.1 on the hourly rate, plus an
additional amount sufficient to cover any duties, taxes,
incentives and other labor-related fees assessed on the income
of foreign nationals (which will be passed along by Operator
to its employees), for pre-approved work performed hereunder
outside of the United States. Reimbursement for individual
income taxes will be in accordance with Fluor Daniel's
International Assignment Policy Supplement 9, Section 9.5,
Expatriate Taxation Policy, effective April 1, 1996. Owner
will be notified of changes to this policy. Expenses
associated with pre-approved work performed will be billed at
cost. Travel and living expenses will be billed in US dollars
at actual cost with no markup in accordance with Operator's
standard travel policies. Payments by Owner to Operator for
such labor shall be in US currency.
E. EXPATRIATE CONTRACT LABOR COSTS. Expatriate contract labor
costs will be treated as normal operations and maintenance
expenses (summarized in 4.01A. above) and will be billed
through to Owner at actual cost with no markup, but with an
increase sufficient to cover any duties, taxes, incentives and
other labor-related fees assessed on the income of such
expatriate contract laborers for payment by Operator to such
laborers. Payments by Owner to Operator for such labor shall
be in U.S. or Chinese currency as directed by Operator.
F. PLANT GENERAL AND ADMINISTRATIVE EXPENSES. Plant site General
and Administrative (G&A) costs will be managed and controlled
according to a predetermined budget that has been accepted by
Owner. All G&A costs associated with plant operations will be
administered by Operator and paid for by Owner in local
currency.
All labor costs (items A., B., D., E., and F. above) will be tracked
against a budget approved by Owner.
G. NOT USED
H. NOT USED
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I. NOT USED
4.02 OPERATOR PROCUREMENT TO OWNER'S ACCOUNT. Operator may procure those
items and services which are considered Reimbursable Costs and are included in
the Approved Budget by issuing purchase orders to be paid directly by Owner on
Owner's purchasing and requisition forms. Operator shall supply a confirming
copy of the purchase order to Owner. For purchase orders in excess of the
equivalent of One Thousand and No/100 Dollars (US$1,000) or for any items not in
the Approved Budget, Operator is required to receive written authorization from
Owner's Representative prior to issuing purchase orders to be paid directly by
Owner on Owner's purchasing and requisition forms.
4.03 COMPENSATION STRUCTURE PRIOR TO THE FACILITIES' COMMERCIAL OPERATION
DATE.
A. Prior to the Facilities Funding Date. The special provisions
for compensation from execution of this Agreement until the
Facilities Funding Date are as follows:
i. No Operating Fee will apply;
ii. Costs of Operator setting up its corporate entity to
operate in China will be borne by Operator;
iii. Travel and labor costs associated with Operator's first
trip to China (regardless of mission or work
accomplishment) will be borne by Operator;
iv. Operator will perform the work scope shown in Section
2.17A. at no cost to Owner, other than: (i) pre-approved
fees and costs of Owner's consultants and other
resources incurred in connection with the Facilities
related services performed by Operator, as provided for
above; and (ii) in connection with services rendered
pursuant to Sections 2.17A.iv. and v (for which Operator
and Owner will agree to a reasonable compensation
structure, prior to Operator providing such work); and
v. All Operator's billings during this period will be held
and will be submitted for payment after the Facilities
Funding Date or six (6) months, whichever comes first.
Operator will submit to Owner monthly statements showing
current billings with totals accrued. No interest will
accrue on the billings.
B. PRE-COMMERCIAL OPERATIONS PERIOD. The special provisions for
compensation subsequent to the Facilities Funding Date and
prior to the Commercial Operation Date, are as follows:
i. All expenses specifically associated with setting up the
Operator's subsidiary in the People's Republic of China
will be to the account of Operator:
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ii. During the Pre-Commercial Operations Period, the Annual
Fee will be One Hundred Eighty-Seven Thousand Five
Hundred and No/100 Dollars (US$187,500) per annum
payable in monthly installments of Fifteen Thousand Six
Hundred Twenty-Five and No/100 Dollars ($15,625)
starting with the Commencement Date; and
iii. Operator will also be eligible for a bonus payment of
Three Hundred Seventy-Five Thousand and No/100 Dollars
(US$375,000) at the end of the Pre-Commercial Operations
Period (the "Startup Bonus"). The Startup Bonus will be
based upon mutually agreed-upon criteria that measure
the Facilities' success during this period including,
but not limited to, achieving critical path elements
such as hiring, training, sparing, or other program
setup milestones within the direct control of Operator;
and
iv. Operator's labor (in-country, expatriate and contract),
travel and other expenses will be reimbursed by Owner in
the same manner as described in Section 4.01D.
4.04 TAXES. Owner shall pay or reimburse all taxes or duties arising from
this Agreement, other than tax on Operator's income, as provided in Section
3.10B. If the People's Republic of China "deem" a profit to Operator based upon
payments relating to this Agreement in an amount in excess of the Annual Fee, as
adjusted pursuant to Section 4.03B(iii), the deemed profit tax payable by
Operator on that excess amount shall be a Reimbursable Cost. Operator shall use
its best efforts to minimize the amount of any such "deemed" profit.
4.05 INVOICING. Operator will invoice monthly for all Reimbursable Costs
and Fees payable under this Agreement. Operator shall include in its invoice the
Annual Fee and the anticipated Reimbursable Costs payable under Section 4.01D,
for the month following the invoice submission. With respect to other
Reimbursable Costs and any Start-up Bonus pursuant to Section 4.03B(iii),
Operator's invoice shall include amounts payable from the preceding month. On a
quarterly basis, Operator and Owner will reconcile actual Reimbursable Costs
under Section 4.01D with the projected amounts which have been paid hereunder,
and Operator's next invoice following such reconciliation will be adjusted
accordingly.
SECTION V
PAYMENT
5.01 PAYMENT OF MONTHLY COMPENSATION. The payment required by Section IV,
will be made on a calendar month basis. Operator shall submit its invoices by
the fifth day of the month. Owner shall pay the amount due to Operator on or
before the thirtieth (30th) day following the date the invoice is received by
Owner, provided that invoices are submitted in a timely manner to allow payment
in the applicable month in accordance with applicable loan requirements.
Invoices not timely submitted shall be paid within sixty (60) days. Operator
shall submit its billing together with copies of supporting invoices, vouchers,
receipts, and such other evidence of payment as Owner shall require.
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5.02 PAYMENT OF TERMINATION PAYMENTS. Owner shall pay the amount due
pursuant to Section 7.02 to Operator on or before the thirtieth (30th) day
following the date the invoice for such amount is received by Owner. Operator
shall submit its billing together with copies of supporting invoices, vouchers,
receipts, and such other evidence of payment as Owner shall require.
5.03 PAYMENT DISPUTES. In the event of a dispute or question regarding any
invoice submitted by Operator, (i) all amounts not disputed or in question shall
be promptly paid as and when required by Section 5.01 above, (ii) an explanation
of the dispute shall be promptly transmitted by Owner to Operator, (iii) Owner
and Operator shall immediately seek to resolve the dispute or question, and (iv)
payment shall be made within ten (10) days of any remaining amount due when the
dispute is resolved.
5.04 AUDIT RIGHTS. Owner shall have the right to audit Operator's books
and records to verify that all reimbursable costs are properly charged to Owner.
No audit rights extend to the makeup of lump sum amounts, unit rates, fixed
percentages or multipliers as may be agreed upon between Owner and Operator.
5.05 INTEREST. If Owner should fail to pay Operator the amounts due and
payable hereunder, except to the extent such amounts may be in dispute, such
delinquent payments shall bear interest at an annual rate equal to one and
twenty-five hundredths (1.25) times the prime interest rate then currently
charged by the Chase Manhattan Bank in New York, New York prorated for the
period of arrears, but in no event shall such rate exceed the maximum legal rate
allowed by applicable usury laws. Payment of interest shall not excuse or cure
any default or delay in payment of amounts due.
SECTION VI
TERM
6.01 TERM. This Agreement shall become effective as of the date of
execution of this Agreement, and shall continue in effect thereafter until the
date of Commercial Operations unless otherwise terminated as provided in this
Agreement.
6.02 NOT USED
SECTION VII
TERMINATION
7.01 TERMINATION BY OWNER WITHOUT CAUSE. Owner shall have the right to
terminate this Agreement upon any termination of the Power Agreement. Any Lender
to the Facilities shall have the right to terminate this Agreement for
convenience should it declare an "Event of Default" under the Loan Documents
after any cure period or other ability of Owner or any other party to cure any
such default. In addition, Owner shall have the right to terminate this
Agreement for convenience or in the event that the Facilities are sold to a
third party who intends to operate the Facilities. In the event Owner gives a
written termination notice pursuant to the provision of this Section 7.01, this
Agreement shall terminate as of the date specified in such notice which shall be
no earlier than fifteen (15) days after the date the notice is given.
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7.02 TERMINATION PAYMENTS. Upon termination pursuant to this Section VII,
Owner shall pay Operator: (i) all outstanding costs pursuant to Section IV
hereof; (ii) reasonable costs that may be incurred by Operator in support of the
termination of this Agreement, and (iii) reasonable severance costs resulting
from the termination of employment of Operator's employees. Payment of these
amounts will be in accordance with Section V.
In the event of termination for convenience pursuant to Section 7.01 or in
the event of termination pursuant to Sections 7.04A. and 7.04B., Owner shall
pay, in addition to the amounts above, monthly termination payments from the
date of termination through the original Term of the On-Shore Agreement for the
Commercial Operations Phase. The monthly amounts for such payments shall be
determined from the following schedule and shall be in accordance with Section
V:
A. Twenty-Five Thousand and No/100 Dollars ($25,000) per month
from the Commercial Operation Date through the twenty-fourth
(24th) month following the Commercial Operation Date;
B. Twenty Thousand and No/100 Dollars ($20,000.00) per month for
the twenty-fifth (25th) month through the forty-eighth (48th)
month following the Commercial Operation Date; and
C. Fifteen Thousand and No/100 Dollars ($15,000) per month for
the forty-ninth (49th) month following the Commercial
Operation Date through the original Term of the Agreement for
the Commercial Operations Phase.
Owner may pay at its sole option Operator these monthly termination
payments in a lump sum based on the net present value of the payment stream
discounted at a rate of twelve percent (12%) per annum.
7.03 TERMINATION BY OWNER FOR CAUSE. Owner may terminate this Agreement
upon written notice to Operator as provided for in Section 7.05 upon the
occurrence of any of the following:
A. Operator's failure to provide adequate qualified personnel to
perform its obligations under the Agreement.
B. NOT USED
C. NOT USED
D. Failure of the Operator to perform in any material respect any
service or obligation to be performed by it hereunder or any
representation or warranty shall prove to be incorrect in any
material respect.
E. The appointment of a receiver, liquidator or trustee for
Operator by a court of competent jurisdiction or an
adjudication of bankruptcy or insolvency by any such court or
the filing by Operator of a petition seeking an adjudication
of bankruptcy or insolvency.
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F. Continuance of a Force Majeure by Operator for more time than
that allowed in Section 12.01.
7.04 Termination By Operator For Cause. Operator may terminate this
Agreement upon written notice to Owner as provided for in Section 7.05 upon the
occurrence of any of the following:
A. Failure to pay undisputed amounts due to Operator under this
Agreement in accordance with Section V.
B. Failure of Owner to perform in any material respect any
service or obligation to be supplied or performed by it or any
representation of warranty shall prove to be incorrect in any
material respect.
C. Failure of Owner to obtain the Facilities Funding Date by June
30, 1997:
D. Continuance of a Force Majeure by Owner for more time than
that allowed in Section 12.01.
7.05 WRITTEN NOTIFICATION OF TERMINATION. In the event a written
termination notice is given pursuant to Sections 7.03A., 7.03D. or 7.04B., such
notice shall set forth the circumstances providing the basis for such
termination and the Party which receives such notice shall have thirty (30) days
to remedy such condition. In the event such circumstance is not corrected by the
Party receiving such notice, or the Party receiving such notice has not taken
substantive action acceptable to the other Party in its sole discretion to
correct the circumstances by the end of such thirty (30) day period, this
Agreement shall terminate.
7.06 TERMINATION PROCEDURE. Neither Party may terminate this Agreement
except as provided in this Section VI I. Operator shall, in the event of
termination, take all reasonable steps necessary to assure an orderly transfer
of operation and maintenance responsibility to Owner or to Owner's designee
including, without limitation, the delivery of all of the following to Owner or
to any such designee:
A. All operation, maintenance or other records, manuals and
procedures associated with the Facilities.
B. All tools, Consumables, spare parts and equipment associated
with the Facilities.
C. At the option of Owner or such designee, assignments to Owner
or such designee, in form reasonably satisfactory to Owner or
such designee, of any agreements between Operator and third
parties relating to the performance of the obligations of
Operator under this Agreement.
7.07 OWNER CURE OF OPERATOR'S DEFAULT. In the event of a default by
Operator in its obligations hereunder, Owner may (but shall not be required to)
cure such default and may charge Operator any additional incremental costs
incurred by Owner to cure such default. The exercise by Owner of this right
shall not waive any other rights of Owner hereunder.
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SECTION VIII
INSURANCE AND INDEMNIFICATION
8.01 INSURANCE. Without limiting any of the obligations or liabilities of
the Operator,Operator shall at all times throughout the term of this Agreement
and any renewal thereof, carry and maintain, or cause to be maintained, at its
own expense, insurance with at least the minimum insurance coverage set forth
below and such other additional insurance as may reasonably be required from
time-to-time by the Owner. All insurance carried and maintained pursuant to this
Agreement shall be with insurers, and shall be in such form as shall be
satisfactory to the Lender.
A. Operator shall carry and maintain or cause to be maintained
worker's compensation insurance (or other similar or
equivalent social insurance) written in accordance with the
governing insurance laws of the People's Republic of China and
employers' liability coverage in an amount not less than
$1,000,000 per occurrence in the annual aggregate. The
employers' liability coverage shall not contain an
occupational disease exclusion.
B. Operator shall carry and maintain or cause to be maintained
comprehensive automobile liability insurance covering all
owned, non-owned and hired vehicles. Such coverage shall be
written in an amount not less than $1,000,000 combined single
limit per occurrence in the annual aggregate.
C. Owner shall provide a Contractor's All Risk (CAR) insurance
policy for the Facilities covering the general liability and
builder's risk exposure. The limit of liability insurance will
be $90,000,000 and Owner, Operator, Subcontractors, and
Financing Entities will be named insureds.
D. Following Final Acceptance, Owner shall procure and maintain
all risk property insurance (including boiler and machinery
and business interruption insurance) naming Operator as an
additional insured and providing a waiver of subrogation in
favor of Operator and designated Subcontractors. Subject to
Owner's approval, such insurance may also include such other
Persons as may be requested by Operator as additional
insureds.
E. Commercial General Liability Insurance. Owner shall provide
coverage for Owner and Operator against claims for third party
bodily injury (including death) and third party property
damage. Such insurance shall provide coverage for products -
completed operations, blanket contractual, explosion, collapse
and underground coverage, broad form property damage and
personal injury insurance. The policy will provide a combined
single limit of liability of $20,000,000 per occurrence and in
the aggregate for bodily injury and property damage.
F. Owner shall furnish Operator and in turn Operator shall
furnish Owner with evidence of the insurance required
hereunder, in the form of insurance certificates. All such
insurance certificates shall represent that the policies may
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not be canceled or changed with respect to the requirements of
this Section 8.01 without thirty (30) days prior written
notice to Operator or its permitted assigns.
G. All deductibles or self-insured retentions under its
respective policies shall be the sole responsibility of the
Operator.
H. Any insurance carried and maintained in accordance with this
Agreement shall be endorsed to provide that:
i. Owner and any Lender to the Facilities, shall be named
as additional insureds with respect to insurance carried
pursuant to items A. employers liability (only if
possible) and B. Any obligation imposed upon the
Operator (including the liability to pay premiums) shall
be the sole obligation of the Operator and not that of
the Owner or Lender;
ii. The interest of the Owner and any Lender to the
Facilities shall not be invalidated by any action or
inaction of the Operator or any other person and all
policies shall insure the Owner and Lender regardless of
any breach or violation by the Operator or any other
Person of any warranties, declarations, or conditions in
such policies;
iii. The insurer thereunder waives all rights of subrogation
against the Owner, any Lender to the Facilities, and the
Utility, any right of set off and counterclaim and any
other right to deduction due to outstanding premium,
whether by attachment or otherwise;
iv. Such insurance shall be primary without right of
contribution of any other insurance carried by or on
behalf of the Owner, any Lender, and the Utility with
respect to their interests as such in the Facilities;
v. Inasmuch as such policies are written to cover more than
one insured, all terms, conditions, insuring agreements
and endorsements (other than the limits of liability)
shall operate in the same manner as if there were a
separate policy covering each insured; and
vi. If such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any substantial
change is made in the coverage that affects the
interests of the Owner, any Lender, and the Utility,
such cancellation or change shall not be effective as to
the Owner, such Lender, and the Utility, until thirty
(30) days after receipt by the Owner, Lender, and the
Utility of written notice sent by registered mail from
such insurer of such cancellation or change; provided,
however, that such thirty (30) day period shall be
reduced to ten (10) days in the case where cancellation
results from the nonpayment of premiums.
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J. On or before the execution of this Agreement and annually
thereafter, Operator shall arrange for furnishing Owner and
third party for which Owner makes written request with
approved certification of all required insurance. Such
certification shall be executed by each insurer or by an
authorized representative of each insurer. Such certification
or notice, as the case may be, shall identify insurers, the
type of insurance, the insurance limits and the policy term
and shall specifically list the special endorsements in
Section 8.01 D. above. Operator will furnish Owner and any
third party with copies of all insurance policies, binders,
and cover notes or other evidence of such insurance relating
to the Facilities in the event of a claim.
K. Concurrently with the furnishing of the certification referred
to in item J. above, Operator will furnish Owner and any third
party at the request of Owner with a report of each insurer or
insurance broker stating that all premiums then due from the
Operator have been paid and that in the opinion of such
insurer or insurance broker, the insurance then carried and
maintained with respect to the Facilities is in accordance
with the terms of this Agreement. Furthermore, Operator will
cause an insurer or insurance broker to advise Owner and any
third party promptly in writing of any default in the payment
of any premiums or any other act or omission on the part of
the Operator or any other person of which such broker has
actual knowledge which might invalidate or render
unenforceable, in whole or in part, any insurance provided
hereunder. Owner and/or such third party may, at their sole
option, obtain such insurance if not obtained by the Operator
and, in such event, Operator shall reimburse Owner and/or such
third party upon demand for the cost thereof.
8.02 RISK OF LOSS. Owner shall bear the risk of physical loss or damage to
the Facility, including all materials, equipment and supplies (including
temporary materials, equipment and supplies) purchased for permanent
installation in or use during construction of the Facility, regardless of
whether Owner has title thereto. Operator and Subcontractors shall have no
liability at any time for loss or damage to property of Owner, or in custody of
Owner, and Owner releases Operator and their Subcontractors there from. Operator
and their Subcontractors shall also have no liability for any loss of, or damage
to the Facility, as it is the intent of the Parties to rely on the proceeds of
Owner's insurance as satisfaction for any loss or damage to the Facility, and
Owner releases Operator and their Subcontractors for any such loss or damage.
8.03 INDEMNIFICATION.
A. Subject to the scope and limits of the insurance coverages
listed in Section 8.01 above; Operator agrees to defend and
indemnify Owner, any Lenders, and the Utility and their
respective directors, officers and employees (collectively
"Indemnitee") against, and hold them harmless from any and all
claims, suits, liabilities and legal expenses (collectively
"Claims") resulting from or in connection with Operator's
performance, negligent performance, or non-performance of its
obligations hereunder except where such Claims were caused by
the sole negligence or willful misconduct of an indemnitee,
provided that Operator shall be promptly notified in writing
so such claim or suit brought against such indemnitee and
shall be permitted to participate in the defense thereof.
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B. Subject to the scope and limits of the insurance coverages
listed in Section 8.01 above; Owner agrees to defend and to
indemnify Operator and its directors, officers and employees
(collectively "Operator Indemnitee") against, and to hold them
harmless from any and all Claims, resulting from or in
connection with Owner's performance, negligent performance, or
non-performance of its obligations hereunder, except where,
such claims were caused by the sole negligence or willful
misconduct of the Operator Indemnitee, provided that the same
notification to, and opportunity to participate, specified in
Section 7.05A. above is afforded to Owner.
C. Owner agrees to defend and to indemnify Operator Indemnitees
against and to hold them harmless from any and all claims,
resulting from or in connection with Operator indemnitee
acting under the EPC Contractor's supervision and direction,
the EPC's Contractor's performance, negligent performance or
non-performance of its obligations pursuant to Section 2.02,
except where such claims where caused by Operator's
Indemnitee's failure to comply with the directions given by
EPC Contractor and/or the sole negligence or willful
misconduct of Operator's indemnitee.
D. Indemnities against, releases from, assumptions of, and
limitations on liability expressed in this Agreement, as well
as waivers of subrogation rights, shall apply even in the
event of the fault, negligence or strict liability of the
Party indemnified or released or whose liability is limited or
assumed or against whom rights of subrogation are waived and
shall extend to the partners of each Party, their Affiliates,
and their respective officers, directors, employees, and
agents.
8.04 ADDITIONAL INSURED. Any Lender and the Utility shall be named as an
additional insured under the foregoing policies of insurance.
8.05 PRE-EXISTING CONTAMINATION. Anything herein to the contrary
notwithstanding, title to, ownership of, and legal responsibility and liability
for any and all pre-existing contamination shall at all times remain with Owner.
"Pre-existing contamination" is any hazardous or toxic substance present at the
site or sites concerned which was not brought onto such site or sites by
Operator. Owner agrees to release, defend, indemnify and hold Operator harmless
from and against any and all liability which may in any manner arise in any way
directly or indirectly caused by such pre-existing contamination except if such
liability arises from Operator's gross negligence or willful misconduct.
8.06 DAMAGE LIMITATION. Except as expressly provided herein, Operator nor
Owner shall have liability to the other party hereunder for indirect, incidental
or consequential damages, including, without limitation, loss of revenues,
liability for loss of use of the Facility or existing property, loss of profits,
loss of product or business interruption, howsoever caused, including breach of
contract, tort (including negligence), strict liability or otherwise.
SECTION IX
PERMITS AND LICENSES
9.01 OWNER PERMITS AND LICENSES. Owner shall be responsible for obtaining
and maintaining all permits, approvals and licenses, required to be in the name
of Owner, necessary for the operation and maintenance of the Facilities (unless
specifically determined to be within the scope
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of work undertaken by Operator). Operator shall cooperate with Owner in
obtaining and maintaining such permits and licenses and in preparing reports
required thereunder.
Operator shall promptly advise Owner of any required permits and licenses or
renewals of which it becomes aware.
9.02 OPERATOR PERMITS AND LICENSES. Operator shall be responsible for
obtaining and maintaining all permits, approvals and licenses required to be in
the name of Operator and otherwise required to be obtained by Operator in the
performance of his duties hereunder.
SECTION X
INDEPENDENT CONTRACTOR
At all times, Operator shall perform the requirements of this Agreement as an
independent contractor to the Owner. Operator shall have full responsibility for
the control and direction of its employees, servants and agents. Operator shall
be fully and solely responsible for the payment of such employees, servants and
agents and for the payment of all obligations incurred by Operator in performing
the requirements of this Agreement. This Agreement is not intended to and shall
not create a partnership of any kind or type. Except for as provided in Section
2.08, Operator shall not be an agent for and may not bind Owner. Owner shall not
be an agent for and may not bind Operator.
SECTION XI
COORDINATION AND ACCESS
11.01 ACCESS. Owner shall provide Operator and its employees, agents, and
subcontractors with full and free access to the Facilities at all times to
perform its obligations under this Agreement. Operator shall furnish Owner with
a list of employees engaged in operation and maintenance of the Facilities and
shall inform Owner in writing of all changes thereto. Operator, its employees,
agents and subcontractors shall comply with all safety and other requirements
established by Operator and Owner in connection with such access.
11.02 COORDINATION; REQUIRED LEVEL OF PERFORMANCE. Operator's personnel
will interface with Owner's Representative and with appropriate representatives
of the Utility. Operator shall accept daily instructions from the Utility, steam
purchasers, and Owner as to projected requirements, subject to the design limits
of the Facilities. In the event of any interruption of the operation of the
Facilities or in the event Operator is unable to operate the Facilities so as to
meet the such requirements of the Utility, steam purchasers, and Owner, Operator
shall immediately notify Owner of the circumstance and shall exert its best
efforts to restore the Facilities to its required operating level.
SECTION XII
FORCE MAJEURE
12.01 FORCE MAJEURE. Neither Party shall be responsible or liable for or
subjected to a termination of this Agreement for or deemed in breach of this
Agreement as a result of any delay or deficiency in the performance of its
obligations hereunder to the extent that such delay or deficiency is
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due to circumstances beyond its reasonable control. "Force Majeure Event" shall
mean any event that is not foreseeable and for which the damages caused by the
event are not reasonably preventable by the Party declaring Force Majeure and
cannot be overcome such that it adversely affects one Party's performance of its
obligations under this Agreement, including, without limitation, unusually
severe weather conditions (i.e., lightening, hurricane or typhoon); any natural
disasters such as fire or earthquakes, any labor difficulty not involving
employees of any parties hereto, any labor difficulty involving employees of
parties hereto to the extent such employees are members of a labor union and
such labor difficulty is in violation of a labor contract or in violation of
applicable laws; any labor difficulty involving employees of parties hereto, not
caused by the act or the failure to act on the part of the relevant party
hereto, to the extent such employees are in the process of becoming members of a
labor union; war; inability to obtain fuel for the Facilities; riots;
requirements, actions or failures to act on the part of governmental authorities
preventing performance; any modifications or changes in law, regulations or
rules made by the government of The People's Republic of China or any other
local government or their agencies which directly or indirectly affect either
Parties' performance of its obligations under this Agreement; inability despite
due diligence to obtain required licenses or approvals; accident; fire; damage
to or breakdown of necessary facilities; or transportation delays or accidents
(such causes hereinafter called "Force Majeure"); provided that:
A. The non-performing party shall give the other party written notice
within a reasonable time after the discovery of the Force Majeure
describing the particulars of the occurrence;
B. The suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure but under no
circumstances shall the Force Majeure exceed one hundred and eighty
(180) days; however, if such Force Majeure is declared by Operator
and results in the inability of the Facilities to furnish Dependable
Capacity to the Utility as required by the Power Agreement;
C. The Party with a deficiency in its performance uses its best efforts
to remedy such deficiency and to mitigate the effect of the Force
Majeure Event. If the Force Majeure Event is labor related, Operator
shall use best efforts to hire new employees or enter into new
subcontracts;
D. When the non-performing Party is able to resume performance of its
obligations under this Agreement that Party shall give the other
Party written notice to that effect;
E. If Operator declares Force Majeure, Owner shall have the immediate
right to enter the site at Owner's discretion to operate and
maintain the Facilities until such time as the Force Majeure is
resolved; and
F. The Force Majeure shall not excuse failure to apply money
obligations nor shall it excuse any deficiency in performance to the
extent caused by any negligent or intentional act, error, or
omission, or failure to comply with any law, rule, regulation, order
or ordinance.
12.02 EXTENSION OF AGREEMENT BY FORCE MAJEURE. Except as otherwise
provided, in no event will any condition of Force Majeure extend this Agreement
beyond its stated Term.
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SECTION XIII
ARBITRATION
Any unresolved dispute that may arise between the Parties regarding this
Agreement shall be settled by arbitration. The arbitration shall be conducted in
accordance with the Commercial Rules of the American Arbitration Association.
Venue for any arbitration proceedings shall be in Dallas, Texas. In such
proceedings, the arbitrator shall have the authority to include in his award
reimbursement of attorney fees and costs to the prevailing Party. Such award
shall be final and binding upon the parties and may be entered and enforced in
any court of appropriate jurisdiction.
SECTION XIV
OPERATOR AND OWNER REPRESENTATIONS AND WARRANTIES
14.01 REPRESENTATIONS AND WARRANTIES OF OPERATOR. Operator represents and
warrants, as of the date hereof, as follows:
A. It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, is duly qualified to
do business in and is in good standing in the State of Nevada and
shall be qualified to do business in the People's Republic of China
within one hundred twenty (120) days after Notice of Proceed to the
Commercial Operation Date, and in any other jurisdiction where it is
required to be so qualified;
B. It has taken all necessary action to authorize the execution,
delivery and performance of its obligations under this Agreement,
which action has not been superseded or modified, and this Agreement
constitutes the legal, valid and binding obligation of Operator,
enforceable in accordance with its terms;
C. The execution, delivery and performance of this Agreement do not
violate (i) its articles of incorporation or by-laws or any
resolution of its Board of Directors or other committees charges
with the governance of its affairs, (ii) any contract to which it
or, to the best of its knowledge, any of its Affiliates is a party
or (iii) any law, rule, regulation, order writ, judgment,
injunction, decree or determination affecting Operator or any of its
properties;
D. It has not filed any petition for relief under the bankruptcy laws
of the United States of America, or any other sovereign nation has
not made nor is making an assignment for the benefit of creditors,
initiated nor been the subject of any proceeding seeking to have a
receiver or trustee appointed to liquidate or manage its affairs,
and none of its properties is subject to the jurisdiction of any
bankruptcy court of the United States of America or any receivership
proceeding;
E. No litigation is pending or, to its knowledge, threatened which
seeks to restrain it from performing its obligations hereunder or
the adverse outcome of which would materially affect its business or
its ability to perform its obligations hereunder;
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F. No authorization or approval or other action by, and notice to or
filing with, any government agency or regulatory body is required
for the due execution, delivery and performance by Operator of this
Agreement which have not been obtained;
G. It or one of its Affiliates is experienced in the operation,
maintenance and repair of electrical generating facilities, has
complied with the provisions of all applicable laws, including,
without limitation, environmental laws, respecting the operation of
such facilities and has not been and is not currently subject to any
judgment or settlement of any claim imposing significant liability
on it for noncompliance with law or mismanagement in its operation
of any electric power generating facility; and
H. It is familiar with the terms of the Power Agreement and steam sales
agreements if Operator is to operate the steam sales agreements
which affect or relate to the operation of the Facilities.
14.02 REPRESENTATIONS AND WARRANTIES OF OWNER. Each of Tangshan Panda,
Tangshan Pan-Western, Tangshan Cayman, and Tangshan Pan-Sino represents and
warrants, as of the date hereof, as follows:
A. It is a foreign joint venture company duly organized, validly
existing and in good standing under the laws of the People's
Republic of China;
B. It has taken all necessary action to authorize the execution,
delivery and performance of its obligations under this Agreement,
which action has not been superseded or modified, and this Agreement
represents the valid and binding obligation of Owner, enforceable in
accordance with its terms.
C. The execution, delivery and performance of this Agreement do not
violate (i) its Joint Venture Contracts, Articles of Association, or
by-laws or any resolution of its Board of Directors or other
committees charges with the governance of its affairs, (ii) any
contract to which it is a party or (iii) any law, rules, regulation,
order, write, judgment, injunction, decree or determination
affecting Owner or any of its properties;
D. It has not filed any petition for relief under the bankruptcy laws
of the United States of America or any other sovereign nation, has
not made nor is making an assignment for the benefit of creditors,
has not initiated nor been the subject of any proceeding seeking to
have a receiver or trustee appointed to liquidate or manage its
affairs, and none of its properties is subject to the jurisdiction
of any bankruptcy court of the United States of America or any
receivership proceeding
E. No litigation is pending or, to its knowledge, threatened which
seeks to restrain the performance of its obligations hereunder or
the adverse outcome of which could materially affect its business or
its ability to perform its obligations hereunder; and
F. No authorization or approval or other action by, and notice to or
filing with, any government agency or regulatory body is required
for the due execution, delivery and performance by Operator of this
Agreement which have not been obtained.
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All notices, approvals, consents, requests and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered to the other Party by registered, certified, or express mail, return
receipt requested, postage prepaid, or by telecopy, addressed as follows:
If to Operator:
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
2225 East Flamingo Road, Suite 307
Las Vegas, Nevada 89119
ATTN: Vice President, Operations and Maintenance
DUKE/FLUOR DANIEL
One Coliseum Centre
2300 Yorkmont Road
Charlotte, North Carolina 28217
ATTN: Vice President, Operations and Maintenance
If to Owner:
Tangshan Panda Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Pan-Western Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Cayman Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
Tangshan Pan-Sino Heat Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: General Manager
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Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
ATTN: Director of Operations
Either Party may change or augment their above address by written
notice given as provided herein.
SECTION XVI
APPLICABLE LAW
16.01 CHOICE OF LAW. This Agreement shall be deemed to have been made in
Dallas, Texas and to be performed in China. It shall be construed in accordance
with the laws of the State of Texas without application of its conflicts of laws
provisions.
16.02 CERTAIN LEGAL REPRESENTATIONS AND UNDERTAKINGS. Each of Operator and
Owner represent, undertake and warrant that it will not engage in and that no
funds shall be used directly or indirectly for any illegal payments or
activities under the laws of The People's Republic of China or of the United
States of America.
Payments made to any person shall not be used for any improper or unlawful
purposes, including any form of comical bribe, kickback, or influence payment.
Without limiting the generality of the foregoing, it is expressly understood
that neither Operator nor Owner shall, directly or indirectly, give, pay, offer,
promise nor authorize the giving or payment of, any money or anything of value
to any officer or employee of any government or any department, agency, or
instrumentality thereof, to any person acting in an official capacity for or on
behalf of any government or any department, agency or instrumentality, to any
political party official, or to any candidate for political office for the
purpose of influencing any act or decision in order to assist the Partnership in
obtaining, retaining or directing business to the Partnership, or any other
person or entity. No party shall establish or maintain any undisclosed or
unrecorded funds or assets nor falsify or cause the making of any artificial
entries in any books or records in connection with any services performed under
this Agreement.
In addition to the foregoing provisions, each of Operator and Owner
expressly undertake that in connection with any inspection or audit of the
records of either party, to insure compliance with the provisions hereof, the
audited party shall cooperate fully with the auditing party or its designee,
shall refrain from making any false or misleading statements, and shall not omit
to state, or cause any person to omit to state, any material facts necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
SECTION XVII
NON-WAIVER
The failure of Owner or of Operator to enforce any of the terms and
conditions or to exercise any right or privilege under this Agreement shall not
be construed as waiving any such term or
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condition or right or privilege and the same shall continue and remain in force
and effect as if no such failure to enforce or exercise has occurred. No waiver
shall be valid unless so stated in writing.
SECTION XVIII
TITLE
Title to all tools, equipment, supplies and parts purchased by Operator
and of all reports, record logs and documentation prepared by Operator pursuant
to this Agreement shall pass directly upon payment by Owner. Said tools,
equipment, supplies and parts shall be and become the property of Owner free of
all liens and encumbrances except as provided for in Section 2.14
SECTION XIX
ASSIGNMENT
Operator may not assign either its rights or duties under this Agreement
without the prior written consent of Owner and Lender which shall not be
unreasonably withheld. Operator shall execute all consents to assignment
reasonably required by Lenders to the Facilities.
SECTION XX
MISCELLANEOUS
20.01 CONFIDENTIALITY. All Proprietary Information of a Party (the
"Transferred") which is \disclosed to or otherwise received or obtained by the
other Party (the "Transferee") incident to this Agreement is disclosed, and
shall be held, in confidence, and the Transferee shall not publish or otherwise
disclosed any Proprietary Information to any person for any reason or purpose
whatsoever or use any Proprietary Information for its own purposes or for the
benefit of any person, without the prior written approval of the Transferor for
a period of eight (8) years from the date of receipt of such Proprietary
Information; provided, however, that the Proprietary Information may be
disclosed to any prospective financier of the Facilities for purposes of
obtaining financing for the development, construction, operation or maintenance
of the Facilities;and, provided further that nothing herein shall limit the
right of the Transferee to provide any Proprietary Information to any court or
governmental authority having jurisdiction over or asserting a right to obtain
such information, provided that (i) such court or governmental authority orders
that such Proprietary Information be provided, and (ii) the Transferee promptly
advises the Transferor of any request for such information by such governmental
authority and cooperates in giving the Transferor an opportunity to present
objections, requests for limitation, and/or requests for confidentiality or
other restrictions on disclosure or access, to such court or governmental
authority.
The term "Proprietary Information" means all written information which has
been or is disclosed by the Transferor, or by an affiliate, officer, employee,
agent, representative, consultant, contractor, subcontractor or partner of the
Transferor, or which other becomes known to the Transferee or other party in a
confidential relationship with the Transferee, and which (x) relates to matters
such as patents, trade secrets, research and development activities, draft or
final contracts or other business arrangements, books and records, budgets, cost
estimates, pro forma calculations, engineering work project, environmental
compliance, pricing information, operations and maintenance procedures, private
processes and other similar information, as they may exist from time-to-time, or
(y) the
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Transferor expressly designates in writing to be confidential. However,
Proprietary Information shall exclude:
A. Information that, at the time of disclosure hereunder is in the
public domain, other than any such information which entered the
public domain by breach of this Agreement or in violation of
applicable law;
B. Information that, after disclosure hereunder, enters the public
domain, other than information that entered the public domain by
breach of this Agreement or any other agreement, or in violation of
applicable law;
C. Information, other than that obtained from third parties, that prior
to disclosure hereunder, was already in the recipient's possession,
either without limitation on disclosure to others or subsequently
becoming free of such limitation;
D. Information obtained by the recipient from a third party having an
independent right to disclose the information; or
E. Information that is obtained through independent research without
use of or access to the Property Information.
20.02 JOINT SEVERAL LIABILITY. Tangshan Panda, Tangshan Pan-Western,
Tangshan Cayman, and Tangshan Pan-Sino, shall be jointly and severally liable
for the obligations under this Agreement.
20.03 AMENDMENTS. All amendments to this Agreement must be written and
must be signed by both parties hereto. Owner shall give Operator written notice
of any relevant amendments to the Loan Documents in a timely manner. If an
amendment or sub-agreement to the Power Agreement, or an amendment to the Loan
Documents materially adversely affects the performance of the Parties to this
Agreement, the Parties shall negotiate in good faith to amend this Agreement
accordingly, including, but not limited to, appropriate modifications to the
Contract Price Adjustments and Terminations for Default provisions, however,
such amendment(s) shall preserve the rights of the Parties hereto.
20.04 INVALIDITY. If any provision of this Agreement shall be found to be
invalid by any court of competent jurisdiction, such finding shall not
invalidate any other provision hereof.
20.05 SUCCESSORS & ASSIGNS. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and upon their respective
successors and assigns.
20.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties as to the subject matter of this Agreement and
merges and supersedes all prior agreements, commitments, representations, and
discussion between the Parties pertaining to the subject matter of this
Agreement.
20.07 SURVIVAL. The provisions of this Agreement which by their nature are
intended to survive the cancellation, completion or termination of the Agreement
shall continue as valid and enforceable commitments of the Parties
notwithstanding any such cancellation, completion or termination.
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20.08 WAIVER OF CONSUMER RIGHTS. The Parties HEREBY WAIVE THEIR RIGHTS
under the Deceptive Trade Practices Consumer Protection Act, Section 17.41 et
seq., Business and Commerce Code, a law that gives consumers special rights and
protections. After both Parties have consulted with attorneys of their own
selection, they voluntarily consent to this waiver.
20.09 LIMITATIONS APPLICATION. Neither Party makes any representations,
covenants, warranties or guarantees, express or implied, other than expressly
set forth herein. The Parties' rights, liabilities, responsibilities and
remedies with respect to the Services, whether in contract or otherwise, shall
be exclusively those expressly set forth in this Agreement.
20.10 THIRD PARTY BENEFICIARIES. Excluding rights any lenders to the
Facilities, this Agreement is not intended to create any third party beneficiary
or rights.
20.11 NOT USED
20.12 COUNTERPARTS. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original but all of which
taken together shall be deemed a single instrument.
Executed on the first day above-written.
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
By: /s/ MICHAEL J. EPPRECHT
Name: Michael J. Epprecht
Title: Vice President
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
TANGSHAN CAYMAN HEAT AND POWER COMPANY, LTD.
By: /s/ JOHN R. ZAMLEN
Name: John R. Zamlen
Title: Authorized Legal Representative
39
EXHIBIT 10.94.06
OFFSHORE SERVICES AGREEMENT
COMMERCIAL OPERATION PHASE
THIS AGREEMENT for the performance of services is executed and made
effective as of January 1, 1998, between Tangshan Panda Heat and Power, Ltd., a
Chinese Joint Venture company ("Tangshan Panda"), Tangshan Pan-Western Heat and
Power Co., Ltd., a Chinese Joint Venture company ("Tangshan Pan-Western"),
Tangshan Cayman Heat and Power Co., Ltd, a Chinese Joint Venture company
("Tangshan Cayman"), and Tangshan Pan-Sino Heat Co., Ltd., a Chinese Joint
Venture company ("Tangshan Pan-Sino"), (collectively, hereinafter referred to as
"Owner") and Duke/Fluor Daniel International, a general partnership formed
pursuant to the laws of the State of Nevada, U.S.A. ("DFDI").
WHEREAS, Owner desires DFDI to provide certain U.S. support services for
the operation and maintenance of the Facilities (as defined in Exhibit "A") to
be located in Luannan County, near the city of Gujiaying, Hebei Province, the
People's Republic of China;
WHEREAS, Owner and DFDI desire to set forth the terms pursuant to which
DFDI shall provide certain U.S. support services for the operation and
maintenance of the Facilities; and
WHEREAS, all of such services are to be performed outside of the Peoples
Republic of China; and
WHEREAS, this Agreement covers such services which are to be provided
following the commencement of commercial operations.
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the parties hereto mutually agree as follows:
1. DFDI shall perform the services described in Exhibit "A", attached
hereto and incorporated herein (the "Services").
2. For and in consideration of the performance of the Services, DFDI shall
be paid an aggregate lump sum amount of $553,812.00 U.S. Dollars) paid
in accordance with the payment terms described in Exhibit "B", attached
hereto and incorporated herein. In the event Owner and DFDI agree on
changes in the scope of Services including an increase or decrease in
the Services, Exhibit "A", the aggregate lump sum amount and the payment
terms shall be adjusted to reflect such change.
3. DFDI warrants that it shall perform the Services in accordance with the
standards of care and diligence normally practiced by recognized
operations and maintenance firms in performing services of a similar
nature in existence at the time of performance of the Services. If,
during the twelve (12) month period following the end of the operation
year in which Services are performed, it is shown that there is an error
in the Services as a result of DFDI's failure to meet those standards,
and Owner has notified DFDI in writing of any such error within that
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period, DFDI shall perform such corrective services within the original
scope of Services, as may be necessary to remedy such error.
4. DFDI shall maintain in force during the period that Services are
performed Workers' Compensation and Employer's Liability Insurance
(limit of One Million Dollars ($1,000,000) each occurrence) in
accordance with the laws having jurisdiction over DFDI's employees who
are engaged in the Services. DFDI shall also maintain during such period
Comprehensive General Bodily Injury and Property Damage Liability,
including automobile (owned, non-owned or hired), Contractual and DFDI's
Protective Liability Insurance covering bodily injury to or death of
persons and/or loss of or damage to property of parties other than Owner
in a combined single limit of One Million Dollars ($1,000,000) for any
one occurrence.
5. DFDI shall indemnify Owner against any and all claims, demands and
causes of action for injury to or death of persons or for damage to or
destruction of property (other than property of Owner for which Owner
assumes responsibility) to the extent resulting from the negligent acts
or omissions of DFDI. Except for DFDI's warranty obligation under
paragraph 3 above, DFDI's liability under this Agreement shall not
exceed amounts recoverable under the scope and limits of the insurance
coverages specifically required to be maintained by DFDI under paragraph
4 above, and Owner agrees to release DFDI from any and all further
liability arising in any manner from the Services. The parties hereby
waive, and shall require their insurers to waive, subrogation against
the other party under any applicable policy of insurance.
6. In performance of the Services, it is understood that if DFDI will be
supplied with certain information and/or data by Owner and/or others,
that DFDI will rely on same. It is agreed that the accuracy of such
information is not within DFDI's control, and DFDI shall not be liable
for its accuracy, nor for its verification, unless this Agreement is
modified by mutual agreement to provide for verification by DFDI.
7. The term of this Agreement shall commence when the Facilities commence
Commercial Operations and shall terminate ten years after that date.
Owner and DFDI may elect to extend such term for two additional periods
of five (5) years each. Any extension of the term of this Agreement will
be affected by mutual written agreement between the parties after having
given notice of the desire to so extend at least sixty (60) days prior
to the end of the then effective term. All of the terms and conditions
of this Agreement which are not modified or changed in any such written
agreement shall remain in full force and effect throughout any such
extended term.
8. Neither party shall be responsible or held liable to the other for
indirect or consequential damages, including, but not limited to, loss
of profit, loss of investment, loss of product or business interruption.
The warranties, obligations, liabilities and remedies of the parties, as
provided herein, are exclusive and in lieu of any others available at
law or in equity. Indemnifications against, releases from, and
limitations of liability and waivers of subrogation shall apply
notwithstanding the default, negligence (whether active, passive, joint
or concurrent), strict liability or other theory of legal liability of
the party indemnified, released or whose liability is limited and shall
be effective to, and only to, the maximum extent allowable by law and in
the event such provision is determined to exceed the maximum scope
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allowed by law, said provision shall be interpreted and enforced so as
to preserve the indemnity, release or limitation to the maximum extent
allowable. The parties agree to look solely to each other with respect
to performance of this Agreement. DFDI may subcontract portions of the
Services to its affiliated entities.
9. Any delays in or failure of performance by DFDI shall not constitute a
default hereunder if such delays or failures of performance are caused
by occurrences beyond the reasonable control of DFDI, including but not
limited to: acts of God or the public enemy; expropriation or
confiscation; compliance with any order of any governmental authority;
act of war, rebellion or sabotage or damage resulting therefrom; fires,
floods, explosion, accidents, riots; strikes or other concerted acts of
workmen, whether direct or indirect; or any other causes, whether
similar or dissimilar, which are beyond the reasonable control of DFDI.
The contract price and/or schedule shall be subject to the equitable
adjustment in the event that the cost of or the time required to perform
the Services increase as a result of the foregoing causes.
10. Owner shall have the right to audit and inspect DFDI's records and
accounts covering costs hereunder at all reasonable times during the
course of the Services and for a period of one (1) year after the end of
the operation year in which Services are performed, provided, however,
that the purpose of any such audit shall be only for verification of
such costs and that DFDI shall not be required to keep records of or
provide access to those of its costs covered by fixed rates, or of costs
which are expressed in terms of percentages of other costs.
11. The cost of any non-U.S. or People's Republic of China duties, taxes or
licenses arising directly out of or that are applicable to the Services
shall be paid by the Owner. Amounts payable to DFDI shall be without
reduction for and free of non-U.S. taxes, duties or other similar
assessments. Any such taxes imposed upon DFDI or any of its employees,
or their affiliates, shall be reimbursable costs to DFDI payable by
Owner. Reimbursement of taxes imposed upon employees shall be made in
accordance with Fluor Daniel's International Assignment Policy
Supplement 9, Section 9.5, Expatriate Taxation Policy, effective April
1, 1996. Owner will be notified of changes to this policy. It is
anticipated by both parties that all Services provided under this
Agreement are to be free of People's Republic of China VAT and
Withholding Tax. Should this not be the case, both parties shall agree
to mutually acceptable adjustments to the terms of the compensation.
12. Tangshan Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan
Pan-Sino shall be jointly and severally liable for the obligations of
Owner under this Agreement.
13. This Agreement and the attached Exhibits constitute the complete basis
for this Agreement. No other representations of any kind, oral or
otherwise, have been made. This Agreement shall be interpreted under the
laws of the State of Texas, excluding its conflict of laws provisions.
14. WAIVER OF CONSUMER RIGHTS. The Parties HEREBY WAIVE THEIR RIGHTS under
the Deceptive Trade Practices Consumer Protection Act, Section 17.41 et
seq., Business and Commerce Code, a law that gives consumers special
rights and protections. After both Parties have consulted with attorneys
of their own selection, they voluntarily consent to this waiver.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
TANGSHAN PANDA HEAT AND POWER, LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN PAN-SINO HEAT CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
DUKE/FLUOR DANIEL INTERNATIONAL,
a General Partnership
By: Richard D. Snell
Title: Vice President
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EXHIBIT "A"
SCOPE OF SERVICES
The following services may be provided by Contractor under this Off-Shore
Agreement:
A. Offshore support of overall job management
B. Offshore management oversight of Annual Operations audit and report
C. Engineering review of plant performance and efficiency
D. Maintenance planning assistance programs
E. Inventory tracking control programs
F. Contract administration and interpretation assistance
G. Troubleshooting support
H. Site safety and hazardous materials programs
I. Capital project engineering support (includes conceptualization,
analysis, and recommendation and does not include detailed
engineering for such projects, which will be performed as
required as a separate contract)
J. Problem analysis and resolution
K. Warranty administration assistance
L. Travel and living expenses of home office personnel
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EXHIBIT "B"
COMPENSATION AND PAYMENT TERMS
Compensation is calculated in accordance with Duke/Fluor Daniel International
Standard Home Office Billing Schedule in effect as of January 1, 1998, as may
hereafter be adjusted on an annual basis. Current scope of services in Exhibit
"A" shall be for the annual lump sum amount of $553,812.00 to be paid in 12
equal monthly installments beginning the month following the date of Commercial
Operation. Operator shall submit its invoices by the fifth day of the month.
Owner shall pay the amount due to Operator on or before the thirtieth (30th) day
following the date the invoice is received by Owner provided that invoices are
submitted in a timely manner to allow payment in the applicable month in
accordance with applicable loan requirements. Invoices not timely submitted
shall be paid within sixty (60) days. Operator shall submit its billing together
with copies of supporting invoices, vouchers, receipts, and such other evidence
of payment as Owner shall require. If Owner should fail to pay Operator the
amounts due and payable hereunder, except to the extent such amounts may be in
dispute, such delinquent payments shall bear interest at an annual rate equal to
one and twenty-five hundredths (1.25) times the prime interest rate then
currently charged by the Chase Manhattan Bank in New York, New York prorated for
the period of arrears, but in no event shall such rate exceed the maximum legal
rate allowed by applicable usury laws. Payment of interest shall not excuse or
cure any default or delay in payment of amounts due.
6
EXHIBIT 10.94.04
OFFSHORE SERVICES AGREEMENT
CONSTRUCTION PHASE
THIS AGREEMENT for the performance of services is executed and made
effective as of January 1, 1998, between Tangshan Panda Heat and Power, Ltd., a
Chinese Joint Venture company ("Tangshan Panda"), Tangshan Pan-Western Heat and
Power Co., Ltd., a Chinese Joint Venture company ("Tangshan Pan-Western"),
Tangshan Cayman Heat and Power Co., Ltd, a Chinese Joint Venture company
("Tangshan Cayman"), and Tangshan Pan-Sino Heat Co., Ltd., a Chinese Joint
Venture company ("Tangshan Pan-Sino"), (collectively, hereinafter referred to as
"Owner") and Duke/Fluor Daniel International, a general partnership formed
pursuant to the laws of the State of Nevada, U.S.A. ("DFDI").
WHEREAS, Owner desires DFDI to provide certain U.S. support services for
the operation and maintenance of the Facilities (as defined in Exhibit "A") to
be located in Luannan County, near the city of Gujiaying, Hebei Province, the
People's Republic of China;
WHEREAS, Owner and DFDI desire to set forth the terms pursuant to which
DFDI shall provide certain U.S. support services for the operation and
maintenance of the Facilities; and
WHEREAS, all of such services are to be performed outside of the
Peoples Republic of China; and
WHEREAS, this Agreement covers such services which are to be provided
during the construction of the Facilities and prior to the commencement of
commercial operations.
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the parties hereto mutually agree as follows:
1. DFDI shall perform the services described in Exhibit "A", attached hereto
and incorporated herein (the "Services").
2. For and in consideration of the performance of the Services, DFDI shall be
paid an aggregate lump sum amount of $757,778.00 (U.S. Dollars) paid in
accordance with the payment terms described in Exhibit "B", attached
hereto and incorporated herein. In the event Owner and DFDI agree on
changes in the scope of Services including an increase or decrease in the
Services, Exhibit "A", the aggregate lump sum amount and the payment terms
shall be adjusted to reflect such change.
3. DFDI warrants that it shall perform the Services in accordance with the
standards of care and diligence normally practiced by recognized
operations and maintenance firms in performing services of a similar
nature in existence at the time of performance of the Services. If,
during the twelve (12) month period following the end of the operation
year in which Services are performed, it is shown that there is an
error in the Services as a result of DFDI's failure to meet those
standards, and Owner has notified DFDI in writing of any such error
within that period, DFDI shall perform such corrective services within
the original scope of Services, as may be necessary to remedy such
error.
1
<PAGE>
4. DFDI shall maintain in force during the period that Services are performed
Workers' Compensation and Employer's Liability Insurance (limit of Five
Hundred Thousand Dollars ($500,000) each occurrence) in accordance with the
laws having jurisdiction over DFDI's employees who are engaged in the
Services. DFDI shall also maintain during such period Comprehensive General
Bodily Injury and Property Damage Liability, including automobile (owned,
non-owned or hired), Contractual and DFDI's Protective Liability Insurance
covering bodily injury to or death of persons and/or loss of or damage to
property of parties other than Owner in a combined single limit of One
Million Dollars ($1,000,000) for any one occurrence.
5. DFDI shall indemnify Owner against any and all claims, demands and causes
of action for injury to or death of persons or for damage to or destruction
of property (other than property of Owner for which Owner assumes
responsibility) the the extent resulting from the negligent acts or
omissions of DFDI. Except for DFDI's warranty obligation under paragraph 3
above, DFDI's liability under this Agreement shall not exceed amounts
recoverable under the scope and limits of the insurance coverages
specifically required to be maintained by DFDI under paragraph 4 above, and
Owner agrees to release DFDI from any and all further liability arising in
any manner from the Services. The parties hereby waive, and shall require
their insurers to waive, subrogation against the other party under any
applicable policy of insurance.
6. In performance of the Services, it is understood that if DFDI will be
supplied with certain information and/or data by Owner and/or others, that
DFDI will rely on same. It is agreed that the accuracy of such information
is not within DFDI's control, and DFDI shall not be liable for its
accuracy, nor for its verification, unless this Agreement is modified by
mutual agreement to provide for verification by DFDI.
7. The term of this Agreement shall commence on the effective date hereof and
shall terminate when the Facilities commence commercial operations.
8. Neither party shall be responsible or held liabile to the other for
indirect or consequential damages, including, but not limited to, loss of
profit, loss of investment, loss of product or business interruption. The
warranties, obligations, liabilities and remedies of the parties, as
provided herein, are exclusive and in lieu of any others available at law
or in equity. Indemnifications against, releases from, and limitations of
liability and waivers of subrogation shall apply notwithstanding the
default, negligence, (whether active, passive, joint or concurrent), strict
liability or other theory of legal liability of the party indemnified,
released or whose liability is limited and shall be effective to, and only
to, the maximum extent allowable by law and in the event such provision is
determined to exceed the maximum scope allowed by law, said provision shall
be interpreted and enforced so as to preserve the indemnity, release or
limitation to the maximum extent allowable. The parties agree to look
solely to each other with respect to performance of this Agreement. DFDI
may subcontract portions of the Services to its affiliated entities.
2
<PAGE>
9. Any delays in or failure of performance by DFDI shall not constitute a
default hereunder if such delays or failures of performance are caused by
occurrences beyond the reasonable control of DFDI, including but not
limited to: acts of God or the public enemy; expropriation or confiscation;
compliance with any order of any governmental authority; act of war,
rebellion or sabotage or damage resulting therefrom; fires, floods,
explosion, accidents, riots; strikes or other concerted acts of workmen,
whether direct or indirect; or any other causes, whether similar or
dissimilar, which are beyond the reasonable control of DFDI. The contract
price and/or schedule shall be subject to the equitable adjustment in the
event that the cost of or the time required to perform the Services
increase as a result of the foregoing causes.
10. Owner shall have the right to audit and inspect DFDI's records and accounts
covering costs hereunder at all reasonable times during the course of the
Services and for a period of one (1) year after the end of the operation
year in which Services are performed, provided, however, that the purpose
of any such audit shall be only for verification of such costs and that
DFDI shall not be required to keep records of or provide access to those of
its costs covered by fixed rates, or of costs which are expressed in terms
of percentages of other costs.
11. The cost of any non-U.S. or People's Republic of China duties, taxes or
licenses arising directly out of or that are applicable to the Services
shall be paid by the Owner. Amounts payable to DFDI shall be without
reduction for and free of non-U.S. taxes, duties or other similar
assessments. Any such taxes imposed upon DFDI or any of its employees, or
their affiliates, shall be reimbursable costs to DFDI payable by Owner.
Reimbursement of taxes imposed upon employees shall be made in accordance
with Fluor Daniel's International Assignment Policy Supplement 9, Section
9.5, Expatriate Taxation Policy, effective April 1, 1996. It is anticipated
by both parties that all Services provided under this Agreement are to be
free of People's Republic of China VAT and Withholding Tax. Should this not
be the case, both parties shall agree to mutually acceptable adjustments to
the terms of the compensation.
12. Tangshan Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-Sino
shall be jointly and severally liable for the obligations of the Owner
under this Agreement.
13. This Agreement and the attached Exhibits constitute the complete basis for
this Agreement. No other representations of any kind, oral or otherwise,
have been made. This Agreement shall be interpreted under the laws of the
State of Texas, excluding its conflict of laws provisions.
14. WAIVER OF CONSUMER RIGHTS. The Parties HEREBY WAIVE THEIR RIGHTS under the
Deceptive Trade Practices Consumer Protection Act, Section 17.41 et seq.,
Business and Commerce Code, a law that gives consumers special rights and
protections. After both Parties have consulted with attorneys of their own
selection, they voluntarily consent to this waiver.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
TANGSHAN PANDA HEAT AND POWER, LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
TANGSHAN PAN-SINO HEAT CO., LTD.,
a Chinese Joint Venture company
By: Robert W. Carter
Title: Director
DUKE/FLUOR DANIEL INTERNATIONAL,
a general partnership
By: Richard D. Snell
Title: Vice President
4
<PAGE>
EXHIBIT "A"
SCOPE OF SERVICES
The following services may be provided by Contractor under this Off-Shore
Agreement:
A. Offshore support of overall job management
B. Offshore management oversight of Annual Operations audit and report
C. Engineering review of plant performance and efficiency
D. Maintenance planning assistance programs
E. Inventory tracking control programs
F. Contract administration and interpretation assistance
G. Troubleshooting support
H. Site safety and hazardous materials programs
I. Capital project engineering support (includes conceptualization,
analysis, and recommendation and does not include detailed
engineering for such projects, which will be performed as required
as a separate contract)
J. Problem analysis and resolution
K. Warranty administration assistance
L. Travel and living expenses of home office personnel
5
<PAGE>
EXHIBIT "B"
COMPENSATION AND PAYMENT TERMS
Compensation is calculated in accordance with Duke/Fluor Daniel International
Standard Home Office Billing Schedule in effect as of January 1, 1998, as may
hereafter be adjusted on an annual basis. Current scope of services in Exhibit
"A" shall be for the annual lump sum amount of $846,889.00 to be paid in 12
equal monthly installments beginning March 1, 1998. DFDI will invoice and Owner
will pay for all Work completed between October 8, 1997 and March 1, 1998.
Operator shall submit its invoices by the fifth day of the month. Owner shall
pay the amount due to Operator on or before the thirtieth (30th) day following
the date the invoice is received by Owner provided that invoices are submitted
in a timely manner to allow payment in the applicable month in accordance with
applicable loan requirements. Invoices not timely submitted shall be paid within
sixty (60) days. Operator shall submit its billing together with copies of
supporting invoices, vouchers, receipts, and such other evidence of payment as
Owner shall require. If Owner should fail to pay Operator the amounts due and
payable hereunder, except to the extent such amounts may be in dispute, such
delinquent payments shall bear interest at an annual rate equal to one and
twenty-five hundredths (1.25) times the prime interest rate then currently
charged by the Chase Manhattan Bank in New York, New York prorated for the
period of arrears, but in no event shall such rate exceed the maximum legal rate
allowed by applicable usury laws. Payment of interest shall not excuse or cure
any default or delay in payment of amounts due.
6
EXHIBIT 10.138.06
CHANGE ORDER
TO THE
AMENDED AND RESTATED CONTRACT
FOR THE
ENGINEERING, PROCUREMENT AND CONSTRUCTION
OF THE
UPPER BHOTE KOSHI HYDROELECTRIC PROJECT
CHANGE ORDER NO. 006
RECITALS:
1. WHEREAS, in accordance with Article 6, the Contractor and Owner mutually
agree to amend certain terms in the Amended and Restated Contract for the
Engineering, Procurement and Construction of the Upper Bhote Koshi
Hydroelectric Project, dated December 19, 1996, including all Change
Orders (the "Contract");
2. WHEREAS, the Parties agreed to Change Order No. 002 dated April 26, 1997,
and the Contractor incurred certain costs associated with issuing and
maintaining the Interim Performance Guarantee.
NOW THEREFORE, the Parties hereby agree to the following:
A. SCHEDULE ADJUSTMENTS
None.
B. SPECIAL CONDITIONS
1. The Parties mutually agree that the Owner shall compensate the Contractor
for costs associated with issuing and maintaining the Interim Performance
Guarantee pursuant to Change Order No. 002, as
described below in Section C.
2. This Change Order No. 006 shall constitute the entire agreement between
Owner and Contractor relating to the subject matter hereof, shall operate
as an amendment to the Contract and shall be deemed to be a part of the
Contract.
3. Except as amended by this Change Order No. 006, all other terms and
conditions of the Contract are hereby ratified and confirmed and shall
remain in full force and effect.
4. The effective date of this Change Order No. 006 shall be the date signed
below.
CHANGE ORDER NO. 006
FINAL
<PAGE>
C. COST ADJUSTMENTS:
Owner agrees to compensate Contractor for costs associated with the issuance and
maintenance of the Interim Performance Guarantee pursuant to Change Order No.
002 in the total amount of US One Hundred Ninety Two Thousand Five Hundred
Forty-Nine and NO/100 Dollars ($192,549.00), which includes the following:
1. Industrial and Commercial Bank of China ("ICBC") Commission $ 27,200.00
2. Administrative Costs $ 12,421.00
3. Interest paid to ICBC $152,928.00
through Interim Notice to Proceed Period (216 days)
-----------
TOTAL AMOUNT DUE UNDER THIS CHANGE ORDER $192,549.00
This one time cost adjustment shall be paid in a lump sum payment to the
Contractor within thirty (30) days of the signing of this Change Order 6 and
shall not be considered an increase in the EPC Contract Price or the "Guaranteed
Amount" of the Performance Guarantee issued by the Industrial and Commercial
Bank of China, Singapore Branch on December 10, 1997.
Agreed to this 21st day of April, 1998 by and between:
OWNER: CONTRACTOR:
Bhote Koshi Power Company China Gezhouba Construction Group
Private Limited Corporation for Water Resources and
Hydropower
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
[SEAL]
CHANGE ORDER NO. 006
FINAL
<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> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-END> MAR-31-1997 MAR-31-1998
<CASH> 95,757,371 77,375,706
<SECURITIES> 0 0
<RECEIVABLES> 9,786,837 10,997,365
<ALLOWANCES> 0 0
<INVENTORY> 6,264,549 6,365,651
<CURRENT-ASSETS> 112,066,634 95,019,666
<PP&E> 331,122,400 339,775,455
<DEPRECIATION> (38,114,058) (41,031,745)
<TOTAL-ASSETS> 491,881,769 484,463,935
<CURRENT-LIABILITIES> 25,994,144 25,179,776
<BONDS> 349,667,769 348,431,639
0 0
0 0
<COMMON> 10 10
<OTHER-SE> (133,940,235) (142,091,502)
<TOTAL-LIABILITY-AND-EQUITY> 491,881,769 484,463,935
<SALES> 17,460,275 16,800,946
<TOTAL-REVENUES> 17,890,002 19,073,700
<CGS> 8,261,187 4,661,158
<TOTAL-COSTS> 10,656,209 7,091,677
<OTHER-EXPENSES> 3,122,685 3,330,612
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,801,629 14,633,578
<INCOME-PRETAX> (6,690,521) (5,982,167)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,690,521) (5,982,167)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,690,521) (5,982,167)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
