<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C> <C>
DELAWARE 4911 22-3422042
DELAWARE 6799 22-3615403
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
TWO TOWER CENTER
20TH FLOOR
EAST BRUNSWICK, N.J. 08816
(732) 249-6750
FRANK HARDENBERGH
GENERAL COUNSEL
304 BOSTON POST ROAD
WAYLAND, MASSACHUSETTS 01778
(508) 358-2510
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPY TO:
DAVID A. GORDON, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE.
NEW YORK, NEW YORK 10022
(212) 906-1251
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED PROPOSED AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER BONDS (1) OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
7.164% Series C Senior Secured Bonds due 2014..... $150,000,000 100% $150,000,000 $41,700
8.160% Series D Senior Secured Bonds due 2025..... $176,000,000 100% $176,000,000 $48,928
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Paid with the initial filing of the Registration Statement.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
OR ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS , 1999
$326,000,000
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
OFFER TO EXCHANGE THEIR 7.164% SERIES C SENIOR SECURED BONDS
DUE 2014 FOR ALL OUTSTANDING 7.164% SERIES A SENIOR SECURED BONDS
DUE 2014 AND THEIR 8.160% SERIES D SENIOR SECURED BONDS
DUE 2025 FOR ALL OUTSTANDING 8.160% SERIES B SENIOR SECURED BONDS DUE 2025
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1999 UNLESS EXTENDED.
LSP Energy Limited Partnership and LSP Batesville Funding Corporation
(together, the "Issuers"), are hereby offering (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of their 7.164% Series C Senior Secured Bonds due 2014
and $1,000 principal amount of their 8.160% Series D Senior Secured Bonds due
2025 (together, the "Exchange Bonds"), which exchange has been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which this Prospectus is a part (the "Registration
Statement"), for each $1,000 principal amount of their outstanding 7.164% Series
A Senior Secured Bonds due 2014 (the "Series A Bonds") and $1,000 principal
amount of their 8.160% Series B Senior Secured Bonds due 2025 (the "Series B
Bonds" and together, with the Series A Bonds, the "Private Bonds"),
respectively, of which a total of $326,000,000 in aggregate principal amount was
issued on May 21, 1999 and is outstanding as of the date hereof. The form and
terms of the Exchange Bonds are the same as the form and terms of the Private
Bonds except that (i) the exchange will have been registered under the
Securities Act, and, therefore, the Exchange Bonds will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Bonds will not
be entitled to certain rights of holders of the Private Bonds under the
Registration Rights Agreement (as defined herein), which rights will terminate
upon the consummation of the Exchange Offer. The Exchange Bonds will evidence
the same indebtedness as the Private Bonds (which they replace) and will be
entitled to the benefits of an indenture dated as of May 21, 1999 governing the
Private Bonds and the Exchange Bonds (the "Indenture"). The Private Bonds and
the Exchange Bonds are sometimes referred to herein collectively as the "Bonds."
See "The Exchange Offer" and "Description of Exchange Bonds."
The Exchange Bonds will bear interest at the same rate and on the same terms
as the Private Bonds. Consequently, interest on the Bonds will be payable on
January 15th and July 15, commencing January 15, 2000. In addition, the Issuers
may redeem all or part of the Bonds at any time at a redemption price equal to
100% of the principal of the Bonds being redeemed plus accrued interest plus a
make-whole premium. See "Description of the Exchange Bonds."
The Bonds will not be listed on any national securities exchange. Currently,
there is no public market for the Bonds.
SEE "RISK FACTORS" BEGINNING ON PAGE 27 FOR A DISCUSSION OF CERTAIN FACTORS
THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE BONDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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FORWARD-LOOKING STATEMENTS................................................................................. ii
NOTICE TO NEW HAMPSHIRE RESIDENTS.......................................................................... iii
PROSPECTUS SUMMARY......................................................................................... 1
RISK FACTORS............................................................................................... 27
THE EXCHANGE OFFER......................................................................................... 38
USE OF PROCEEDS............................................................................................ 47
ESTIMATED SOURCES AND USES OF FUNDS........................................................................ 48
CAPITALIZATION............................................................................................. 49
SELECTED FINANCIAL DATA.................................................................................... 50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION................................................ 51
BUSINESS................................................................................................... 53
OWNERSHIP AND MANAGEMENT................................................................................... 59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 62
DESCRIPTION OF THE PRINCIPAL PROJECT DOCUMENTS............................................................. 63
DESCRIPTION OF THE EXCHANGE BONDS.......................................................................... 106
DESCRIPTION OF THE PRINCIPAL FINANCING DOCUMENTS........................................................... 115
SOME FEDERAL INCOME TAX CONSIDERATIONS..................................................................... 135
PLAN OF DISTRIBUTION....................................................................................... 136
VALIDITY OF THE EXCHANGE BONDS............................................................................. 137
EXPERTS.................................................................................................... 137
INDEPENDENT ENGINEER....................................................................................... 137
INDEPENDENT ELECTRICITY MARKET AND FUEL CONSULTANT......................................................... 137
AVAILABLE INFORMATION...................................................................................... 137
INDEX TO THE FINANCIAL STATEMENTS.......................................................................... F-1
ANNEX-A DEFINITIONS........................................................................................ A-1
ANNEX-B INDEPENDENT ENGINEER'S REPORT...................................................................... B-1
ANNEX-C INDEPENDENT ELECTRICITY MARKET AND FUEL CONSULTANT'S REPORT........................................ C-1
ANNEX-D FORM OF REQUEST FOR INFORMATION FROM THE TRUSTEE................................................... D-1
</TABLE>
------------------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
This prospectus is based on information provided by us and by other sources
that we believe are reliable. We cannot assure you that this information is
accurate or complete. This prospectus summarizes certain documents and other
information, and we refer you to them for a more complete understanding of what
we discuss in this prospectus. In making an investment decision, you must rely
on your own examination of the Issuers and the terms of the offering and the
Bonds, including the merits and risks involved.
We are not making any representation to any purchaser of the Bonds regarding
the legality of an investment in the Bonds by such purchaser under any legal
investment or similar laws or regulations. You should not consider any
information in this prospectus to be legal, business or tax advice. You should
consult your own attorney, business advisor and tax advisor for legal, business
and tax advice regarding an investment in the Bonds.
i
<PAGE>
You must comply with all laws applicable to the purchase, sale or offer of
the Bonds and to the distribution of this prospectus. You must also obtain any
approvals required for the purchase, sale or offer of the Bonds, and we will not
assume any responsibility for obtaining any approvals.
We will accept for exchange any and all validly tendered Private Bonds not
withdrawn prior to 5:00 p.m., New York City time, on , 1999, unless the
Exchange Offer is extended by us in our sole discretion (the "Expiration Date").
Tenders of Private Bonds may be withdrawn at any time prior to the Expiration
Date. Private Bonds may be tendered only in integral multiples of $1,000. The
Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer--Conditions."
We will not receive any proceeds from, and have agreed to bear the expenses
of, the Exchange Offer. No underwriter is being used in connection with this
Exchange Offer. See "The Exchange Offer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM, HOLDERS OF PRIVATE BONDS IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, WILL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward looking statements on our current expectations, and our independent
consultants' and advisors' projections, about future events based upon our
knowledge of facts as of the date of this prospectus and our and our independent
consultants' assumptions about future events. These forward looking statements
are subject to various risks and uncertainties that may be outside our control,
including, among other things:
- governmental, statutory, regulatory or administrative changes or
initiatives affecting us, our power plant or our contracts;
- construction risks, including unanticipated costs not included in our
budget (such as cost overruns and the assessment of property taxes), and
completion delays;
- operating risks, including equipment failure, environmental compliance
issues, dispatch levels for our power plant, availability of our power
plant, heat rate and output, transmission credits and the amounts and
timing of revenues and expenses;
- the cost and availability of fuel and transmission service for our power
plant;
- the enforceability of the long-term power purchase agreements for our
power plant;
- the ongoing creditworthiness of our power purchasers; and
- competition from other power plants, including new plants that may be
developed in the future.
We use words like "anticipate," "estimate," "project," "plan," "expect" and
similar expressions to help identify forward looking statements in this
prospectus.
For additional factors that could affect the validity of our forward-looking
statements, you should read "Risk Factors" beginning on page 27. In light of
these and other risks, uncertainties and
ii
<PAGE>
assumptions, actual events or results may be very different from those expressed
or implied in the forward-looking statements in this prospectus, or may not
occur. We have no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
iii
<PAGE>
PROSPECTUS SUMMARY
IN THIS PROSPECTUS, THE WORDS "PARTNERSHIP," "WE," "OUR," "OURS" AND "US"
REFER ONLY TO LSP ENERGY LIMITED PARTNERSHIP AND NOT TO ANY OF OUR PARENT OR
SISTER COMPANIES OR ANYBODY ELSE. THE FOLLOWING SUMMARY CONTAINS BASIC
INFORMATION ABOUT US AND ABOUT OUR OFFERING OF THE BONDS. IT DOES NOT CONTAIN
ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE
UNDERSTANDING OF OUR BUSINESS AND FINANCIAL STATUS AND THE BONDS THAT WE ARE
OFFERING, YOU SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS AND THE OTHER
DOCUMENTS THAT WE WILL REFER YOU TO. CERTAIN TERMS THAT ARE NOT DEFINED IN THE
BODY OF THIS PROSPECTUS ARE DEFINED IN ANNEX A.
OUR COMPANY
We were formed to develop, construct, own, operate and finance a gas-fired
power plant facility in Batesville, Mississippi that will include three
combined-cycle electric generation units. In this prospectus, we refer to this
power plant facility, together with an electrical substation on our site and the
transmission lines that connect the substation with two utility transmission
systems, as "the Facility" or "our Facility," and we refer to the Facility,
together with all its associated contracts and the gas and water infrastructure
that we may own, as "the Project" or "our Project." Our Project is already under
construction. Though we may expand the Facility after the offering of the Bonds
by constructing additional electric generation capacity at the Facility site, we
do not intend to engage in any business activities other than those related to
our Project.
We are indirectly owned primarily by LS Power, LLC and Cogentrix Energy,
Inc. LS Power is a privately owned independent power producer that develops,
constructs, owns and operates independent power projects in the United States.
LS Power and its affiliates have completed the financing of more than 2,000
megawatts (or "MW") of electric generating capacity, including our Facility, and
have approximately 1,400 MW of additional capacity in advanced development.
Cogentrix is an independent power producer that acquires, develops, owns and
operates electric generating plants, principally in the United States. Cogentrix
has net ownership interests in 26 facilities comprising approximately 2,110 MW,
including our Facility.
Our sister company, LSP Batesville Funding Corporation, will be the
co-issuer of the Bonds that we are offering in this prospectus. The Funding
Corporation was formed for the sole purpose of issuing the Bonds and incurring
other debt to finance the Project. The Funding Corporation has nominal assets
and will not conduct any operations.
Our principal executive offices are located at Two Tower Center, 20th Floor,
East Brunswick, New Jersey 08816. Our telephone number is (732) 249-6750.
For a more detailed description of our ownership structure, please see the
chart on the next page.
1
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[CHART]
(*) Subject to adjustment based on the limited liability company operating
agreement of Holding. See "Ownership and Management."
2
<PAGE>
OUR PROJECT
GENERAL DESCRIPTION. Our Facility, which is in the process of being
constructed, will be an approximately 837 MW natural gas-fired, three
combined-cycle unit electric generation facility. Natural gas-fired facilities
are those which use natural gas as a fuel source. Combined-cycle facilities are
those which use the exhaust heat produced by a combustion turbine to generate
steam, which is in turn used to make electricity in a steam turbine. Each of the
three combined-cycle "Units" of our facility will therefore contain three main
pieces of equipment: (1) a gas-fired combustion turbine; (2) a heat recovery
steam generator; and (3) a steam turbine, plus certain auxiliary equipment.
KEY PROJECT DOCUMENTS. The chart below depicts some of our key Project
contracts.
[CHART]
3
<PAGE>
KEY PROJECT PARTICIPANTS. The table below indicates some of the principal
participants in our Project and our company.
<TABLE>
<S> <C>
Funding Corporation.......... LSP Batesville Funding Corporation, our affiliate and the
co-issuer of the Bonds.
Holding...................... LSP Batesville Holding, LLC, our limited partner and the sole
shareholder of LSP Energy and the Funding Corporation.
LSP Energy................... LSP Energy, Inc., our general partner.
LS Power..................... LS Power, LLC, one of our indirect owners.
Cogentrix.................... Cogentrix Energy, Inc., one of our indirect owners.
Contractor................... BVZ Power Partners-Batesville, a joint venture between Black &
Veatch Construction Inc. and H.B. Zachry Company and the
construction contractor for our Facility, other than the
electrical substation and the transmission lines.
Virginia Power............... Virginia Electric and Power Company, one of our two long-term
power purchasers.
Aquila/UtiliCorp............. Aquila Energy Marketing Corporation and UtiliCorp United Inc.,
who together constitute our other long-term power purchaser.
Operator..................... Cogentrix Batesville Operations, LLC, a subsidiary of Cogentrix
and the operator of most of our Project.
Manager...................... LS Power Management, LLC, a subsidiary of LS Power and the
business manager of our Project.
County....................... Panola County, Mississippi, the governmental authority to whom
we may transfer the gas and water infrastructure that we are
currently constructing.
IDA.......................... The Industrial Development Authority of Panola County, which
will own the gas and water infrastructure once it is completed,
assuming that we transfer this infrastructure to the County.
If so, the IDA will lease this infrastructure to us.
Tennessee Gas................ Tennessee Gas Pipeline Company, one of the two interstate gas
pipeline companies that has agreed to interconnect its
pipeline with the lateral natural gas pipeline that will reach
our Facility.
ANR.......................... ANR Pipeline Company, the other interstate gas pipeline company
that has agreed to interconnect its pipeline with the lateral
natural gas pipeline that will reach our Facility.
TVA.......................... The Tennessee Valley Authority, one of two utility transmission
systems that has agreed to interconnect its transmission grid
to our Facility.
Entergy...................... Entergy Mississippi, Inc., the other utility transmission
system that has agreed to interconnect its transmission grid to
our Facility.
</TABLE>
4
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<TABLE>
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R.W. Beck.................... R.W. Beck, Inc., which is acting as the independent engineer
for the Project and has prepared the report included as Annex B
to this prospectus.
C.C. Pace.................... C.C. Pace Consulting, L.L.C., which is acting as the
independent power market and fuel consultant and has prepared
the report included as Annex C to this prospectus.
</TABLE>
CONSTRUCTION OF OUR FACILITY. The Contractor is a joint venture between
Black & Veatch Construction, Inc. and H.B. Zachry Company. The Contractor has
agreed to design, engineer, procure equipment for, construct, test and start-up
our Facility, other than the electric substation and transmission lines. We have
agreed to pay the Contractor a fixed price of approximately $240,000,000 for
doing this work in accordance with the construction contract that we have
entered into with the Contractor. We gave the Contractor a notice to proceed
with the work on the Facility on August 28, 1998. Since that time, we have
agreed on change orders under this construction contract which have increased
the contract price by about $64,000. We are also considering other change orders
that would increase the contract price by approximately $2,500,000. These change
orders would be covered by the contingency funds provided for in our budget. As
of June 30, 1999, (1) the Contractor reported to us that its portion of the
Facility was about 83% complete and (2) the Contractor had invoiced us for about
66% of the fixed price of the construction contract. Based on the Contractor's
most recent progress report, we currently expect that the Contractor's work on
the Facility will be completed during the second quarter of 2000.
We have also entered into construction and supply contracts with Lauren
Constructors, Inc., North American Transformer, Inc. and Siemens Power
Transmission and Distribution, LLC for the design, engineering, procurement,
testing and start-up of our electrical substation and transmission lines that
will interconnect our substation with the utility transmission systems described
below. We have agreed to pay these contractors and suppliers approximately
$8,907,000 in the aggregate. Based on the most recent progress reports of these
contractors and suppliers, we believe that their work on these facilities was
about 26% complete as of June 30, 1999 and we currently expect that they will
complete their work on the electrical substation and transmission lines during
the fourth quarter of 1999.
From 1987 to 1996, Black & Veatch Construction, Inc. and H.B. Zachry Company
have been awarded contracts to construct approximately 62,530 MW of new power
plant projects. Black & Veatch Construction, Inc. and H.B. Zachry Company are
both equally responsible for performing the Contractor's obligations to us under
the main construction contract. Black & Veatch Construction, Inc.'s parent,
Black & Veatch, LLP, has guaranteed the Contractor's obligations to us under the
main construction contract. In addition, Continental Casualty Company, whose
insurer financial strength rating is A1 from Moody's Investors Service Inc. and
A+ (outlook negative) from Standard & Poor's Ratings Group, has provided us with
a performance and payment bond on behalf of Black & Veatch Construction, Inc.
United States Fidelity and Guaranty Company, whose insurer financial strength
rating is A1 from Moody's Investors Service Inc. and AA from Standard & Poor's
Ratings Group, has provided us with a performance and payment bond on behalf of
H.B. Zachry Company.
The substation and transmission line contractor, Lauren Constructors, Inc.,
has been in business since 1985. Since 1996, Lauren Constructors, Inc. has been
awarded construction contracts for $66,000,000 worth of mechanical and
electrical projects. United States Fidelity and Guaranty Company has provided us
with performance and payment bonds on behalf of Lauren Constructors, Inc.
The transformer supply contractor, North American Transformer, Inc., was
founded in 1906 under the name Pacific Electric Manufacturing. Today, North
American Transformer, Inc. is a division of Rockwell International, which has a
market capitalization of approximately $10,000,000,000. Liberty
5
<PAGE>
Mutual Insurance Company has provided us with performance and payment bonds on
behalf of North American Transformer, Inc.
The circuit breaker supply contractor, Siemens Power Transmission and
Distribution, LLC, was formed in 1996 and is a division of Siemens, A.G.
Siemens, A.G. has been manufacturing circuit breakers since 1937. Siemens Power
Transmission and Distribution, LLC currently manufactures over 1000 circuit
breakers per year and has sales in excess of $50,000,000 per year. Federal
Insurance Company has provided us with performance and payment bonds on behalf
of Siemens Power Transmission and Distribution, LLC.
SALE OF POWER FROM OUR FACILITY. We have entered into two long-term power
purchase agreements for the sale of the capacity of and electric energy from our
Facility. One of those agreements is with Virginia Electric and Power Company
and covers the sale of the capacity of and electric energy from two of our Units
for an initial term of 13 years, which Virginia Power can extend at its option
for an additional 12 years. The other agreement is with UtiliCorp United Inc.
and Aquila Energy Marketing Corporation and covers the sale of the capacity of
and electric energy from our other Unit for an initial term of 15 years and
seven months, which Aquila/UtiliCorp can extend at its option for an additional
five years. When our agreements with Virginia Power and Aquila/UtiliCorp expire,
we will either enter into new long-term power purchase agreements with other
customers and/or will sell the capacity of and energy from our Facility on a
"merchant" basis. This means that we will sell our capacity and electric energy
to the market on the basis of shorter term or "spot" contracts.
These power purchase agreements require Virginia Power and Aquila/UtiliCorp
to provide us with the natural gas which we will use to fuel the Units that are
dedicated to the applicable purchaser. In addition, both of these power purchase
agreements require the applicable purchaser to pay us (1) a monthly
"reservation" payment based on the tested capacity and availability of the Units
dedicated to them, (2) an "energy" payment based on the amount of energy that we
actually produce for them and deliver to the interconnection point between our
Facility and the utility transmission systems described below and (3) other
payments, including payments based upon the fuel efficiency of our Units and the
number of times we start up our Units each year. Both of these power purchase
agreements allow the power purchaser to dispatch the Units we have dedicated to
them, meaning that the power purchasers have the right to control how much
electricity they want their dedicated Units to produce. However, even if we are
not dispatched at all by Virginia Power and Aquila/UtiliCorp, they will still
have to pay us a reservation payment as provided under the power purchase
agreements.
Virginia Power is among the 15 largest regulated electric utilities in the
United States, serving nearly 2,000,000 customers in Virginia and North
Carolina. Virginia Power's long term unsecured debt is rated A3 by Moody's
Investors Service Inc. and A- by Standard & Poor's Ratings Group. Virginia
Power's parent, Dominion Resources, Inc., is a holding company engaged in
regulated and unregulated electric power, natural gas, financial services and
real estate businesses primarily in the United States. Aquila Energy Marketing
Corporation, a successor by merger to Aquila Power Corporation, has been a
leading power marketer since 1995. Aquila Energy Marketing Corporation owns
equity interests in 17 independent power projects. Aquila Energy Marketing
Corporation's parent, UtiliCorp United Inc., serves nearly 4,500,000 electric
and gas utility customers in eight states, one Canadian province, the United
Kingdom, New Zealand and Australia. UtiliCorp United Inc.'s long term debt is
rated Baa3 by Moody's Investors Service, Inc. and BBB by Standard & Poor's
Ratings Group.
OPERATION OF OUR FACILITY. Cogentrix Batesville Operations, LLC, which is a
subsidiary of Cogentrix, has agreed to operate most of our Project for 27 years.
Under the operation and maintenance agreement that we have entered into with
this Operator, we will pay the Operator its reimbursable expenses plus a fee of
$41,667 per month, which escalates annually, to perform customary operations and
maintenance services for most of our Project. We will agree to pay this fee to
the Operator only if we have allocated the required funds to our debt service
and reserve accounts in
6
<PAGE>
accordance with the financing documents. We will also pay the Operator its
reimbursable expenses plus a fee of $390,000, payable in ten monthly
installments, for services performed by the Operator prior to the date on which
our Units are scheduled to enter commercial operation.
Cogentrix has owned and operated electric generating facilities since 1985.
The Operator and its affiliates have provided or are under contract to provide
operation and maintenance services for approximately 13 projects with a combined
total of about 1,630 MW of capacity, excluding the Facility. Four of these
projects are natural gas-fired facilities. Three of these projects utilize
combustion turbines similar to those being installed at our Facility.
INFRASTRUCTURE RELATED TO OUR FACILITY. In order for our Facility to
operate it needs access to gas and water. We have engaged three contractors to
design and construct the pipelines and related facilities needed to transport
gas and water to the Facility and to transport wastewater from the Facility. We
refer to all of these pipelines and related facilities as "the Infrastructure."
Robinson Mechanical Contractors, Inc. has agreed to design and build the water
intake facilities that will withdraw water from Enid Lake. As of June 30, 1999,
Robinson Mechanical Contractors, Inc.'s work on these facilities was
approximately 47% complete. Garney Companies, Inc. has agreed to design and
build the pipeline to transport water from Enid Lake to the Facility, the
pipeline to transport wastewater from the Facility to the Little Tallahatchie
River and related facilities. As of June 30, 1999, Garney Companies, Inc.'s work
on these pipelines and facilities was approximately 96.5% complete. Big Warrior
Corporation has agreed to design and build the lateral gas pipeline and related
facilities that will transport natural gas from two interstate gas pipelines to
our Facility. As of June 30, 1999, Big Warrior Corporation's work on the gas
pipeline infrastructure was approximately 60% complete.
The water intake system contractor, Robinson Mechanical Contractors, Inc.,
was formed in 1979. It is a subsidiary of Robinson Construction Company, which
has been in business since 1940. Their engineer, Archer Engineers, has provided
engineering for water projects throughout the United States for over 90 years.
Over the past three years Robinson Mechanical Contractors, Inc. has completed
construction of nearly $45,000,000 worth of construction projects. American
Casualty Company of Reading, Pennsylvania has provided us with performance and
payment bonds on behalf of Robinson Mechanical Contractors, Inc.
The water supply and wastewater pipeline contractor, Garney Companies, Inc.,
has been in business since 1962. Over the past three years, Garney Companies,
Inc. has installed over 585,000 feet of pipe and has completed projects totaling
nearly $88,000,000. United States Fidelity and Guaranty Company has provided us
with performance and payment bonds on behalf of Garney Companies, Inc.
The gas pipeline contractor, Big Warrior Corporation, was founded in 1984.
Since then Big Warrior Corporation has successfully installed hundreds of miles
of gas, water and wastewater pipe throughout the southeastern United States.
Their engineer, Universal ENSCO, has provided engineering support for hundreds
of gas pipeline projects throughout the world. Travelers Casualty and Surety
Company of America has provided us with performance and payment bonds on behalf
of Big Warrior Corporation.
We currently expect to transfer the ownership of and construction contracts
relating to the Infrastructure to Panola County, Mississippi at some point. When
we do, we expect that the County will reimburse us for (1) certain
Infrastructure development costs that we have incurred to date, such as easement
acquisition costs and engineering costs and (2) the costs that we will pay for
work performed to construct the Infrastructure from April 12, 1999 until the
County obtains financing for the Infrastructure. We expect that the County will
make this reimbursement with the proceeds of general obligation bonds to be
issued by the State of Mississippi. The proceeds of those general obligation
bonds also will be used to pay the County's costs of constructing the
Infrastructure from that point forward. Those general obligation bonds will not
be secured by our Project, and we will have no obligation to pay debt service on
those bonds. In connection with this transfer and payment, we expect that we
will enter into agreements with the County to lease the Infrastructure under
terms which will
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give us the right to use the capacity of the Infrastructure to an extent which
should be sufficient to operate our Facility. There will be certain risks
associated with these arrangements that we discuss under the caption "Risk
Factors."
If the County does reimburse us as described above, its payments to us, and
the amount that we have budgeted for the construction of the Infrastructure but
have not yet spent, will become additional contingency funds. We could use those
additional contingency funds if we experience any cost overruns, or, if we do
not need to use those additional contingency funds to complete the Project, we
could distribute the remaining funds to our limited partner to the extent that
we satisfy the distribution conditions contained in the financing documents. In
addition, if we transfer the construction and ownership of the Infrastructure to
Panola County, your lien on these assets will automatically be released.
GAS PIPELINE INTERCONNECTIONS. Once the Infrastructure is completed, we
will have the ability to connect our Facility through the lateral gas pipeline
to the Tennessee Gas Pipeline Company's and ANR Pipeline Company's interstate
gas pipelines. This will enable us to transport natural gas from the
interconnection with the interstate pipelines through the lateral pipeline to
our Facility. We have entered into agreements with Tennessee Gas and ANR that
allow us to connect the lateral gas pipeline to their pipelines. They have
agreed to construct, at our expense, the interconnections between the lateral
natural gas pipeline and each of their respective pipelines. We expect each of
those interconnections to be capable of transporting the Facility's entire fuel
requirement. We plan to engage the Operator or another company experienced in
the operation of gas pipelines to operate the lateral gas pipeline.
Tennessee Gas operates three pipeline systems consisting of over 16,000
miles of pipeline connecting supply regions in Texas, Louisiana and the Gulf of
Mexico to gas markets in 20 eastern and midwestern states. ANR operates
approximately 10,600 miles of pipeline connecting supply regions in the Gulf of
Mexico, the midwest, the Rocky Mountains and Canada to gas markets in 18
midwestern and southern states.
WATER SUPPLY. Once the Infrastructure is completed, we will have the
ability to obtain water from Enid Lake and to dispose of the Facility's
wastewater into the Little Tallahatchie River. We have entered into an agreement
with the United States government that will allow us to withdraw water from Enid
Lake. In addition, we have obtained the permits we will need to dispose of water
into the Little Tallahatchie River. The operation and maintenance of the water
supply and discharge pipelines and water intake system will be performed by the
Operator.
ELECTRICAL INTERCONNECTIONS. In order to deliver electricity to our power
purchasers, we have arranged to have our Facility interconnected to two utility
transmission systems. We have entered into separate interconnection agreements
with each of the Tennessee Valley Authority and Entergy Mississippi, Inc., each
of which has an initial term of 35 years. These agreements require us to
construct and install a portion of the equipment that will be used to
interconnect our Facility with the transmission grids, which the Contractor,
Lauren Constructors, North American Transformer, Inc. and Siemens Power
Transmission and Distribution, LLC are in the process of doing, and require TVA
and Entergy to construct the remainder of that equipment, at our expense. We
expect each of these interconnections to be capable of accepting the entire
electrical output of our Facility under most operating conditions. These
agreements allow TVA and Entergy to disconnect or curtail our Facility under
certain circumstances.
Although our power purchasers are responsible for the transmission of our
electricity from our interconnection point across the TVA and Entergy
transmission grids, we have agreed with TVA and Entergy to pay for the costs of
upgrading their transmission systems so that each transmission system can handle
the entire electrical output of our Facility under most operating conditions.
These upgrades
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will be owned by TVA and Entergy. In exchange, TVA and Entergy have agreed to
credit us or our power purchasers an amount equal to the lesser of (1) the
revenues that they receive from our power purchasers and their customers for
transmission services provided for the delivery of energy from our Facility and
(2) the total costs paid by us for the system upgrades. Our recovery of these
credits is dependent upon the availability of transmission service from TVA and
Entergy for, and the use of this transmission service by, our power purchasers
and their customers.
TVA's U.S. transmission system includes over 17,000 miles of high-voltage
transmission lines delivering power to about 159 power distributors serving
about 7,300,000 people. Entergy's U.S. transmission system consists of more than
15,500 miles of high voltage transmission lines and 1,450 substations, and
serves nearly 2,500,000 customers in four states.
OUR FINANCING PLAN
We estimate that the total cost of developing, constructing, financing and
commissioning our Project will be approximately $380,000,000. We had an
outstanding loan, which we used to pay the cost of developing and constructing
the Project. We used a portion of the net proceeds of the Private Bonds to repay
that loan in full. We used the rest of the net proceeds of the Private Bonds to
pay a portion of the remaining Project costs. The net proceeds that we received
from the sale of the Private Bonds covered approximately 86% of the total
Project costs described above. To cover the rest of those costs, our direct
parent, LSP Batesville Holding, LLC, will make equity contributions to us from
time to time in the aggregate amount of $54,000,000 after we have used all of
the proceeds of the Private Bonds. To support this equity contribution
obligation, Cogentrix has obtained a $54,000,000 letter of credit for the
benefit of the holders of the Bonds and our other senior creditors. We will have
no obligation to reimburse draws under this letter of credit.
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THE EXCHANGE OFFER
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<S> <C>
The Exchange Offer........... We are hereby offering to exchange $1,000 principal amount of
7.164% Series C Senior Secured Bonds and 8.160% Series D Senior
Secured Bonds for each $1,000 principal amount of 7.164% Series
A Senior Secured Bonds and 8.160% Series B Senior Secured
Bonds, respectively, that are properly tendered and accepted.
We will issue the Exchange Bonds on or promptly after the
Expiration Date. As of the date hereof, there is $326,000,000
aggregate principal amount of Private Bonds outstanding. See
"The Exchange Offer."
Based on an interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, we believe
that the Exchange Bonds issued pursuant to the Exchange Offer
in exchange for Private Bonds may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who purchases such Exchange Bonds directly from
the Issuers to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person
that is an affiliate of either of the Issuers within the
meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is
acquiring Exchange Bonds in the ordinary course of its business
and is not participating, and had no arrangement or
understanding with any person to participate, in the
distribution of the Exchange Bonds. (See e.g. EXXON CAPITAL
HOLDINGS CORP., SEC No-Action Letter (available April 13, 1989)
and MORGAN STANLEY & CO. INC., SEC No-Action Letter (available
June 5, 1991), collectively, the "No-Action Letters"). Holders
who tender their Private Bonds in the Exchange Offer with the
intention of participating in a distribution of the Exchange
Bonds will not be able to rely on the No-Action Letters or
similar no-action letters. Each broker-dealer that receives
Exchange Bonds for its own account in exchange for Private
Bonds, where such Private Bonds were acquired by such
broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange
Bonds. See "The Exchange Offer--Resale of the Exchange Bonds."
Registration Rights
Agreement.................. We sold the Private Bonds on May 21, 1999 to Credit Suisse
First Boston, Scotia Capital Markets, and TD Securities (the
"Initial Purchasers") pursuant to a Purchase Agreement, dated
May 13, 1999, by and among the Issuers and the Initial
Purchasers (the "Purchase Agreement") in aggregate principal
amount of $326,000,000 of Private Bonds. Pursuant to the
Purchase Agreement, the Issuers and the Initial Purchasers
entered into a Registration Rights Agreement, dated as of May
21, 1999 (the "Registration Rights Agreement"), which grants
the holders of the Private Bonds certain exchange and
registration rights. The Exchange Offer is intended to satisfy
such rights, which will terminate upon the consummation of the
Exchange
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<S> <C>
Offer. The holders of the Exchange Bonds will not be entitled
to any exchange or registration rights with respect to the
Exchange Bonds. See "The Exchange Offer--Termination of Certain
Rights."
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City
time, on [ ], 1999, unless we, in our sole discretion,
extend the Exchange Offer, in which case the term "Expiration
Date" will mean the latest date and time to which the Exchange
Offer is extended. See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
Accrued Interest on the
Exchange Bonds and the
Private Bonds.............. The Exchange Bonds will bear interest from and including the
date of issuance of the Private Bonds (May 21, 1999). Holders
whose Private Bonds are accepted for exchange will be deemed to
have waived the right to receive any interest accrued on the
Private Bonds, other than interest accrued from the date of
initial issuance of the Exchange Bonds and interest accrued on
the Private Bonds from the date of initial delivery to the date
of exchange thereof for Exchange Bonds. See "The Exchange
Offer--Interest on the Exchange Bonds."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary conditions
that may be waived by us. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of Private Bonds
being tendered for exchange. See "The Exchange
Offer--Conditions."
Procedures for Tendering
Private Bonds.............. Each holder of Private Bonds wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver
such Letter of Transmittal, or such facsimile, together with
such Private Bonds and any other required documentation to The
Bank of New York, as exchange agent (the "Exchange Agent"), at
the address set forth herein. By executing the Letter of
Transmittal, the holder will represent to and agree with the
Issuers that, among other things:
(i) the Exchange Bonds to be acquired by such holder of Private
Bonds in connection with the Exchange Offer are being acquired
by such holder in the ordinary course of its business;
(ii) such holder has no arrangement or understanding with any
person to participate in a distribution of the Exchange Bonds;
(iii) if such holder is a broker-dealer registered under the
Exchange Act or is participating in the Exchange Offer for the
purposes of distributing the Exchange Bonds, such holder will
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Bonds acquired by
such person and cannot rely on the position of the staff of the
Commission set forth in no-action letters (see "The Exchange
Offer--Resale of Exchange Bonds");
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<S> <C>
(iv) such holder understands that a secondary resale
transaction described in clause (iii) above and any resales of
Exchange Bonds obtained by such holder in exchange for Private
Bonds acquired by such holder directly from the Issuers should
be covered by an effective registration statement containing
the selling securityholder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the Commission;
and
(v) such holder is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuers. (See, the No-Action
Letters). Holders who tender their Private Bonds in the
Exchange Offer with the intention of participating in a
distribution of the Exchange Bonds will not be able to rely on
the No-Action Letters or similar no-action letters. If the
holder is a broker-dealer that will receive Exchange Bonds for
its own account in exchange for Private Bonds that were
acquired as a result of market-making activities or other
trading activities, such holder will be required to acknowledge
in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange
Bonds; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Private Bonds are registered in the
name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender such Private Bonds in
the Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and
delivering such owner's Private Bonds, either make appropriate
arrangements to register ownership of the Private Bonds in such
owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may
take considerable time and may not be able to be completed
prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures................. Holders of Private Bonds who wish to tender their Private Bonds
and whose Private Bonds are not immediately available or who
cannot deliver their Private Bonds, the Letter of Transmittal
or any other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date
must tender their Private Bonds according to the guaranteed
delivery procedures set forth under the caption "The Exchange
Offer--Guaranteed Delivery Procedures."
Acceptance of the Private
Bonds and Delivery of the
Exchange Bonds............. Subject to the satisfaction or waiver of the conditions to the
Exchange Offer, we will accept for exchange any and all Private
Bonds that are properly tendered in the Exchange Offer prior to
the Expiration Date.
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The Exchange Bonds issued pursuant to the Exchange Offer will
be delivered on the earliest practicable date following the
Expiration Date. See "The Exchange Offer--Terms of the Exchange
Offer."
Withdrawal Rights............ Tenders of Private Bonds may be withdrawn at any time prior to
the Expiration Date. See "The Exchange Offer--Withdrawal of
Tenders."
Some Federal Income Tax
Considerations............. For a discussion of some material federal income tax
considerations relating to the exchange of the Exchange Bonds
for the Private Bonds, see "Some Federal Income Tax
Considerations."
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THE EXCHANGE BONDS
The Exchange Offer applies to $326,000,000 in aggregate principal amount of
the Private Bonds. The form and terms of the Exchange Bonds are the same as the
form and terms of the Private Bonds except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Bonds will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Bonds will not be entitled to certain rights of holders of the Private Bonds
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Bonds will evidence the same
indebtedness as the Private Bonds (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture. For further information, see
"Description of the Exchange Bonds."
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<S> <C>
The Bonds Offered................... $150,000,000 principal amount of 7.164% Series C
Senior Secured Bonds due 2014.
$176,000,000 principal amount of 8.160% Series D
Senior Secured Bonds due 2025.
Maturity Date....................... Series C Bonds: January 15, 2014.
Series D Bonds: July 15, 2025.
Interest Payment Dates.............. January 15 and July 15, beginning on January 15,
2000.
Scheduled Principal Payments........ We will be required to pay principal of the Series C
Bonds on each January 15 and July 15, commencing on
July 15, 2001, as follows:
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<CAPTION>
PERCENTAGE OF
PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
------------------------------------------------- ---------------
<S> <C> <C>
July 15, 2001.................................... 2.75%
January 15, 2002................................. 2.75%
July 15, 2002.................................... 2.30%
January 15, 2003................................. 2.30%
July 15, 2003.................................... 2.45%
January 15, 2004................................. 2.45%
July 15, 2004.................................... 2.60%
January 15, 2005................................. 2.60%
July 15, 2005.................................... 3.80%
January 15, 2006................................. 3.80%
July 15, 2006.................................... 4.15%
January 15, 2007................................. 4.15%
July 15, 2007.................................... 4.20%
January 15, 2008................................. 4.20%
July 15, 2008.................................... 4.35%
January 15, 2009................................. 4.35%
July 15, 2009.................................... 4.50%
January 15, 2010................................. 4.50%
July 15, 2010.................................... 4.70%
January 15, 2011................................. 4.70%
July 15, 2011.................................... 5.10%
January 15, 2012................................. 5.10%
July 15, 2012.................................... 5.10%
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<CAPTION>
PERCENTAGE OF
PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
------------------------------------------------- ---------------
<S> <C> <C>
January 15, 2013................................. 5.10%
July 15, 2013.................................... 4.00%
January 15, 2014................................. 4.00%
We will be required to pay principal of the Series D Bonds on each
January 15 and July 15, commencing on July 15, 2014,as follows:
<CAPTION>
PERCENTAGE OF
PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
------------------------------------------------- ---------------
<S> <C> <C>
July 15, 2014.................................... 2.65%
January 15, 2015................................. 2.65%
July 15, 2015.................................... 2.85%
January 15, 2016................................. 2.85%
July 15, 2016.................................... 2.85%
January 15, 2017................................. 2.85%
July 15, 2017.................................... 3.00%
January 15, 2018................................. 3.00%
July 15, 2018.................................... 2.90%
January 15, 2019................................. 2.90%
July 15, 2019.................................... 3.45%
January 15, 2020................................. 3.45%
July 15, 2020.................................... 2.15%
January 15, 2021................................. 2.15%
July 15, 2021.................................... 5.25%
January 15, 2022................................. 5.25%
July 15, 2022.................................... 5.35%
January 15, 2023................................. 5.35%
July 15, 2023.................................... 5.40%
January 15, 2024................................. 5.40%
July 15, 2024.................................... 6.90%
January 15, 2025................................. 6.90%
July 15, 2025.................................... 14.50%
Initial Average Life......................... Series C Bonds: approximately 9.2 years.
Series D Bonds: approximately 22.1 years.
Ratings...................................... "Baa3" by Moody's Investors Service, Inc. and "BBB-" by Standard &
Poor's Ratings Group.
Denomination................................. We will issue the Exchange Bonds in minimum denominations of
$1,000.
Ranking of the Bonds......................... The Bonds:
- are senior secured indebtedness;
- are equivalent in right of payment to all of our existing
and future senior indebtedness; and
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<S> <C> <C>
Nonrecourse Obligations...................... The obligations to pay principal of, premium, if any, and interest
on the Bonds will be solely our obligations and those of the
Funding Corporation. Neither our partners nor the Funding
Corporation's shareholder, nor any of our or the Funding
Corporation's affiliates, employees, officers, or directors or any
other person or entity will guarantee the Bonds or have any
obligation to make any payments on the Bonds.
Collateral................................... The Bonds are secured by:
- a mortgage on the Facility site and the Facility easements;
- a security interest in substantially all of our personal
property, including our power purchase agreements with
Virginia Power and Aquila/UtiliCorp, our other contracts and
the assets comprising the Facility, but excluding the
accounts that we may establish for the benefit of
Aquila/UtiliCorp and Panola County;
- a pledge of all of our limited and general partnership
interests; and
- a pledge of all of the capital stock of our general partner
and the Funding Corporation.
Redemption at the Option
of the Issuers............................. We may redeem any or all of the Series C Bonds and/or the Series D
Bonds at a redemption price equal to:
- 100% of the principal amount of the Bonds being redeemed,
PLUS
- accrued and unpaid interest on the Bonds being redeemed,
PLUS
- a make-whole premium which is based on the rates of treasury
securities with average lives comparable to the remaining
average lives of the applicable Bonds plus 30 basis points
in the case of the Series C Bonds or 50 basis points in the
case of the Series D Bonds.
Mandatory Redemption......................... If the Project is damaged or destroyed or taken by eminent domain,
or if there is a defect in our title to the Project site, and
- we receive more than $5,000,000 of insurance or other
proceeds because of the damage, destruction, taking or
defect and we decide not to, or cannot, restore the Project
or fix the title defect to make the Project operate on a
commercially feasible basis, then we must use the proceeds
we received to redeem Bonds and prepay some of our other
senior secured obligations; or
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<S> <C> <C>
- we receive insurance or other proceeds because of the
damage, destruction, taking or defect and more than
$5,000,000 of the proceeds are left over after we have
restored the Project or fixed the title defect to make the
Project operate on a commercially feasible basis, then we
must use the proceeds in excess of $5,000,000 that remain
after we have restored the Project to redeem Bonds and
prepay some of our other senior secured obligations unless
we receive a confirmation of the then current ratings of the
Bonds.
If we are required to redeem Bonds as described above, the
redemption price will be 100% of the principal amount of the Bonds
being redeemed plus accrued and unpaid interest on the Bonds being
redeemed.
If we receive more than $10,000,000 of performance liquidated
damages under the main construction contract for the Project, then
we must use these proceeds to redeem Bonds and prepay some of our
other senior secured obligations unless we receive a confirmation
of the then current ratings of the Bonds. If we are required to
redeem Bonds with performance liquidated damages, the redemption
price will be 100% of the principal amount of the Bonds being
redeemed PLUSaccrued and unpaid interest on the Bonds being
redeemed.
If we receive more than $10,000,000 of proceeds from buy-outs of
our power purchase agreements, then we must use these proceeds to
redeem Bonds and prepay some of our other senior secured
obligations unless we receive a confirmation of the then current
ratings of the Bonds. If we are required to redeem Bonds with the
proceeds of power contract buy-outs, then the redemption price
will be 100% of the principal amount of the Bonds being redeemed
plus accrued and unpaid interest on the Bonds being redeemed.
Redemption at the Option of the If:
Bondholders................................
- funds remain on deposit in the distribution suspense account
for at least 12 months in a row, and
- we cause the holders of the Bonds to vote on whether we
should use those funds to redeem Bonds, and
- holders of at least 66 2/3% of the outstanding Bonds vote to
require us to use those funds to redeem Bonds,
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<S> <C> <C>
then we will have to use the funds which have remained on deposit
in the distribution suspense account for at least 12 months in a
row to redeem Bonds and prepay some of our other senior secured
obligations. If we are required to redeem Bonds with those funds,
then the redemption price will be 100% of the principal amount of
the Bonds being redeemed PLUS accrued and unpaid interest on the
Bonds being redeemed. If we are not required to redeem Bonds with
those funds following the vote of the holders of the Bonds, then
we will be permitted to distribute those funds to our partners
without regard to the satisfaction of the debt service coverage
ratio tests contained in the indenture.
Change of Control............................ If:
- LS Power, LLC, Cogentrix Energy, Inc. and/or any qualified
third party experienced in owning and operating power
generation facilities collectively cease to own, directly or
indirectly, at least 51% of the capital stock of our general
partner (unless any or all of them maintain management
control of us), or
- LS Power, LLC, Cogentrix Energy, Inc. and/or any such
qualified and experienced third party collectively cease to
own, directly or indirectly, at least 10% of the ownership
and economic interest in us,
then we must offer to purchase all of the Bonds at a purchase
price equal to 101% of the outstanding principal amount of the
Bonds plus accrued and unpaid interest unless we receive a
confirmation of the then current ratings of the Bonds or at least
66 2/3% of the holders of the outstanding Bonds approve the change
in ownership.
Operating Flow of Funds...................... After completion of the Project, we will deposit all of our
revenues into the revenue account and disburse these revenues each
month to pay operating and maintenance expenses, management fees
and expenses and debt service, and to fund reserve accounts which
the indenture requires us to maintain. Funds remaining in the
revenue account after making these disbursements will be
transferred to the distribution suspense account for distribution
to or as directed by us if the distribution conditions in the
indenture are satisfied.
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Reserves Required for Distributions.......... We will not be allowed to make distributions unless the total
amount of funds in our debt service payment account, debt service
reserve account and distribution suspense account is equal to or
greater than the sum of (1) a debt service reserve equal to (a) if
the distribution is being made on a scheduled payment date for the
Bonds, the principal and interest payments due on all of our
senior secured debt on that date and (b) if the distribution is
being made on any other date, the principal and interest payments
due on all of our senior secured debt on the next scheduled
payment date for the Bonds, (2) the aggregate of the principal,
interest and other payments which will be due on all of our senior
debt on the next semiannual payment date and (3) the aggregate of
the principal, interest and other payments we will be required to
make on our senior debt between the distribution date and the next
semiannual payment date.
Additional Indebtedness...................... The indenture permits us to incur indebtedness in addition to the
Bonds. For example, we are allowed to incur additional
indebtedness in order to:
- finance modifications or improvements to the Project which
are necessary (1) to comply with applicable law or (2) to
complete the Project after all other funds available for
this purpose have been depleted, if:
- after giving effect to the financing, the minimum
Projected Senior Debt Service Coverage Ratio for each
fiscal year for the remaining term of the Bonds will be
greater than or equal to (x) 1.20/1.00 during the 100%
PPA Period, (y) 1.35/1.00 during the Two-Thirds PPA
Period and (z) 1. 50/1.00 during any other period, or
- we receive a confirmation of the then current ratings of
the Bonds.
- finance improvements to the Project which are not necessary
to comply with applicable law, if:
- after giving effect to the financing:
- the minimum Projected Senior Debt Service Coverage Ratio
for each fiscal year for the remaining term of the Bonds
will be greater than or equal to (x) 1.45/1.00 during
the 100% PPA Period, (y) 1.70/1.00 during the Two-Thirds
PPA Period and (z) 2.00/1.00 during any other period,
and
</TABLE>
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<TABLE>
<S> <C> <C>
- the average annual Projected Senior Debt Service
Coverage Ratio for the remaining term of the Bonds will
be greater than or equal to (x) 1.45/1.00 during the
100% PPA Period, (y) 1.75/1.00 during the Two-Thirds PPA
Period and (z) 2.25/1.00 during any other period, or
- we receive a confirmation of the then current ratings of
the Bonds.
- finance an expansion of the Project, if we receive a
confirmation of the then current ratings of the Bonds.
Covenants.................................... We will agree to, among other things:
- maintain our existence,
- obtain and comply with applicable governmental approvals,
- comply with applicable laws,
- maintain insurance for the Facility,
- provide financial statements, default notices and other
notices to the trustee,
- prepare a major maintenance plan,
- maintain our status as an exempt wholesale generator, and
- pay our taxes.
We will agree not to, among other things:
- create any lien on our properties other than permitted
liens,
- make any distributions other than as permitted under the
indenture,
- engage in any business other than the development,
financing, construction, operation and expansion of the
Project,
- make any investment other than permitted investments, or
- enter into non-arm's length transactions with our
affiliates.
These affirmative and negative covenants are subject to a number
of important qualifications and exceptions.
Trustee, Administrative Agent and Collateral
Agent...................................... The Bank of New York.
</TABLE>
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<TABLE>
<S> <C> <C>
Independent Engineer......................... The Independent Engineer will be responsible for, among other
things, providing confirmations and reports to the Trustee and the
Administrative Agent with respect to:
- construction drawdowns and concurrence with certain
certifications by the Partnership;
- material change order requests under the main construction
contract;
- the occurrence of completion of the Project;
- review of the annual operating budget; and
- upon receipt by the Partnership of insurance and other loss
proceeds:
(1) whether it is commercially feasible to repair, rebuild,
restore or replace the Facility; or
(2) whether such proceeds will not be sufficient to repair,
rebuild, restore or replace the Project.
Independent Electricity Market and Fuel The Independent Electricity Market and Fuel Consultant will be
Consultant................................. responsible for providing projections of market prices for
electricity which we will use to confirm certifications that we
will make with respect to projections of debt service coverage
ratios during periods in which less than all of the capacity of
the Facility is being disposed of pursuant to long term power
purchase agreements.
</TABLE>
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THE INDEPENDENT ENGINEER'S REPORT
R.W. Beck, Inc. has prepared a report dated May 13, 1999 which discusses
certain technical, environmental and economic aspects of our Facility, and
includes projections prepared by R.W. Beck of our operating results for the term
of the Bonds. We refer to the R.W. Beck projections of our operating results as
the "Projected Operating Results." R.W. Beck is an engineering consulting firm
which provides consulting services with respect to power plants. Their report is
set forth in its entirety as Annex B to this prospectus. Although we set forth
below R.W. Beck's conclusions about our Facility and the Projected Operating
Results, you should read their report in its entirety. Some of the capitalized
terms used below that are not defined in this prospectus (including the
definitions included in Annex A) have the meanings given those terms in the R.W.
Beck report. In addition, R.W. Beck has defined some of the capitalized terms
used below differently than we have defined those capitalized terms elsewhere in
this prospectus. For example, R.W. Beck's use of the term "Facility" is broader
than our use of the term "Facility." When you read the following conclusions you
should assume that, unless otherwise indicated, all of the capitalized terms
have the meanings given in the R.W. Beck report, rather than the meanings given
elsewhere in this prospectus.
Subject to the information and assumptions contained in the R.W. Beck
report, R.W. Beck expressed the following opinions in their report:
1. The Contractor and the Operator have previously demonstrated the capability
to perform their responsibilities under the Construction Contract and the
O&M Agreement, respectively.
2. Sufficient data has been gathered at the Site to perform the geotechnical
analysis, engineering, and reduction of data required to provide the
geotechnical recommendations and detailed site-work and foundation design
criteria needed to properly complete the Facility design. With proper
foundation design and adequate construction controls to minimize the change
in the moisture content of the Site soils, the Site should be suitable for
the construction and operation of the Facility.
3. Based upon R.W. Beck's review of the environmental site assessments for the
power plant site, the transmission line right-of-way, the wastewater
pipeline right-of-way, the water supply pipeline right-of-way and the
natural gas pipeline right-of-way:
- there are no significant risks identified regarding environmental
contamination at the Site; and
- there are no Site contamination issues that require substantial
investigations or significant allocation of funds.
4. The proposed method of design, construction, operation and maintenance of
the Facility has been developed in accordance with generally accepted
industry practice and has taken into consideration the current
environmental, license and permit requirements that the Facility must meet.
5. After consideration of:
- the emissions and blade cracking issues experienced with the two dual-fuel
installations of the 501F-DLN type of combustion turbine being installed
at the Facility as described in the R.W. Beck report; and
- the effect that single-fuel firing, higher allowable NOx emission limits,
and the other mitigating factors described in the R.W. Beck report have on
these emissions and blade cracking issues,
the combined-cycle technology proposed for the Facility is a sound, proven
method of energy generation and recovery.
6. If designed, constructed, operated and maintained as currently proposed by
the Partnership, the Contractor and the Operator, the Facility should be
capable of passing the Acceptance Tests
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included in the Construction Contract and satisfying the current
environmental, license and permit requirements which the Facility must meet.
7. If designed, constructed, operated and maintained as currently proposed and
dispatched as projected by C.C. Pace, the Facility should be capable of
achieving:
- an average annual output of 806,100 kW; and
- an average annual net plant heat rate of 7,050 Btu/kWh (HHV).
8. The Facility should be capable of achieving a contract availability under
the Power Purchase Agreements with Virginia Power and Aquila/UtiliCorp
required to avoid reductions in the reservation payments under those
agreements.
9. Assuming:
- the Facility is designed, constructed, operated and maintained as proposed
by the Partnership, the Contractor and the Operator;
- all equipment is operated in accordance with manufacturers'
recommendations;
- all required repairs, refurbishments and replacements are made on a timely
basis; and
- natural gas and water used by the Facility are within the expected range
with respect to quantity and quality,
then the Facility will have a useful life extending beyond the term of the
Bonds.
10. Assuming the absence of events such as:
- delivery delays;
- labor difficulties;
- unusually adverse weather conditions;
- force majeure events;
- the discovery of hazardous materials or wastes not previously known; or
- other abnormal events that are prejudicial to normal construction or
installation,
and although the construction contracts that the Partnership has entered into
for the electrical substation, transmission lines and water infrastructure
do not provide for these facilities to be completed by the dates by which
the Contractor needs electrical backfeed and water in order to conduct
certain tests, commercial operation of the Facility by June 1, 2000 is
achievable and within the previously demonstrated capabilities of the
Contractor and the Partnership using generally accepted construction and
project management practices.
11. The scope and duration of the Acceptance Tests included in the Construction
Contract are similar to the tests of other projects with which R.W. Beck is
familiar and should be adequate to verify the performance guarantees in
accordance with the Construction Contract.
12. The Partnership has received the key environmental permits and approvals
required from the various federal, state and local agencies that are
currently necessary to construct the Facility. While not all the required
permits and approvals have been issued, including some which cannot be
obtained until the Facility is ready to operate, R.W. Beck is not aware of
any technical circumstances that would prevent the issuance of the remaining
permits.
13. The estimates which serve as the basis for the Construction Contract Price
and the Total Construction Cost were prepared in accordance with generally
accepted engineering and estimating
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practices and methods. The Construction Contract Price and the Total
Construction Cost, including the Project Contingency, are comparable to the
costs and contingency of similar projects at a similar stage of completion
and utilizing similar technologies with which R.W. Beck is familiar.
14. Based upon the interest and reinvestment rates as estimated by the Initial
Purchasers and the total uses of funds as estimated by the Partnership, the
principal amount of the Bonds, when combined with the $54,000,000 of equity
that the Partnership expects will be contributed by its parent and interest
income during the construction period, should be sufficient to fund the
Total Construction Cost and interest on the Bonds through June 1, 2000.
15. The basis for the Partnership's estimate of the cost of operating and
maintaining the Facility, including provision for major maintenance, is
reasonable.
16. For the Base Case Projected Operating Results, which assumes the extension
of the Virginia Power and the Aquila/Utilicorp Power Purchase Agreements,
the projected revenues from the sale of electricity are adequate:
- to pay annual operating and maintenance expenses (including deposits to
the Major Maintenance Reserve Account), fuel expense and other operating
expenses; and
- to provide an annual Debt Service Coverage Ratio of at least 1.42 in each
year during the term of the Bonds and a weighted average Debt Service
Coverage Ratio of 1.63 over the term of the Bonds.
17. If the Contractor pays the Partnership performance liquidated damages due to
a failure to achieve the Maximum Unit Power Output, Unit Power Output or
Unit Heat Rate, then the weighted average Debt Service Coverage Ratio over
the term of the Bonds is projected to remain at the same level as in the
Base Case Projected Operating Results for a deficiency consistent with the
Performance Minimums for Maximum Unit Power Output, Unit Power Output, and
Unit Heat Rate set forth in the Construction Contract.
THE INDEPENDENT POWER MARKET AND FUEL CONSULTANT'S REPORT
C.C. Pace Consulting, L.L.C. has prepared a report dated May 13, 1999 which
discusses the southeastern power market and the availability of fuel and fuel
transportation for the Facility. C.C. Pace is an energy consulting firm that
specializes in preparing market forecasts in the power and gas industries and
analyzing fuel supply and transportation arrangements for independent power
projects. Their report is set forth in its entirety as Annex C to this
prospectus. Although we set forth below C.C. Pace's conclusions about our
Facility and the southeastern power market, you should read their report in its
entirety. Some of the capitalized terms used below that are not defined in this
prospectus (including the definitions included in Annex A) have the meanings
given those terms in the C.C. Pace report. In addition, C.C. Pace has defined
some of the capitalized terms used below differently than we have defined those
capitalized terms elsewhere in this prospectus. When you read the following
conclusions you should assume that, unless otherwise indicated, all of the
capitalized terms have the meaning given in the C.C. Pace report, rather than
the meaning given elsewhere in this prospectus.
Subject to the information and assumptions contained in the C.C. Pace
report, C.C. Pace expressed the following opinions in their report:
1. Compared to other power market regions, the southeastern power market is
highly competitive. The market's competitiveness is evidenced by the
region's large volume of power transactions. The market region represents
such a large amount of transactions that the region has become a market
standard for power deliveries referenced by the New York Mercantile Exchange
and Chicago Board of Trade futures contracts.
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<PAGE>
2. C.C. Pace anticipates that given the rapid pace of this wholesale energy
market's development, a competitive and deregulated environment for retail
customers' energy requirements will be implemented on a near- to mid-term
basis (I.E., before the expiration of the power purchase agreements that the
Partnership has entered into with Virginia Power and Aquila/UtiliCorp). The
development of this kind of capacity and energy market will enhance the
Partnership's ability to make power sales and should provide additional
marketing flexibility to the Partnership if the Virginia Power and
Aquila/UtiliCorp power purchase agreements expire.
3. The technical capability of the Project to start up and shut down quickly
should allow the Partnership's power purchasers, at times when the
Partnership's power purchasers control the dispatch of the Project, and the
Partnership, at times when the Partnership controls the operation of the
Project, to select operating hours in which revenues and profitability can
be maximized.
4. The market for power in the southeast is characterized by:
- sustained energy demand growth expected to continue at a steady annual
average pace of 1.51% to 2.24% over the next 20 years. This sustained
growth rate is higher than virtually any region in the United States and
makes the southeastern market both the largest and the fastest growing
demand center;
- ready access to competitively priced gas supply from a diversified range
of sources through an extensive interstate gas pipeline transmission
system;
- natural gas-based generation currently determining market prices for
electricity for 30% of the time, rising to 70% over the next 20 years; and
- a well-developed electrical transmission system capable of transferring
high volumes of electricity throughout the southeast and covering over ten
states and approximately 20% of the electricity demand in the United
States.
5. The most significant factors affecting the pricing of electricity in the
southeastern power market are:
- fuel costs;
- the efficiency and replacement rate of existing generating assets and
capital costs of replacing existing generating assets;
- the cost and efficiency of incremental capacity additions which are
undertaken to meet future energy requirements and maintain system
reliability; and
- increases in annual peak demand and energy requirements.
6. C.C. Pace's Base Case market price forecasts are between $29.95 per megawatt
hour (or "MWh") and $33.75/MWh (measured in 1998 real dollars) for the
period from 2000 to 2025. C.C. Pace expects that due to incremental demand
and the large amount of capacity additions necessary to meet market demand,
the southeastern power market will realize an approximately 0.5% real price
increase in electricity prices over the period from 2000 to 2025, which is
almost directly reflective of the real price escalation of natural gas.
Exhibit I-1 to the C.C. Pace report summarizes the southeastern system's
market price results between 2000 and 2025 for the Base Case.
7. C.C. Pace's Downside Case market price forecast (I.E., a conservative case
in which there is a 95% probability that market prices will be equal to or
greater than the Downside Case result obtained) is between $27.25/MWh and
$32.20/MWh (measured in 1998 real dollars) for the period from 2000 to 2025.
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8. The Project represents a low cost, highly competitive and much needed
resource for the growing southeastern market equaling only a small fraction
of the capacity required in the southeastern power market (only 1.85% of the
total required expansion capacity) by the year 2020.
9. The Project has many strong competitive advantages such as:
- a location which provides low cost access to gas and water;
- direct access to multiple power markets via bi-directional transmission
links into both the TVA and Entergy power systems;
- state of the art generation technology which is the most efficient in the
market; and
- close proximity to fuel production regions lowering fuel supply and
transportation costs.
These competitive advantages create an operational profile which suggests
that the Project should be a low cost and profitable resource in the
southeastern power market.
10. Virginia Power and Aquila/UtiliCorp, the two initial long-term power
purchasers, have entered into mutually acceptably priced power purchase
agreements with the Project. Both power purchasers are active in the
wholesale power market and are regionally well-positioned to operate in the
southeastern power market.
11. The power purchase agreements are of high strategic value to both Virginia
Power and Aquila/ UtiliCorp, complementing their current utility and
non-utility operations and market positions. Specifically, neither entity
owns or operates any significant amount of generating capacity in the
southeastern power market and, with the Project's capacity, they are able to
trade firm capacity and energy in the southeastern market, doubling each
company's marketing area and allowing them to serve virtually any customer
across ten to twelve states.
12. The extension options under the power purchase agreements allow Virginia
Power and Aquila/ UtiliCorp to purchase power at prices that are
approximately 40% lower than the Projected Market Price during the extension
period. This, together with the utilities' current total cost of generation
relative to the prices under these power purchase agreements, indicates a
high likelihood that these power purchase agreements will be extended by
Virginia Power and Aquila/ UtiliCorp.
13. Based on the timely construction of pipeline laterals and interconnection
facilities and the Project's maximum hourly fuel demand from the Tennessee
Gas and ANR gas pipelines, market priced natural gas supplies and interstate
transportation will be available in sufficient quantities and on acceptable
terms and conditions to support merchant plant generation requirements from
years 13 to 25 of the Project's operation.
14. Southeastern market utilities expect consistent and relatively high
(compared to the national average) summer peak demand and energy
requirements to increase at an average annual rate of 2.16% and 1.57% over
the next 10 years, respectively.
15. To provide full access to both TVA and Entergy power markets, the
Partnership has arranged for the upgrade of certain transmission facilities.
Under the agreements with TVA and Entergy, the Partnership will be granted
transmission upgrade credits up to the value of the transmission upgrade
costs for the transmission of energy across the TVA and Entergy systems.
C.C. Pace estimates that beginning in the first year of the Project's
operation and continuing until the total transmission upgrade cost is repaid
to the Partnership, the Partnership will accumulate additional revenues
equal to a minimum of approximately $3.4 million per year related to these
transmission upgrade credits.
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RISK FACTORS
AN INVESTMENT IN THE BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK, INCLUDING
THE RISKS DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED
BELOW AND THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT IN THE BONDS.
EXCHANGE OFFER RISK
THERE MAY BE ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE YOUR PRIVATE BONDS.
If you do not exchange your Private Bonds in the exchange offer, then you
will continue to be subject to the transfer restrictions on the Private Bonds as
set forth in the offering circular distributed in connection with the sale of
the Private Bonds. In general, the Private Bonds may not be offered or sold
unless they are registered or exempt from registration under the Securities Act
of 1933 and applicable state securities laws. Except as required by the
registration rights agreement, we do not intend to register resales of the
Private Bonds under the Securities Act of 1933. You should refer to "The
Exchange Offer" for information about how to tender your Private Bonds.
The tender of Private Bonds pursuant to the exchange offer will reduce the
principal amount of the Private Bonds outstanding, which may have an adverse
effect upon, and increase the volatility of, the market price of the Private
Bonds due to a reduction in liquidity.
CONSTRUCTION AND OPERATING RISKS
WE MAY NOT BE ABLE TO COMPLETE THE CONSTRUCTION OF OUR PROJECT ON TIME FOR
REASONS BEYOND OUR CONTROL OR OUR CONTRACTORS' CONTROL.
The construction and timely completion of our Project may be adversely
affected by factors commonly associated with large power plant projects,
including:
1) shortages of equipment, materials or labor;
2) work stoppages or other labor disputes;
3) weather problems;
4) unforeseen engineering, environmental, permitting or geological
problems;
5) unanticipated cost increases for reasons beyond our control or our
contractors' control; and
6) other unforeseen circumstances.
If any of these kinds of events occur, the construction of the Project may
be delayed, the Project may cost us more to complete than we have currently
budgeted, or the Project may not perform as well as we expect it to, which could
cause us to be unable to make payments on the Bonds and our other debt when due.
WE MAY INCUR ADDITIONAL COSTS OR EXPERIENCE A REDUCTION IN REVENUE UNDER OUR
POWER PURCHASE AGREEMENTS IF OUR UNITS ARE NOT OPERATING BY THE DATE ON WHICH
OUR DELIVERY OBLIGATIONS UNDER OUR POWER PURCHASE AGREEMENTS BEGIN. MOREOVER,
OUR CONTRACTOR HAS NOT GUARANTEED THAT IT WILL COMPLETE THE UNITS BY THAT DATE.
We have agreed with Virginia Power and Aquila/UtiliCorp that their
respective Units will be able to begin delivering power to them by June 1, 2000,
which date may be extended as a result of certain excused delays. The
Contractor's June 30, 1999 monthly progress report anticipates that the
Contractor will achieve substantial completion of each Unit prior to this date.
However, the Contractor has not guaranteed that it will substantially complete
the Facility by this date. Instead, the Contractor has guaranteed to
substantially complete the two Units that will provide power to Virginia Power
by
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July 16, 2000 and July 26, 2000 and to substantially complete the Unit that will
provide power to Aquila/UtiliCorp by July 31, 2000. Each of these dates may be
extended pursuant to the construction contract in some circumstances to give the
Contractor more time to substantially complete the Units. If the Contractor does
not substantially complete the Units by the day following the guaranteed
completion dates (as those dates may be extended pursuant to the construction
contract), the Contractor will have to pay us the delay liquidated damages
described in the construction contract. However, we will not receive any
liquidated damages from the Contractor for any period between the start of our
delivery obligations under the power purchase agreements and the day following
the guaranteed completion dates under our contract with the Contractor.
If the Units are not substantially complete by the date on which we have
agreed to begin delivery under our power purchase agreements, we may:
1) be required to supply replacement power to Virginia Power or reimburse
Virginia Power for any incremental replacement power cost that Virginia
Power incurs between the date on which we have agreed to begin delivery
under the Virginia Power power purchase agreement and the date on which
each Virginia Power Unit is substantially complete, up to a maximum of
$5,660,000 per Unit;
2) be required to do one of the following (to be selected at our option),
(a) supply Aquila/ UtiliCorp with replacement power, (b) reimburse
Aquila/UtiliCorp for any incremental replacement power cost that they
incur or (c) elect a delivery delay adjustment to the reservation
payments that Aquila/UtiliCorp must pay us under the Aquila/Utilicorp
power purchase agreement, in each case, between the date on which we have
agreed to begin delivery under the Aquila/Utilicorp power purchase
agreement and the date on which the Aquila/UtiliCorp Unit is
substantially complete; and
3) incur other increased costs as a result of the delay and forego some
revenues under our power purchase agreements during the period of delay.
For these reasons, construction delays generally, together with the fact
that we have committed to specified delivery dates with our power purchasers
while our Contractor has not committed to complete the Units by those dates,
could cause us to be unable to make payments on the Bonds and our other debt
when due.
THE LIQUIDATED DAMAGES THAT WE MAY RECEIVE FROM OUR CONTRACTORS MAY NOT
FULLY COMPENSATE US FOR OUR LOSSES IF THERE IS A CONSTRUCTION DELAY OR IF THE
COMPLETED FACILITY DOES NOT SATISFY ITS PERFORMANCE REQUIREMENTS.
The Contractor is obligated to pay us delay liquidated damages if it fails
to substantially complete a Unit by the day after it has guaranteed that it will
do so. Because the Contractor's delay liquidated damages are limited to the
lesser of (1) for each delayed Unit, 5% of the total price of the construction
contract and (2) 15% of the total price of the construction contract in the
aggregate, we cannot assure you that the delay liquidated damages will fully
compensate us for the replacement power costs, increased expenses and other
costs that we may incur due to a delay for which the Contractor is responsible.
In addition, the Contractor is not obligated to pay us delay liquidated damages
if it was not responsible for a delay, such as delays caused by our actions or
our other contractors' actions or by events beyond the Contractor's control. Any
of these events could extend the Contractor's guaranteed completion dates,
thereby delaying the date on which the Contractor's obligation to pay us delay
liquidated damages would begin.
The Contractor will be entitled to an extension of its guaranteed completion
dates if we are unable to provide certain consumables, including water, gas and
electrical backfeed, to the Contractor so that the Contractor may perform its
tests as scheduled. Our permanent arrangements for the water intake system and
the electrical backfeed will not be in place on the dates required in our
contract with the
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Contractor. We plan to make temporary arrangements to provide the Contractor
with water and electrical backfeed so that the Contractor may perform its tests
as scheduled, but we cannot assure you that we will be able to enter into these
temporary arrangements in a timely manner. In addition, although the contractors
constructing the electrical substation, transmission lines and Infrastructure
are required to pay us liquidated damages if their completion of these
facilities is delayed beyond the dates set forth in their contracts, these
liquidated damages are rather limited and would not be sufficient to cover the
losses that we could incur as a result of these delays. Furthermore, if we
transfer the Infrastructure to Panola County, we will no longer be entitled to
receive any liquidated damages under the Infrastructure construction contracts.
Any of these events or circumstances could make us unable to make payments on
the Bonds and our other debt when due.
In addition, if the completed Units are not able to satisfy the performance
standards that are guaranteed by the Contractor, we may find that:
1) our revenue is reduced because the Facility is not capable of producing
as much electricity as we expected it would;
2) our expenses increase because the Facility is less efficient and
therefore requires more fuel;
3) we are unable to operate the Facility in compliance with applicable
permits and laws; or
4) our power purchasers may terminate their agreements with us, if the
performance deficiency causes a material breach of those agreements.
The Contractor is obligated to pay us performance liquidated damages if the
Units cannot satisfy tests that measure their net power output and net heat
rate, among other things, against the guaranteed standards included in the
Contractor's contract. The Contractor's contract limits the aggregate amount of
performance liquidated damages payable by the Contractor to the lesser of (1)
for each deficient Unit, 15% of the total price of the Contractor's contract and
(2) the amount of bonus payments to the Contractor plus 30% of the total price
of the Contractor's contract, less any delay damages payable by the Contractor.
As a result, we cannot assure you that the performance liquidated damages will
fully compensate us for the losses that we may suffer due to any Unit's failure
to satisfy the performance guarantees. In addition, under some circumstances the
Contractor may not be obligated to pay us performance liquidated damages until
the expiration of a remediation period. Any such deficiency or delay in the
payment of liquidated damages could make us unable to make payments on the Bonds
and our other debt when due.
THE AMOUNT THAT WE HAVE BUDGETED TO COVER INCREASED COSTS, AND THE AMOUNT OF
OUR INSURANCE COVERAGE, MAY BE INSUFFICIENT TO COVER UNANTICIPATED COST
OVERRUNS.
Our project budget includes a line item (which we refer to as "contingency")
of approximately $10,649,000 that is designed to cover things like change orders
under the various construction contracts, the cost of fuel consumed by the
Facility during testing in excess of the revenue received from the sale of test
energy, the payment of taxes that may become due during the construction period,
and other increased costs due to force majeure and other events that may
increase our expenses. In addition, we are required to maintain casualty risk
insurance during the construction period, including delayed opening insurance
covering a period of approximately 18 months subject to a 30-day deductible per
occurrence. However, we cannot assure you that these contingency funds or the
proceeds of this insurance coverage will be sufficient to pay for any
unanticipated costs not set forth in the project budget.
IF WE TRANSFER THE INFRASTRUCTURE TO PANOLA COUNTY, WE WILL NO LONGER BE
ABLE TO DIRECTLY CONTROL THE CONSTRUCTION OF THE INFRASTRUCTURE.
We have engaged contractors to construct the Infrastructure, and
construction of the Infrastructure is underway. We currently expect to transfer
the partially completed Infrastructure, along with the
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Infrastructure construction contracts, to Panola County at some point. If we do
this, Panola County will agree that they will complete the Infrastructure in
accordance with those construction contracts. Under this scenario, we would no
longer be able to directly control the completion of the Infrastructure and, as
a result, we may not be able to ensure that the Infrastructure is completed by
the time the Contractor needs gas and water in order to be able to perform
certain tests or by the time our Units are required to be available to our power
purchasers. In addition, under this scenario we would no longer have approval
rights over change orders related to the Infrastructure, we would only have the
right to recommend the rejection of non-conforming Infrastructure work and we
would no longer be entitled to receive any liquidated damages payable by the
Infrastructure contractors. Nevertheless, we would still be responsible for any
cost overruns relating to the Infrastructure. If there are significant cost
overruns on the Infrastructure or if the completion of the Infrastructure is
materially delayed for any reason, we may be unable to make payments on the
Bonds and our other debt when due.
THE OPERATION OF OUR FACILITY INVOLVES MANY RISKS, INCLUDING TECHNOLOGY
RISK, OPERATING RISK, PERIODIC TESTING RISK, AVAILABILITY RISK, AND THE RISK OF
EVENTS BEYOND OUR CONTROL.
The operation of power generation facilities like our Facility involves many
risks, including:
1) performance below expected levels of output or efficiency;
2) breakdown, failure, and/or interruptions of power generation equipment,
transmission lines, pipelines or other necessary equipment or processes;
3) under-performance during facility testing;
4) failure to operate the facility optimally and reliably;
5) labor disputes;
6) violation of permit requirements; and
7) operator error or catastrophic events such as fires, explosions,
earthquakes and floods, which could result in personal injury, loss of
life, severe damage or destruction of the Project, pollution or
environmental damage and suspension of operations.
Plants using similar technology have had problems with respect to excess
pollutant emissions and turbine blade cracking. Moreover, because our Facility
is under construction, we have no actual operating results from the Facility and
we cannot fully predict its performance. Furthermore, because the reservation
payments that Virginia Power and Aquila/UtiliCorp are required to pay us are
based on the tested capacity of, and are reduced due to decreased availability
of, the Units dedicated to them, if any Unit fails to operate at the expected
performance levels the payments that we receive from Virginia Power and
Aquila/UtiliCorp may be lower than the amounts shown in the Projected Operating
Results. The occurrence of the kinds of events listed above could significantly
decrease our revenues, significantly increase our costs or impair our ability to
make payments on the Bonds and our other debt when due. Although we have
insurance to protect against some of these risks, the insurance proceeds may not
be adequate to cover lost revenues, increased expenses or other costs related to
these occurrences. In addition, the insurance that we currently have may not be
available in the future at commercially reasonable rates.
WE DEPEND ON A NUMBER OF OTHER PEOPLE TO CONSTRUCT AND OPERATE OUR PROJECT,
AND ON A SMALL NUMBER OF POWER PURCHASERS TO PROVIDE ALL OF OUR REVENUES.
We are highly dependent on many people to construct and operate our Project,
including the following:
1) various contractors for the construction of the Facility;
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2) various contractors for the construction of the Infrastructure, and, if
we transfer the Infrastructure to Panola County, on the County and the
IDA for the construction and our lease of the Infrastructure so that we
can transport water to and from our Facility and natural gas to our
Facility;
3) the Operator and other operators for the operation and maintenance of
the Facility and the Infrastructure;
4) TVA and Entergy for our ability to deliver our electricity to our power
purchasers and for the construction of some interconnection facilities
and the transmission system upgrades;
5) Tennessee Gas and ANR for the transportation of natural gas to our
Facility and for the construction of some interconnection facilities;
6) the United States government for our ability to withdraw water from Enid
Lake; and
7) Virginia Power and Aquila/UtiliCorp, during the term of our power
purchase agreements with them, for purchases of electric generating
capacity and energy from our Facility.
If any of these people breach their obligations to us, or terminate their
agreements with us, our revenues could decrease materially and we could be
unable to make payments on the Bonds and our other debt when due.
OUR POWER PURCHASE AGREEMENTS WITH VIRGINIA POWER AND AQUILA/UTILICORP WILL
EXPIRE BEFORE THE MATURITY OF THE BONDS. AFTER THESE AGREEMENTS EXPIRE, WE WILL
HAVE TO FIND OTHER LONG-TERM CUSTOMERS AND/OR MAKE SHORT-TERM SALES.
Our agreement with Virginia Power is currently set to expire in June 2013,
and our agreement with Aquila/UtiliCorp is currently set to expire in December
2015. Although both Virginia Power and Aquila/UtiliCorp have the option to
extend their agreements, we cannot assure you that they will do so. When our
agreements with them expire, we will either enter into new power purchase
agreements with other customers and/or make short-term (or "spot") sales (in
which case our Facility will be what is known in the industry as a "merchant"
plant). We cannot assure you that our net revenues generated from merchant sales
or new power purchase agreements will be sufficient to allow us to make payments
on the Bonds and our other debt when due.
In addition, if our future purchasers do not agree to supply us with natural
gas (as Virginia Power and Aquila/UtiliCorp have), we will have to obtain
natural gas ourselves. Currently, we do not have any agreements with gas
suppliers and for procurement or delivery of natural gas to the Facility.
Although C.C. Pace has concluded in its report that, based on the assumptions
stated therein, market-priced natural gas and interstate transportation will be
available in sufficient quantities and on acceptable terms to support the
Facility's requirements throughout the term of the Bonds, we cannot assure you
that this conclusion will prove to be accurate. If we are unable to enter into
gas supply or transportation agreements at competitive rates, we may be unable
to make payments on the Bonds and our other debt when due. See "Annex
C--Independent Electricity Market and Fuel Consultant's Report."
Our status as an exempt wholesale generator under federal law prohibits us
from making retail sales of electricity in the United States, although we may
sell electricity to any power marketer, including one of our affiliates, which
may in turn make retail electricity sales. We currently anticipate that electric
capacity and energy generated by our Facility will be sold primarily in the
wholesale market if and after the Facility becomes a merchant plant.
Nevertheless, if we wanted to participate directly in the retail electric
market, we would not be able to do so unless there were a change in federal law.
See "Business--Regulation."
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WE MAY NOT ALWAYS HAVE OPEN ACCESS TO TRANSMISSION SERVICE AFTER OUR POWER
PURCHASE AGREEMENTS EXPIRE. IN ADDITION, WE MAY NOT BE ABLE TO RECOVER THE
AMOUNTS THAT WE MUST PAY TVA AND ENTERGY TO UPGRADE THEIR TRANSMISSIONS SYSTEMS.
Although we have entered into agreements with TVA and Entergy to
interconnect the Facility to their transmission systems, we do not have any
agreements in place for the transmission of electricity from the interconnection
point across TVA's and Entergy's transmission systems. We do not need
transmission agreements during the term of our agreements with Virginia Power
and Aquila/UtiliCorp because Virginia Power and Aquila/UtiliCorp are required to
obtain transmission service for the power purchased by them from the Facility
and are required to pay us their reservation charges even if they are unable to
obtain transmission service. If our future power purchasers do not agree to take
responsibility for transmission service, as Virginia Power and Aquila/UtiliCorp
have, we will have to obtain this service ourselves. While the current
regulatory framework does not allow transmission providers to deny access to
electric generators on a discriminatory basis, we cannot assure you that, under
the current regulatory framework or under a different future regulatory
structure, transmission service will always be available to us or that the price
of available transmission service would enable us to compete effectively in the
merchant power market. If we are unable to obtain electric transmission service
at competitive rates when needed, we may be unable to make payments on the Bonds
and our other debt when due.
In addition, at any time at least five years after the commercial operation
date of our Facility, TVA may terminate their interconnection agreement with us
if we refuse to amend the agreement to be consistent with the terms being
offered by TVA to other generating facilities at the time. As a result, while
under the current regulatory framework TVA must allow open access to its system
and any amendment to the TVA interconnection agreement must not be
discriminatory, we cannot assure you that the terms of the TVA interconnection
agreement will not change in the future in a manner that could cause us to be
unable to make payments on the Bonds and our other debt when due.
Finally, we have agreed to pay all costs associated with certain upgrades of
Entergy's and TVA's transmission systems. These upgrades will be owned by
Entergy and TVA. In exchange, TVA and Entergy have agreed to credit us or our
power purchasers an amount equal to the lesser of (1) the revenues that they
receive from our power purchasers and their customers for transmission services
provided for the delivery of energy from our Facility and (2) the total costs
paid by us for the system upgrades. Our recovery of these credits is dependent
upon the availability of transmission service from TVA and Entergy for, and the
use of this transmission service by, our power purchasers and their customers.
The Projected Operating Revenues included in the R.W. Beck report contain
assumptions regarding the amount of system upgrade credits that C.C. Pace has
projected that we will receive each year. We cannot assure you that the actual
amount and timing of system upgrade credits that we receive will be the same as
those in the Projected Operating Results. If it turns out that we pay
significantly more to fund the transmission upgrades than we receive in return
as system upgrade credits, then our ability to make payments on the Bonds and
our other debt when due may be adversely impacted.
IF WE TRANSFER THE INFRASTRUCTURE TO PANOLA COUNTY, WE WILL BE DEPENDENT ON
GOVERNMENTAL AUTHORITIES FOR OUR USE OF THE PIPELINES AND RELATED SYSTEMS THAT
WILL TRANSFER NATURAL GAS TO OUR FACILITY AND WATER TO AND FROM OUR FACILITY.
PANOLA COUNTY AND OTHER GOVERNMENTAL ENTITIES THAT WE HAVE CONTRACTS WITH COULD
TRY TO CLAIM SOVEREIGN IMMUNITY IF WE SUED THEM TO ENFORCE OUR RIGHTS.
We currently expect to transfer the construction and ownership of the
Infrastructure to Panola County at some point. Although we and the County have
not yet finalized the details of this transfer, we currently expect that the
transfer arrangement is likely to take the form described in this paragraph.
When we transfer the Infrastructure to the County, we will most likely continue
to pay the costs of constructing the Infrastructure until the State of
Mississippi issues general obligation bonds to finance
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the Infrastructure. At that point, the County will most likely reimburse us for
the costs that we have paid for work performed to construct the Infrastructure
from April 12, 1999 until the State of Mississippi issues the general obligation
bonds. If the State never issues the general obligation bonds or does not apply
the proceeds to the construction of the Infrastructure, then we expect that we
will be able to require the County to transfer the Infrastructure and the
related construction contracts back to us. However, assuming that the State does
issue the general obligation bonds and that the County therefore retains
ownership of the Infrastructure, we will lease the Infrastructure from the
County and the IDA. This would make us dependent on the County and the IDA for
our lease of the Infrastructure, including the lateral gas and water pipelines,
which are critical to the operation of our Facility. If we were unable to use
the lateral gas and water pipelines for any reason and our Units were not
available to Virginia Power and Aquila/UtiliCorp as a result, then the
reservation payments from Virginia Power and Aquila/UtiliCorp would be reduced
due to the unavailability of their Units. This could cause us to be unable to
make payments on the Bonds and our other debt when due.
In some cases, private parties cannot sue a governmental authority because
the governmental authority claims the benefit of what is known as "sovereign
immunity." Although we have been advised by our Mississippi counsel that the
County and the IDA would not, under current law, be entitled to claim sovereign
immunity if we try to sue them in court to enforce their obligations to us under
the infrastructure agreements, we cannot assure you that the County, the IDA,
the United States and other governmental authorities that we might have
contracts with would not be entitled to successfully claim sovereign immunity.
If that happened, we would not be able to enforce our rights against the County
and the IDA under the infrastructure agreements or the United States under our
water supply agreement. This, too, could cause us to be unable to make payments
on the Bonds and our other debt when due. In addition, although you will have a
lien on our interests in these use agreements, you also may find it difficult to
enforce your rights under these agreements if you foreclose on the Project.
THERE ARE RISKS ASSOCIATED WITH THE YEAR 2000 COMPUTER PROBLEM.
Many existing computer systems use only two digits to identify a year in the
date field. These systems were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the year 2000. We
believe that we will be able to achieve substantial 2000 readiness with respect
to the critical systems that we control. However, we cannot assure you that all
our systems and any systems of third parties on whom we rely will be adequately
remediated so that they are year 2000 ready by January 1, 2000. If we or our
power purchasers, contractors or suppliers experience critical year 2000-related
failures, the adverse impact on our business could be material and we could be
unable to make payments on the Bonds and our other debt when due.
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REGULATORY RISKS
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATIONS AND PERMITTING
REQUIREMENTS AND MAY BE ADVERSELY AFFECTED BY CHANGES IN SUCH REGULATIONS OR
REQUIREMENTS.
There are many federal, state and local laws that pertain to power
generation and that are designed to protect human health and the environment.
These laws impose numerous requirements on the construction, ownership, and
operation of the Facility and the Infrastructure. For example, we must obtain
and comply with permits for air emissions, water withdrawal, waste water
discharges, construction in wetlands, and other regulated activities. Each
permit contains its own set of requirements. We also must implement certain
management practices for handling hazardous materials, preventing spills,
planning for emergencies, ensuring worker safety, and addressing other
operational issues. If we fail to comply with these requirements, we could be
prevented from completing or operating the Facility or the Infrastructure.
Moreover, modifications to the Facility or the Infrastructure to comply with
these requirements could be expensive.
In addition, the structure of federal and state energy regulation is
currently, and may continue to be, subject to challenges and restructuring
proposals. Although we believe that we have obtained all material energy-related
approvals currently required to construct, operate and use the Facility and the
Infrastructure, we may require additional regulatory approvals in the future due
to a change in existing laws and regulations, a change in our power purchasers
or for other reasons.
We cannot assure you that we, our power purchasers or our contractors or
suppliers, will be able to obtain any required regulatory approvals, or any
necessary modifications to existing regulatory approvals, or maintain existing
required regulatory approvals. We also cannot assure you that we will be able to
operate our Facility in accordance with all of our permits and approvals. If we
cannot timely obtain and maintain any regulatory approvals or are unable to
timely satisfy any related conditions, we could be prevented from operating the
Facility or making sales to our power purchasers, or we could incur additional
costs. Any of these events could cause us to be unable to make payments on the
Bonds and our other debt when due.
Laws and regulations affecting us, the Facility and the Infrastructure may
change in a way that could cause us to be unable to make payments on the Bonds
and our other debt when due. For example, changes in laws or regulations could
impose more stringent or comprehensive requirements on the operation and
maintenance of our Facility or the Infrastructure, or could expose us to
liability for actions taken in compliance with laws previously in effect or for
actions taken or conditions caused by unrelated third parties.
In addition, we could be responsible for the costs of remediating
contamination from existing or future off-site sources that are subsequently
identified at the Project site or the Project easements. Any payment by us of
such remediation costs could cause us to be unable to make payments on the Bonds
and our other debt when due.
FINANCING RISKS
IF WE AND THE FUNDING CORPORATION DEFAULT ON THE BONDS, YOUR RECOURSE WILL
BE LIMITED TO THE ASSETS AND CASH FLOWS OF OUR FACILITY.
We and the Funding Corporation are co-issuers of the Bonds and are equally
responsible for making payments on the Bonds. No one else (including our
partners, shareholders, affiliates, directors, officers or the people who own or
work for them or us) are responsible for making payments on the Bonds or in any
way guarantee the payment of the Bonds. The Funding Corporation has no ongoing
business and only nominal assets, and really cannot be viewed as a source of
payment. Our ability to make payments on the Bonds will be entirely dependent on
our ability to construct our Facility and to
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operate it at levels which provide sufficient revenues, after the payment of our
operations and maintenance costs, to make payments on the Bonds and our other
debt when due.
The Bonds are secured only by (1) the Project, (2) a lien on the partnership
interests in the Partnership and (3) a lien on the capital stock of the Funding
Corporation and of our general partner. We cannot assure you that, if we and the
Funding Corporation default on the Bonds and you foreclose on and sell the
Project, you will receive sufficient proceeds to pay all amounts that we and the
Funding Corporation owe you on the Bonds. In addition, there are certain assets
comprising the Project, such as permits, that you may not be able to effectively
foreclose upon without the consent of a third party, such as a governmental
authority. We cannot assure you that if you try to foreclose on our assets, you
will get all of the third party approvals that you need to effectively do so.
WE MAY INCUR ADDITIONAL DEBT, OR BE REQUIRED TO MAKE PAYMENTS TO REIMBURSE
DRAWS UNDER LETTERS OF CREDIT, THAT COULD ADVERSELY AFFECT YOU.
We may incur additional debt, including additional series of Bonds, to pay
for certain capital improvements and expansions of our Facility and for other
purposes. Certain types of this permitted indebtedness may rank equally with the
Bonds and share ratably in the collateral which secures the Bonds. This may
reduce the benefits of the collateral to you and your ability to control certain
actions taken with respect to the collateral.
In addition, in order to secure certain of our obligations under our power
purchase agreements, we have provided an irrevocable standby letter of credit to
Virginia Power and may be required to provide an irrevocable standby letter of
credit or other security to Aquila/UtiliCorp. See "Description of the Principal
Financing Documents--Virginia Power L/C Agreement" and "--Common Agreement--
Reserve Accounts--Aquila PPA Reserve Account." If Virginia Power or
Aquila/UtiliCorp draw upon any of these letters of credit, we will be required
to reimburse the banks that have provided these letters of credit. Our
obligations to reimburse these banks will rank equally with our obligations to
make payments on the Bonds. Our ability to make payments on the Bonds when due
could be adversely impacted as a result.
WE ARE RELYING ON PROJECTIONS OF THE FUTURE PERFORMANCE OF OUR FACILITY, AND
THESE PROJECTIONS MAY NOT PROVE TO BE TRUE.
The report by R.W. Beck contains Projected Operating Results that are based
on assumptions and forecasts of our ability to generate revenue and of our
expected costs. R.W. Beck made some of the assumptions used in the Projected
Operating Results after performing its technical and economic evaluation of the
Facility, and made other assumptions of business and economic conditions
generally. R.W. Beck has informed us that it believes these assumptions to be
reasonable. However, R.W. Beck has not reviewed our Infrastructure, electrical
substation and transmission line construction contracts for purposes of
determining whether the facilities being constructed pursuant to those contracts
will be technically compatible with the rest of the Facility. C.C. Pace made
some of the assumptions used by R.W. Beck in the Projected Operating Results
based on its evaluation of the fuel and electricity markets in the southeast.
C.C. Pace has informed us that it believes these assumptions to be reasonable.
We agree that all of the assumptions underlying the Projected Operating Results
are reasonable. Nevertheless, all the assumptions on which the Projected
Operating Results are based are subject to significant uncertainties, and
neither we nor any other person can predict with any certainty whether they will
prove to be true. KPMG LLP, our independent certified public accountants, have
not reviewed the Projected Operating Results and do not express any opinion with
respect to the Projected Operating Results. Neither we nor R.W. Beck nor any
other person will provide the Bondholders with any revisions to the Projected
Operating Results or with any analysis of the differences between the Projected
Operating Results and our actual operating results.
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The projections are not necessarily an indication of our future performance.
Neither we nor R.W. Beck nor any other person assumes any responsibility for
their accuracy. In fact, our actual results will differ, perhaps materially,
from those in the Projected Operating Results. Therefore, we are not making, and
you should not infer, any representation about the likely existence of any
particular future set of facts or circumstances. If our actual results are less
favorable than those shown in the Projected Operating Results or if the
assumptions we used in preparing the Projected Operating Results prove to be
incorrect, we may be unable to make payments on the Bonds or our other debt when
due.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE
CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon the occurrence of specific kinds of change of control events which we
cannot necessarily control, we will be required to offer to repurchase all
outstanding Bonds. However, it is possible that we will not have sufficient
funds at the time of the change of control to make the required repurchase of
Bonds. See "Description of the Bonds--Redemption at the Option of the
Bondholders--Change of Control."
YOU MAY FIND IT DIFFICULT TO TRANSFER THE EXCHANGE BONDS DUE TO THE LACK OF
A PUBLIC TRADING MARKET.
The Exchange Bonds are new securities for which there is no existing market.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Bonds. The Initial Purchasers of the Private Bonds have
advised us that they currently intend to make the market in the Exchange Bonds.
However, the Initial Purchasers of the Private Bonds are not obligated to do so,
and any market making with respect to the Exchange Bonds may be discontinued at
any time without notice. We do not intend to apply for a listing of the Exchange
Bonds on any securities exchange or on any automated dealer quotation system.
The liquidity of, and trading market for, the Exchange Bonds also may be
adversely affected by general declines in the market for similar securities or
by changes in our financial performance. Such a market decline may adversely
affect such liquidity and trading markets independent of our financial
performance and prospects.
BANKRUPTCY RISKS
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
VOID OUR OBLIGATIONS UNDER THE BONDS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, our obligations under the Bonds could be voided or
subordinated to all of our other debts if, among other things, at the time that
we issue the Bonds, we:
1) received less than reasonably equivalent value or fair consideration for
the issuance of the Bonds; and
2) were insolvent or rendered insolvent as a result of issuing the Bonds;
or
3) were engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or
4) intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they mature.
The same analysis would apply to the Funding Corporation as well. In
addition, any payment that we or the Funding Corporation made on the Bonds could
be voided and required to be returned to us or the Funding Corporation, as
applicable, or to a fund for the benefit of our respective creditors.
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The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, we would be considered
insolvent if:
1) the sum of our debts, including contingent liabilities, were greater
than the fair saleable value of all of our assets; or
2) the present fair saleable value of our assets were less than the amount
that would be required to pay our probable liability on our existing
debts, including contingent liabilities, as they become absolute and
mature; or
3) we could not pay our debts as they become due.
Again, the same analysis would apply to the Funding Corporation.
We used a portion of the net proceeds of the Private Bonds to pay
development fees to our affiliates. Nevertheless, because we received value from
these affiliates in the form of development services prior to paying this fee,
we do not believe that, as a result of paying this fee, we have received less
than reasonably equivalent value or fair consideration for issuing the Private
Bonds. After giving effect to our issuance of the Private Bonds, we believe that
we are not insolvent, we do not have unreasonably small capital for the business
in which we are engaged, and we have not incurred debts beyond our ability to
pay those debts as they mature. However, we cannot assure you that a court would
apply this standard or agree with our conclusions.
In addition, because (1) both we and the Funding Corporation are equally
responsible for making payments on the Bonds, (2) the Funding Corporation will
not receive any of the proceeds of the Bonds and (3) the Funding Corporation has
no assets to speak of, the Funding Corporation may in fact be considered to have
received less than reasonably equivalent value for issuing the Bonds and to be
insolvent.
IF WE, THE FUNDING CORPORATION OR ONE OF THE COUNTERPARTIES TO OUR CONTRACTS
ARE THE SUBJECT OF BANKRUPTCY PROCEEDINGS, YOUR ABILITY TO FORECLOSE ON THE
COLLATERAL SECURING THE BONDS, AS WELL AS YOUR RECEIPT OF PAYMENTS ON THE BONDS,
COULD BE SIGNIFICANTLY IMPAIRED.
If we or the Funding Corporation seek the protection of the bankruptcy laws,
or if one of our or the Funding Corporation's creditors begins a bankruptcy
proceeding against us or the Funding Corporation, your rights to foreclose upon
the Project are likely to be significantly impaired. In addition, we cannot
predict how long payments on the Bonds could be delayed following the
commencement of a bankruptcy case involving us or the Funding Corporation.
Finally, because part of the collateral securing the Bonds consists of our
contracts, if we or any counterparty to any one of those contracts were the
subject of bankruptcy proceedings, then we, that counterparty or a trustee
appointed in our or the counterparty's bankruptcy case could chose to reject the
contract. If that occurred, you could not specifically enforce the rejected
contract.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We sold the Private Bonds on May 21, 1999 (the "Closing Date") to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently sold the Private Bonds to "qualified institutional buyers"
("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in
reliance on Rule 144A. As a condition to the sale of the Private Bonds, the
Issuers and the Initial Purchasers entered into the Registration Rights
Agreement on May 21, 1999. Pursuant to the Registration Rights Agreement, we
agreed that, unless the Exchange Offer is not permitted by applicable law or
Commission policy, we would (i) file with the Commission a Registration
Statement under the Securities Act with respect to the Exchange Bonds as soon as
reasonably practicable after the Closing Date, (ii) use our reasonable best
efforts to cause such Registration Statement to become effective under the
Securities Act on or prior to 270 days after the Closing Date (iii) keep
continuously effective such Registration Statement for a period of 120 days or
until the consummation of the Exchange Offer and (iv) use our best efforts to
consummate the Exchange Offer within 30 days from the date on which notice that
the Registration Statement was declared effective by the Commission is mailed. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement. The Registration Statement is intended to satisfy
certain of our obligations under the Registration Rights Agreement and the
Purchase Agreement.
RESALE OF THE EXCHANGE BONDS
With respect to the Exchange Bonds, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, we believe that a holder (other than (i) a broker-dealer who purchases
such Exchange Bonds directly from us to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) any such holder that
is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act) who exchanges Private Bonds for Exchange Bonds in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement with any person to participate, in a distribution of the
Exchange Bonds, will be allowed to resell Exchange Bonds to the public without
further registration under the Securities Act and without delivering to the
purchasers of the Exchange Bonds a prospectus that satisfies the requirements of
Section 10 of the Securities Act. See e.g. EXXON CAPITAL HOLDINGS CORP., SEC
No-Action Letter (available April 13, 1989) and MORGAN STANLEY & CO. INC., SEC
No-Action Letter (available June 5, 1991). However, if any holder acquires
Exchange Bonds in the Exchange Offer for the purpose of distributing or
participating in the distribution of the Exchange Bonds or is a broker-dealer,
such holder cannot rely on the position of the staff of the Commission
enumerated in certain no-action letters issued to third parties and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Each broker-dealer that receives Exchange Bonds for its
own account in exchange for Private Bonds, where such Private Bonds were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Bonds received in exchange for Private Bonds where such Private Bonds
were acquired by such broker-dealer as a result of market-making or other
trading activities.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, we will accept any and all Private Bonds
validly tendered and not withdrawn prior to the
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Expiration Date. We will issue $1,000 principal amount of Exchange Bonds in
exchange for each $1,000 principal amount of outstanding Private Bonds
surrendered pursuant to the Exchange Offer. Private Bonds may be tendered only
in integral multiples of $1,000.
The form and terms of the Exchange Bonds are the same as the form and terms
of the Private Bonds except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Bonds will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Bonds will not
be entitled to any of the rights of holders of Private Bonds under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Exchange Bonds will evidence the same indebtedness as
the Private Bonds which they replace and will be issued under, and be entitled
to the benefits of, the Indenture, which also authorized the issuance of the
Private Bonds, such that both the Series A Bonds and the Series C Bonds will be
treated as a single class of debt securities under the Indenture and such that
both the Series B Bonds and the Series D Bonds will be treated as a single class
of debt securities under the Indenture.
As of the date of this Prospectus, $326,000,000 in aggregate principal
amount of the Private Bonds are outstanding and registered in the name of Cede &
Co., as nominee for DTC. Only a registered holder of the Private Bonds (or such
holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer. There
will be no fixed record date for determining registered holders of the Private
Bonds entitled to participate in the Exchange Offer.
Holders of the Private Bonds do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. We intend to conduct
the Exchange Offer in accordance with the provisions of the Registration Rights
Agreement and the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations of the Commission thereunder.
We will be deemed to have accepted validly tendered Private Bonds when, as
and if we have given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering holders of Private Bonds for
the purposes of receiving the Exchange Bonds from the Issuers.
Holders who tender Private Bonds in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Bonds pursuant to the Exchange Offer. We will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" will mean 5:00 p.m., New York City time on
[ ], 1999, unless we, in our sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" will mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, we will (i) notify the Exchange Agent
of any extension by oral or written notice, (ii) mail to the registered holders
an announcement thereof and (iii) issue a press release or other public
announcement which will include disclosure of the approximate number of Private
Bonds deposited to date, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which we may choose to make a public announcement of any
delay, extension, amendment or termination of the Exchange Offer, we will have
no obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to an appropriate news
agency.
We reserve the right, in our sole discretion, (i) to delay accepting any
Private Bonds, (ii) to extend the Exchange Offer or (iii) if any conditions set
forth below under the caption "--Conditions" are not satisfied, to terminate the
Exchange Offer by giving oral or written notice of such delay, extension or
39
<PAGE>
termination to the Exchange Agent. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders, and we will extend the Exchange Offer
for a period of five to ten business days, depending upon the significance of
the amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
INTEREST ON THE EXCHANGE BONDS
The Exchange Bonds for the Series A Bonds will bear interest at a rate equal
to 7.164% per annum and the Exchange Bonds for the Series B Bonds will bear
interest at a rate equal to 8.160% per annum. Interest on the Exchange Bonds
will be payable semi-annually in arrears on each January 15 and July 15,
commencing January 15, 2000. Holders of Exchange Bonds will receive interest on
January 15, 2000 from the date of initial issuance of the Exchange Bonds, plus
an amount equal to the accrued interest on the Private Bonds from the date of
initial delivery to the date of exchange thereof for Exchange Bonds. Holders of
Private Bonds that are accepted for exchange will be deemed to have waived the
right to receive any interest accrued on the Private Bonds, other than as set
forth in the previous sentence.
PROCEDURES FOR TENDERING
Only a registered holder of Private Bonds may tender such Private Bonds in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Bonds
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under the caption "--Exchange
Agent" for receipt prior to the Expiration Date. In addition, either (i)
certificates for such Private Bonds must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Private Bonds, if such procedure
is available, into the Exchange Agent's account at the Depository pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE BONDS AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE BONDS SHOULD BE
SENT TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner of the Private Bonds whose Private Bonds are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must,
40
<PAGE>
prior to completing and executing the Letter of Transmittal and delivering such
owner's Private Bonds, either make appropriate arrangements to register
ownership of the Private Bonds in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Private Bonds tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Bonds listed therein, such Private Bonds must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Private Bonds.
If the Letter of Transmittal or any Private Bonds or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Private Bonds.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Bonds will be determined
by us in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all Private Bonds not properly
tendered or any Private Bonds the Issuers' acceptance of which would, in the
opinion of counsel for the Issuers, be unlawful. We also reserve the right to
waive any defects, irregularities or conditions of tender as to particular
Private Bonds. Our interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Bonds must be cured within such time as we
will determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of Private Bonds, neither we, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Private Bonds will not be deemed to have been
made until such defects or irregularities have been cured or waived.
While we have no present plan to acquire any Private Bonds that are not
tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Bonds that are not tendered in the Exchange Offer, we
reserve the right in our sole discretion to purchase or make offers for any
Private Bonds that remain outstanding subsequent to the Expiration Date or, as
set forth below under the caption "--Conditions," to terminate the Exchange
Offer and, to the extent permitted by applicable law, to purchase Private Bonds
in the open market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the Exchange
Offer.
41
<PAGE>
By tendering, each holder of Private Bonds will represent to us that, among
other things, (i) Exchange Bonds to be acquired by such holder of Private Bonds
in connection with the Exchange Offer are being acquired by such holder in the
ordinary course of business of such holder, (ii) such holder has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Bonds, (iii) if such Holder is a resident of the State of California,
it falls under the self-executing institutional investor exemption set forth
under Section 25102(i) of the Corporate Securities Law of 1968 and Rules
260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if such
Holder is a resident of the Commonwealth of Pennsylvania, it falls under the
self-executing institutional investor exemption set forth under Sections 203(c),
102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of
the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November
16, 1985, (v) such holder acknowledges and agrees that any person who is a
broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing the Exchange Bonds must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Bonds acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (vi) such holder understands that a
secondary resale transaction described in clause (v) above and any resales of
Exchange Bonds obtained by such holder in exchange for Private Bonds acquired by
such holder directly from the Issuers should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) such holder is not an "affiliate," as defined in Rule 405
under the Securities Act, of either of the Issuers. If the holder is a
broker-dealer that will receive Exchange Bonds for such holder's own account in
exchange for Private Bonds that were acquired as a result of market-making
activities or other trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange Bonds; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE BONDS
If any tendered Private Bonds are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Bonds are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Private Bonds will be
returned without expense to the tendering holder thereof (or, in the case of
Private Bonds tendered by book-entry transfer into the Exchange Agent's account
at the Depository pursuant to the book-entry transfer procedures described
below, such Private Bonds will be credited to an account maintained with the
Depository) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Bonds at the Depository for purposes of the Exchange Offer within
two business days after the date of this prospectus, and any financial
institution that is a participant in the Depository's systems may make
book-entry delivery of Private Bonds by causing the Depository to transfer such
Private Bonds into the Exchange Agent's account at the Depository in accordance
with the Depository's procedures for transfer. However, although delivery of
Private Bonds may be effected through book-entry transfer at the Depository, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under the
caption "--Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
42
<PAGE>
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Bonds and (i) whose Private Bonds
are not immediately available or (ii) who cannot deliver their Private Bonds,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by us (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Bonds
and the principal amount of Private Bonds tendered, stating that the
tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or a facsimile thereof), together with the certificate(s)
representing the Private Bonds in proper form for transfer or a
Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof), as
well as the certificate(s) representing all tendered Private Bonds in
proper form for transfer and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Bonds according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Bonds may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Bonds in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Bonds to be withdrawn (the "Depositor"), (ii) identify the Private
Bonds to be withdrawn (including the certificate number or numbers and principal
amount of such Private Bonds) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Bonds were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by us in our sole discretion, and our
determination will be final and binding on all parties. Any Private Bonds so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Bonds will be issued with respect thereto unless
the Private Bonds so withdrawn are validly retendered. Properly withdrawn
Private Bonds may be retendered by following one of the procedures described
above under the caption "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, we will not be
required to accept for exchange, or exchange the Exchange Bonds for, any Private
Bonds, and may terminate the Exchange Offer as provided herein before the
acceptance of such Private Bonds, if the Exchange Offer violates applicable law,
rules or regulations or an applicable interpretation of the staff of the
Commission.
43
<PAGE>
If we determine in our sole discretion that any of these conditions are not
satisfied, we may (i) refuse to accept any Private Bonds and return all tendered
Private Bonds to the tendering holders, (ii) extend the Exchange Offer and
retain all Private Bonds tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Private Bonds (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Private Bonds
that have not been withdrawn. If such waiver constitutes a material change to
the Exchange Offer, we will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders of the
Private Bonds, and we will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Bonds eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to our continuing obligations to indemnify such holders and certain parties
related to such holders against certain liabilities (including liabilities under
the Securities Act).
ADDITIONAL INTEREST
In the event of an Illiquidity Event (as defined in the Registration Rights
Agreement), the interest rate on any Transfer Restricted Securities (as defined
below) will increase by 0.5%, which increase will remain in effect until the
Illiquidity Event no longer exists with respect to such Transfer Restricted
Securities. Transfer Restricted Securities means each Private Bond until the
earlier to occur of (i) the date on which such Private Bond has been exchanged
by a person for an Exchange Bond in the Exchange Offer, (ii) the date on which
such Private Bond has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement (as defined in
the Registration Rights Agreement) or (iv) the date on which such Private Bond
is distributed to the public pursuant to Rule 144 under the Securities Act or is
eligible for resale pursuant to Rule 144(k) under the Securities Act. The filing
and effectiveness of the Registration Statement of which this prospectus is a
part and the consummation of the Exchange Offer will eliminate all rights of the
holders of Private Bonds eligible to participate in the Exchange Offer to
receive damages that would have been payable if such actions had not occurred.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this prospectus or of the Letter of
44
<PAGE>
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY:
The Bank of New York The Bank of New York
101 Barclay Street, 16th Floor 101 Barclay Street, 16th Floor
New York, NY 10286 New York, NY 10286
Attention: Corporate Trust Administration Attention: Corporate Trust Administration
BY OVERNIGHT DELIVERY: BY FACSIMILE:
The Bank of New York (212) 815-5915
101 Barclay Street, 16th Floor
New York, NY 10286 CONFIRM BY TELEPHONE:
Attention: Corporate Trust Administration
(212) 815-5939
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by officers and regular employees of the
Issuers and their affiliates.
We have not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. However, we will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by us and are estimated in the aggregate to be approximately $305,000.
Such expenses include registration fees, fees and expenses of the Exchange Agent
and the Trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of
Private Bonds pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Bonds pursuant to
the Exchange Offer, then the amount of any such transfer tax (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Bonds are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Private Bonds that are not exchanged for the Exchange Bonds pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Private
Bonds may be offered, resold, pledged or otherwise transferred only (1) to a
person who the seller reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of Rule 144
under the Securities Act, outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act, or in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Issuers so request),
(2) to the Issuers or (3) pursuant to an effective registration
45
<PAGE>
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the Exchange Offer. The expenses of the Exchange Offer will be amortized over
the term of the Exchange Bonds.
46
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds in connection with the Exchange Offer. The
net proceeds received by us from the Private Offering were approximately
$324,290,000 million, after deducting discounts and commissions and other fees
and expenses related to the offering of the Private Bonds (the "Private
Offering") payable by us.
We used a portion of the net proceeds from the sale of the Private Bonds to
repay in full the indebtedness outstanding under our existing loan facility.
Affiliates of each of the Initial Purchasers of the Bonds were lenders under
that loan facility. We were using the proceeds of this outstanding loan to pay
for costs associated with developing, constructing and financing the Project.
The outstanding loan incurred interest at a rate of LIBOR (which is a rate per
annum equal to the offered rate for U.S. dollar deposits in the London Interbank
Market two days prior to the beginning of the interest period for the loan
divided by 100% and minus the reserve requirement for the loan) plus 1 1/8% and
would have matured on December 15, 2001. We used the remainder of the net
proceeds from the sale of the Bonds to pay a portion of our remaining Project
costs. These costs include, among other things:
1) payments under our construction and supply contracts for the Units,
the electrical substation, the transmission lines and related facilities and
equipment;
2) payments under the Infrastructure construction contracts;
3) costs and expenses of developing, designing, permitting and managing
the Project, including development and management fees;
4) financing, legal and consulting fees and expenses;
5) costs associated with pre-completion operation and maintenance
services;
6) taxes;
7) interest during the construction phase of the Facility;
8) start-up expenses and inventories;
9) funding the debt service reserve account identified in the financing
documents; and
10) other costs, contingencies and disbursements associated with the
Project.
If we transfer the construction and ownership of the Infrastructure to the
County, we will, instead of making the payments described under item (2) above,
fund an account for the benefit of the State of Mississippi and/or the County in
an amount equal to the total contract price under the Infrastructure
construction contracts less amounts that we spent for Infrastructure
construction prior to April 12, 1999 and less amounts that we advance for the
payment of Infrastructure construction costs from April 12, 1999 until we
transfer the Infrastructure. The County will be able to use the amounts in this
account to pay Infrastructure construction costs until it finances the
Infrastructure construction. The County will probably finance the Infrastructure
with the proceeds of general obligation bonds issued by the State of
Mississippi. Any amounts remaining in the account after the County finances the
Infrastructure should be returned to us.
The rest of our Project costs will be funded with the $54,000,000 of equity
contributions that we will receive from our direct parent after we have spent
all of the proceeds of the Private Bonds. For a more detailed description of our
estimated sources and uses of funds, see "Estimated Sources and Uses of Funds."
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<PAGE>
ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the estimated sources and uses of funds in
connection with the development, construction, financing and commencement of
commercial operations of the Project, including the issuance of the Bonds. We
cannot assure you that these estimates will correspond to the actual uses of
funds required to complete our Project. Proceeds from the sale of the Private
Bonds net of disbursements made on the Closing Date were deposited in an account
called the construction account and applied in accordance with the financing
documents. The Bondholders and some of our other senior creditors have a lien on
the construction account. See "Description of the Principal Financing
Documents--Common Agreement--Deposit and Disbursement--Construction Account."
<TABLE>
<CAPTION>
(IN
SOURCES OF FUNDS: THOUSANDS)
- ------------------------------------------------------------------------------- -------------
<S> <C>
7.164% Series A Senior Secured Bonds due January 15, 2014...................... $ 150,000
8.160% Series B Senior Secured Bonds due July 15, 2025......................... 176,000
Equity Investment(1)........................................................... 54,000
-------------
Total Sources.............................................................. $ 380,000
-------------
-------------
USES OF FUNDS:
Repayment of Indebtedness (as of May 13, 1999)................................. $ 136,600
Engineering, Procurement, Construction......................................... 144,281
Start-up costs and spare parts(2).............................................. 5,273
Contractor's Fee............................................................... 1,944
Construction Management(3)..................................................... 1,419
Development and Financing Fees(4).............................................. 5,392
Gas, Water and Electrical Facilities(5)........................................ 24,703
Electrical Interconnections.................................................... 15,458
Debt Service Reserve........................................................... 12,551
Contingency(6)................................................................. 10,649
Construction Interest Expense(7)............................................... 25,971
Interest Income(8)............................................................. (4,240)
-------------
Total uses................................................................. $ 380,000
-------------
-------------
</TABLE>
- ------------------------
(1) See "Description of the Principal Financing Documents--Equity
Arrangements--Equity Commitment Obligation."
(2) Includes the $390,000 fee to be paid to the Operator under the operation and
maintenance agreement for services provided prior to the commencement of
commercial operation.
(3) Includes the $333,333 fee to be paid to the Manager under the management
services agreement for services provided prior to June 1, 2000.
(4) Includes a development fee to be paid to one of our affiliates, as described
in the definition of "Project Costs."
(5) Includes the costs of the Infrastructure.
(6) If we transfer the Infrastructure to the County, any amounts that the County
pays us in connection with this transfer, plus the amounts that we have
budgeted for the construction of the Infrastructure but have not yet spent,
will become additional contingency funds. We could use those additional
contingency funds if we experience any cost overruns, or, if we do not use
those additional contingency funds to complete the Project, we could
distribute the remaining funds to our limited partner to the extent that we
satisfy the distribution conditions contained in the financing documents.
(7) Reflects an interest rate of 7.164% for the Series C Bonds, and an interest
rate of 8.160% for the Series D Bonds.
(8) Reflects an assumed annual interest rate of 5.50% on funds in interest
bearing accounts.
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<PAGE>
CAPITALIZATION
The following tables set forth our capitalization as of December 31, 1998
and March 31, 1999 and as adjusted to give effect to our issuance of the Bonds.
The Private Bonds surrendered in exchange for the Exchange Bonds will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Exchange Bonds
will not result in any increase or decrease in the indebtedness of the Issuers.
As such no effect has been given to the exchange offer in the tables set forth
below. In addition, we have not adjusted the following tables to reflect (1)
obligations of our parent to make equity contributions to us in an aggregate
amount of $54,000,000 after we issue the Bonds and spend all of the Bond
proceeds or (2) our contingent obligations to reimburse draws under the Virginia
Power letters of credit, in an aggregate face amount of $11,320,000.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Existing loan facility................................................................. $ 78,000 $ 0
Series A Senior Secured Bonds due 2014................................................. 0 150,000
Series B Senior Secured Bonds due 2025................................................. 0 176,000
---------- -----------
Total long-term debt................................................................. $ 78,000 $ 326,000
PARTNERS' CAPITAL:
Capital contributions.................................................................. 1 1
Net income accumulated during the development stage(1)................................. 4,930 4,930
Distributions to partners(1)........................................................... (5,374) (5,374)
---------- -----------
Total partners' capital (deficit).................................................... (443) (443)
---------- -----------
Total long-term debt and partners' capital (deficit)............................... $ 77,557 $ 325,557
---------- -----------
---------- -----------
<CAPTION>
MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
LONG-TERM DEBT:
Existing loan facility................................................................. $ 120,900 0
Series A Senior Secured Bonds due 2014................................................. 0 150,000
Series B Senior Secured Bonds due 2025................................................. 0 176,000
---------- -----------
Total long-term debt................................................................. $ 120,900 $ 326,000
PARTNERS' CAPITAL (DEFICIT):
Capital contributions.................................................................. 1 1
Net income accumulated during the development stage(1)................................. 4,847 4,847
Distributions to partners(1)........................................................... (5,374) (5,374)
---------- -----------
Total partners' capital (deficit).................................................... (526) (526)
---------- -----------
Total long-term debt and partners' capital (deficit)............................... $ 120,374 $ 325,474
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Income derived principally from a payment made to us by a potential power
purchaser upon the expiration of an option that it had to cause us to sell
power to it. Distributions of this income were made in 1996 and 1997.
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SELECTED FINANCIAL DATA
The following selected financial data has been taken from the financial
statements of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition" and the financial
statements and related notes included herein.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION FOR THE PERIOD
FOR THE THREE FOR THE YEAR ENDED (FEBRUARY 7, FROM INCEPTION
MONTHS ENDED DECEMBER 31, 1996) (FEBRUARY 7,
MARCH 31, ------------------------- TO DECEMBER 31, 1996)
1999 1998 1997 1996 TO MARCH 31, 1999
------------- ----------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
LSP Energy Limited Partnership
Revenues............................... $ -- $ -- $ 5,224,084 $ 158,205 $ 5,382,289
Project development expenses........... 82,885 443,725 4,205 3,744 534,559
------------- ----------- ------------ -------- -----------------
Net income (loss)...................... $ (82,885) $ (443,725) $ 5,219,879 $ 154,461 $ 4,847,730
------------- ----------- ------------ -------- -----------------
------------- ----------- ------------ -------- -----------------
LSP Batesville Funding Corporation:
Revenues............................... $ -- $ -- N/A N/A $ --
Project development expenses........... -- -- N/A N/A --
------------- ----------- ------------ -------- -----------------
Net income (loss)...................... $ -- $ -- N/A N/A $ --
------------- ----------- ------------ -------- -----------------
------------- ----------- ------------ -------- -----------------
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1999 1998 1997 1996 1995 1994
-------------- ------------- --------- ------------ --------- ---------
LSP Energy Limited Partnership
Current assets.................................... $ 851,477 $ 140,933 $ -- $ -- N/A N/A
Current liabilities............................... 14,024,936 13,662,781 -- -- N/A N/A
Investments....................................... -- -- -- 3,544,461 N/A N/A
Property and construction in progress............. 128,901,277 83,429,694 -- -- N/A N/A
Deferred revenue.................................. -- -- -- 3,500,000 N/A N/A
Total assets...................................... 139,518,347 94,102,400 -- 3,544,461 N/A N/A
Contract retainage................................ 5,119,021 2,882,344 -- -- N/A N/A
Long-term debt.................................... 120,900,000 78,000,000 -- -- N/A N/A
Partners' capital (deficit)....................... $ (525,610) $ (442,725) $ -- $ 44,461 N/A N/A
LSP Batesville Funding Corporation
Current assets.................................... $ 1,000 $ 1,000 N/A N/A N/A N/A
Current liabilities............................... -- -- N/A N/A N/A N/A
Total assets...................................... 1,000 1,000 N/A N/A N/A N/A
Stockholder's equity.............................. $ 1,000 $ 1,000 N/A N/A N/A N/A
RATIO OF EARNINGS TO FIXED CHARGES(1)
</TABLE>
- ------------------------
(1) Earnings were insufficient to cover fixed charges by $2,585,885 and
$2,258,725 during the three months ended March 31, 1999 and for the year
ended December 31, 1998, respectively. Capitalized interest including
amortization of debt issuance and financing costs was $2,503,000 ($1,688,000
before amortization) and $1,815,000 ($1,581,000 before amortization) for the
three months ended March 31, 1999 and for the year ended December 31, 1998.
For all periods prior to 1998 the Partnership incurred no fixed charges.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
GENERAL
Since our formation in 1996, we have been developing and constructing the
Facility. The Facility has not yet generated any operating revenues. Revenues in
1997 primarily represent a $5,000,000 option payment received by us under an
option purchase agreement entered into in 1996 with a third party. Under the
terms of the option purchase agreement, the third party had the option to
purchase 750 megawatts of capacity and dispatchable energy for a defined term
from the Facility. Effective November 1, 1997, the option purchase agreement
expired unexercised. We have no continuing financial commitments under the
option purchase agreement.
LIQUIDITY AND CAPITAL RESOURCES
We expect that the total cost of developing, constructing and financing our
Project will be approximately $380,000,000. Prior to the issuance of the Private
Bonds, we funded these costs with the proceeds of our loan facility. We repaid
this loan of $136,600,000 in full on May 21, 1999 with a portion of the net
proceeds of the Private Bonds. As of June 30, 1999, we had spent about
$195,800,000 on the Project. We will use the rest of the net proceeds of the
Private Bonds to pay a portion of our remaining costs of completing the Project.
See "Use of Proceeds" and "Estimated Sources and Uses of Funds."
We are considering funding certain of the development, design, engineering
and construction costs relating to the Infrastructure through the proceeds of
general obligation bonds issued by the State of Mississippi. If this occurs, we
would reallocate the costs that we have allocated to the Infrastructure to our
contingency fund. We describe the use of these funds in more detail under the
caption "Estimated Sources and Uses of Funds." Although we, the State of
Mississippi, Panola County, and the other relevant governmental entities have
not yet finalized the details of this financing, we currently expect that we
would transfer the construction and ownership of the Infrastructure to Panola
County in order to obtain this financing. The holders of the Mississippi general
obligation bonds will not have a lien on the infrastructure or any construction
contracts relating thereto and will not have a meaningful lien on any of the
agreements which we enter into with any Mississippi governmental entity. We
would have the responsibility to operate and maintain, or to make arrangements
for the operation and maintenance of, the Infrastructure.
If we transfer the construction and ownership of the Infrastructure to the
County, we will, instead of making the payments to the Infrastructure
contractors ourselves, fund an account in an amount equal to the total contract
price under each of the Infrastructure construction contracts less amounts that
we spent for Infrastructure construction prior to April 12, 1999 and less
amounts that we advance for the payment of Infrastructure construction costs
from April 12, 1999 until we transfer the Infrastructure. For the period from
April 13, 1999 through June 30, 1999 we have spent about $4,996,000 on
Infrastructure construction costs. Panola County will be able to use the amounts
in this account to pay Infrastructure construction costs until it finances the
Infrastructure construction. Any amounts remaining in the account after Panola
County finances the Infrastructure should be returned to us.
The rest of our Project costs will be funded with the $54,000,000 of equity
contributions that we will receive from Holding from time to time after we have
spent all of the proceeds of the Private Bonds. Holding's obligation to
contribute equity to us under its equity contribution agreement is supported by
a letter of credit naming Cogentrix as the account party. This letter of credit
has been issued by a bank rated at least A2 by Moody's Investors Service, Inc.
and at least A by Standard & Poor's Rating Group. See "Description of the
Principal Financing Documents--Equity Arrangements."
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<PAGE>
We have entered into two long-term power purchase agreements for the sale of
the capacity of and electric energy from our Facility. One of these agreements
is with Virginia Power and covers the sale of the capacity of and electric
energy from two of our Units for an initial term of 13 years, which Virginia
Power can extend at its option for an additional 12 years. The other agreement
is with Aquila/UtiliCorp and covers the sale of the capacity of and electric
energy from our other Unit for an initial term of 15 years and seven months,
which Aquila/UtiliCorp can extend at its option for an additional five years.
These agreements require Virginia Power and Aquila/Utilicorp to provide us with
the natural gas which we will use to fuel the Units that are dedicated to the
applicable purchaser. In addition, both of these power purchase agreements
require the applicable purchaser to pay us (1) a monthly "reservation" payment
based on the tested capacity and availability of the Units dedicated to them,
(2) an "energy" payment based on the amount of energy that we actually produce
for them and deliver to the
interconnection point between our Facility and the utility transmission systems
and (3) other payments, including payments based upon the fuel efficiency of our
Units and the number of times we start up our Units each year. Both of these
power purchase agreements allow the power purchasers to dispatch the Units we
have dedicated to them, meaning that the power purchasers have the right to
control how much electricity they want their dedicated Units to produce,
However, even if we are not dispatched at all by Virginia Power and
Aquila/UtiliCorp, they will still have to pay us the reservation payment as
provided under the power purchase agreements.
We are required to provide security to support our obligations under the
Virginia Power power purchase agreement. We have satisfied this requirement by
providing letters of credit for the benefit of Virginia Power. The Virginia
Power letters of credit have an initial face amount of $5,660,000. This amount
will increase to a maximum of $11,320,000 if we fail to meet certain milestones
under the Virginia Power power purchase agreement. Prior to the commercial
operation date for the Virginia Power dedicated Units, the Virginia Power
letters of credit will not be replenished if they are drawn upon. However, we
will be required to reimburse the issuing bank if these letters of credit are
drawn. Upon the commercial operation date for the Virginia Power dedicated
Units, the Virginia Power letters of credit will be adjusted to a face amount of
$5,660,000 and will be subject to replenishment if drawn. Again, we will be
required to reimburse the issuing bank if these letters of credit are drawn. See
"Description of the Principal Financing Documents--Virginia Power L/C
Agreement." We also may be required to provide security to support our
obligations under the Aquila/UtiliCorp power purchase agreement. This security
would be in the form of cash, a surety bond, or a letter of credit or guarantee
from an investment grade entity. We describe the circumstances in which we would
be required to provide this security and the amount of this security under the
caption "Description of the Principal Project Documents--Aquila/UtiliCorp Power
Purchase Agreement--Security."
As with any power generation facility, the construction of the Project
involves certain risks, including shortages of labor, work stoppages, labor
disputes, weather interference, engineering, environmental permitting and
unanticipated cost increases for reasons beyond our and our construction
contractors' control. The occurrence of one or more of these events could
significantly increase the expenses of the Project, thereby impacting our
ability to make payments of principal and interest on the Exchange Bonds. Not
all risks are insured and the proceeds from such insurance applicable to covered
risks may not be adequate to cover the Project's increased expenses.
52
<PAGE>
BUSINESS
OUR COMPANY
THE SCOPE OF OUR BUSINESS. We were formed in 1996 to develop, construct,
own, operate and finance the Project. Our Project is already under construction.
Though we may expand the Facility after the offering of the Bonds by
constructing additional electric generation capacity at the Facility site, we do
not intend to engage in any business activities other than those related to our
Project. Because none of our Facility's Units is operational yet, we have not
yet generated any operating revenues.
OUR INDIRECT OWNERS. We are indirectly owned primarily by LS Power, LLC and
Cogentrix Energy, Inc. LS Power is a privately owned independent power producer
that develops, constructs, owns and operates independent power projects in the
United States. LS Power and its affiliates have completed the financing of more
than 2,000 MW of electric generating capacity, including our Facility, and have
approximately 1,400 MW of additional capacity in advanced development. Cogentrix
is an independent power producer that acquires, develops, owns and operates
electric generating plants, principally in the United States. Cogentrix has net
ownership interests in 26 facilities comprising approximately 2,110 MW,
including our Facility.
OUR CO-ISSUER. Our sister company, LSP Batesville Funding Corporation, will
be the co-issuer of the Bonds. The Funding Corporation was formed in 1998 for
the sole purpose of issuing these Bonds and incurring other debt to finance the
Project. The Funding Corporation has nominal assets and will not conduct any
operations.
WE HAVE NO EMPLOYEES. Currently, neither we nor the Funding Corporation has
any employees. We will be dependent upon a number of third parties for the
provision of substantially all the services that we require. See "Risk
Factors--Construction and Operating Risks."
OUR PRINCIPAL EXECUTIVE OFFICE. Our principal executive offices are located
at Two Tower Center, 20th Floor, East Brunswick, New Jersey 08816. Our telephone
number is (732) 249-6750.
OUR PROJECT
OUR FACILITY. Our Facility will be an approximately 837 MW natural
gas-fired, three combined cycle unit electric generation facility. Natural
gas-fired facilities are those which use natural gas as a fuel source. Combined
cycle facilities are those which use the exhaust heat produced by the combustion
turbine to generate steam, which is in turn used to make electricity in a steam
turbine. Each of the three combined-cycle Units of our facility will therefore
contain three main pieces of equipment: (1) a gas-fired combustion turbine; (2)
a heat recovery steam generator; and (3) a steam turbine, plus certain auxiliary
equipment.
When it is complete, our Facility will contain the following major
equipment, systems and facilities:
- three Westinghouse 501F combustion turbines equipped with dry low NOx
combustors;
- three Nooter/Erikson heat recovery steam generators, each equipped with
duct burners;
- three Asea Brown Boveri steam turbines;
- air quality control and monitoring systems; and
- various associated equipment and facilities, including water treatment
facilities and administration and maintenance buildings.
R.W. Beck discusses the major technical components of the Facility in its
report, which is included in Annex B to this prospectus. We encourage you to
read the R.W. Beck report in its entirety.
53
<PAGE>
SOME OF OUR PRINCIPAL PROJECT DOCUMENTS. We have entered into a
construction contract with a joint venture between Black & Veatch Construction,
Inc. and H.B. Zachry Company. This Contractor has agreed to design, engineer,
procure equipment for, construct, test and start-up our Facility, other than the
electrical substation and transmission lines. We have agreed to pay the
Contractor a fixed price of approximately $240,000,000 for doing this work in
accordance with this construction contract. We gave the Contractor a notice to
proceed with the work on the Facility on August 28, 1998. Since that time, we
have agreed on change orders under this construction contract which have
increased the contract price by about $64,000. We are also considering other
change orders that would increase the contract price by approximately
$2,500,000. These change orders would be covered by the contingency funds
provided for in our budget. As of June 30, 1999, (1) the Contractor reported to
us that its portion of the Facility was about 83% complete and (2) the
Contractor had invoiced us for about 66% of the fixed price of the construction
contract. Based on the Contractor's most recent progress report, we currently
expect that the Contractor's work on the Facility will be completed during the
second quarter of 2000.
We have also entered into several other construction contracts with other
contractors for the design, engineering, procurement, testing and start-up of
our substation and transmission lines and the Infrastructure. In particular, we
have entered into an engineering services contract with Black & Veatch, LLP to
develop the conceptual design and specifications for the substation, the
transmission lines and the Infrastructure in a manner that is compatible with
the portion of the Facility that the Contractor is constructing. Although we
believe that these facilities will be capable of properly interconnecting with
the portion of the Facility that the Contractor is constructing, R.W. Beck has
not reviewed the Infrastructure, electrical substation or transmission line
construction contracts for purposes of determining whether this will be the
case.
In addition, we have entered into an operation and maintenance agreement
with the Operator, which is a subsidiary of Cogentrix. This agreement has a term
of 27 years. Under this agreement, we will pay the Operator its reimbursable
expenses plus a fee of $41,667 per month, which escalates annually, to perform
customary operations and maintenance services for most of our Project. We will
agree to pay this fee to the Operator only if we have allocated the required
funds to our debt service and reserve accounts in accordance with the financing
documents. We will also pay the Operator its reimbursable expenses plus a fee of
$390,000, payable in ten monthly installments, for services performed by the
Operator prior to the date on which our Units begin commercial operation.
To obtain water for our Facility, we have entered into an agreement with the
United States government that will allow us to withdraw water from Enid Lake. In
addition, we have obtained the permits that will allow us to dispose of the
Facility's wastewater into the Little Tallahatchie River.
To connect our Facility to interstate gas pipelines, we have entered into
separate agreements with Tennessee Gas and ANR that allow us to connect the
lateral gas pipeline that we or Panola County will construct to the Tennessee
Gas and ANR pipelines. Tennessee Gas and ANR have agreed to construct, at our
expense, the interconnections between the lateral gas pipeline and each of their
respective pipelines. We expect each of those interconnections to be capable of
transporting the Facility's entire fuel requirement.
To connect our Facility to transmission lines so that we can transmit the
electricity that we produce to our power purchasers, we have entered into
separate interconnection agreements with each of the Tennessee Valley Authority
and Entergy Mississippi, Inc., each of which has an initial term of 35 years.
TVA can terminate the TVA interconnection agreement if we fail to agree upon
amendments that they are allowed to propose in order to make our interconnection
agreement consistent with agreements that they have with facilities similar to
our Facility. These agreements require us to construct and install a portion of
the equipment that will be used to interconnect our Facility with the
transmission grids, which the Contractor and some of our other contractors are
in the process of doing, and require TVA
54
<PAGE>
and Entergy to construct the remainder of that equipment, at our expense. We
expect each of these interconnections to be capable of accepting the entire
electrical output of our Facility under most operating conditions. These
agreements allow TVA and Entergy to disconnect or curtail our Facility under
certain circumstances.
Although our power purchasers are responsible for the transmission of our
electricity from our interconnection point across the TVA and Entergy
transmission grids, we have agreed with TVA and Entergy to pay for the costs of
upgrading their transmission systems so that each transmission system can handle
the entire electrical output of our Facility under most operating conditions.
These upgrades will be owned by TVA and Entergy. In exchange, TVA and Entergy
have agreed to credit us or our power purchasers an amount equal to the lesser
of (1) the revenues that they receive from our power purchasers or their
customers for transmission services provided for the delivery of energy from our
Facility and (2) the total costs paid by us for the system upgrades. Our
recovery of these credits is dependent upon the availability of transmission
service from TVA and Entergy for, and the use of this transmission service by,
our power purchasers and their customers.
Finally, we have entered into two long-term power purchase agreements for
the sale of the capacity of and electric energy from our Facility. One of those
agreements is with Virginia Power and covers the sale of the capacity of and
electric energy from two of our Units for an initial term of 13 years, which
Virginia Power can extend at its option for an additional 12 years. The other
agreement is with Aquila/UtiliCorp and covers the sale of the capacity of and
electric energy from our other Unit for an initial term of 15 years and seven
months, which Aquila/UtiliCorp can extend at its option for an additional five
years. These agreements require Virginia Power and Aquila/UtiliCorp to provide
us with the natural gas which we will use to fuel the Units that are dedicated
to the applicable purchaser. In addition, both of these power purchase
agreements require the applicable purchaser to pay us (1) a monthly
"reservation" payment based on the tested capacity and availability of the Units
dedicated to them, (2) an "energy" payment based on the amount of energy that we
actually produce for them and deliver to the interconnection point between our
Facility and the utility transmission systems described above and (3) other
payments, including payments based upon the fuel efficiency of our Units and the
number of times we start up our Units each year. Both of these power purchase
agreements allow the power purchasers to dispatch the Units we have dedicated to
them, meaning that the power purchasers have the right to control how much
electricity they want their dedicated Units to produce. However, even if we are
not dispatched at all by Virginia Power and Aquila/UtiliCorp, they will still
have to pay us a reservation payment as provided under the power purchase
agreements.
The contracts mentioned above are some of our key project documents. We have
entered into several other important project documents as well. We describe the
documents mentioned above, as well as our other important project documents, in
greater detail under the caption "Description of the Principal Project
Documents." We encourage you to read that section in its entirety.
THE INFRASTRUCTURE. We are considering funding certain of the development,
design, engineering and construction costs relating to the Infrastructure
through the proceeds of general obligation bonds issued by the State of
Mississippi. If this occurs, we would reallocate the costs that we have
allocated to the Infrastructure to our contingency fund. We describe the use of
these funds in more detail under the caption "Estimated Sources and Uses of
Funds." Although we, the State of Mississippi, Panola County, and the other
relevant governmental entities have not yet finalized the details of this
financing, we currently expect that we would transfer the construction and
ownership of the Infrastructure to Panola County in order to obtain this
financing. The holders of the Mississippi general obligation bonds will not have
a lien on the Infrastructure or any construction contracts relating thereto and
will not have a meaningful lien on any of the agreements which we enter into
with any Mississippi governmental entity. We would have the responsibility to
operate and maintain, or to make arrangements for the operation and maintenance
of, the Infrastructure. Although we can give you no assurances as to the final
details,
55
<PAGE>
we currently expect that the financing and transfer arrangements are likely to
take the form described in the following paragraphs.
We expect to enter into four agreements with the Mississippi governmental
entities. Under an "Inducement Agreement," the State of Mississippi would
promise to issue general obligations bonds to finance the Infrastructure, Panola
County (and ultimately the IDA) would assume ownership of the Infrastructure,
and we would promise to operate and maintain both our Facility and the
Infrastructure. At the time we enter into the Inducement Agreement, we expect
that we will transfer to Panola County the construction contracts relating to
the Infrastructure and our title to the Infrastructure already completed or
under construction, and we will grant construction easements to Panola County to
give Panola County and its contractors access to the Infrastructure sites to
complete the construction. We will most likely continue to pay the costs of
constructing the Infrastructure until the State of Mississippi issues general
obligation bonds to finance the Infrastructure. At that point, the County will
most likely pay the costs that we have incurred for certain development and
easement acquisition activities, and for the construction of the Infrastructure
from April 12, 1999 until the general obligation bonds are issued. At that point
we would also transfer certain permanent easements and real estate rights
relating to the Infrastructure sites to Panola County. If the State never issues
the general obligation bonds or never applies the proceeds to the construction
of the Infrastructure, then we expect that we will be able to require the County
to transfer the Infrastructure and the related construction contracts back to
us.
However, assuming that the State does issue the general obligation bonds and
applies the proceeds to the Infrastructure, then Panola County will complete the
construction of and own the Infrastructure. We have designed and engineered, and
entered into construction contracts for, the Infrastructure. We describe these
documents under the caption "Description of the Principal Project Documents" and
we encourage you to read that section in its entirety. Nevertheless, once Panola
County assumes the responsibility for the construction of the Infrastructure, we
would no longer be able to directly control the completion of the
Infrastructure, we would no longer have approval rights over change orders
relating to the Infrastructure, we would only have the right to recommend the
rejection of non-conforming Infrastructure work and we would no longer be
entitled to receive any liquidated damages payable by the Infrastructure
contractors. In addition, we would still be responsible for any cost overruns
relating to the Infrastructure.
Under the Inducement Agreement, we will promise to maintain the Facility and
to keep it capable of being operated other than during periods when the Facility
is not available because of maintenance or repair or for reasons beyond our
control and to perform our obligations under the other Infrastructure Financing
Documents. In the event we fail to do so, we would be responsible for paying to
the State an amount equal to (1) the outstanding principal amount of the general
obligation bonds times a fraction the numerator of which is the number of months
remaining in the term of these bonds and the denominator of which is the
original number of months in the term of these bonds plus (2) accrued interest
on that principal amount plus (3) the costs of redeeming these bonds.
We also expect to enter into agreements with the County and the IDA that
will allow us to use the Infrastructure. We expect to enter into one agreement
with respect to the natural gas lateral pipeline and one with respect to the
water supply and wastewater discharge systems. We expect each of these
agreements to be in the form of a lease. In return for our use of the
Infrastructure, we would promise to operate and maintain, or arrange for the
operation and maintenance of, the Infrastructure and to pay for all operation
and maintenance expenses. We currently expect that the operation and maintenance
of the natural gas lateral pipeline will be performed by the Operator or another
experienced gas pipeline operator, and that operation and maintenance of the
water supply and wastewater discharge systems will be performed by the Operator.
We also currently expect that the City of Batesville, Mississippi will be an
additional user of the capacity of the natural gas lateral pipeline which is in
excess of the capacity required to operate our Facility. We currently expect
that there may be additional users in the future of the water supply and
wastewater discharge systems. In the case of
56
<PAGE>
any such additional user of the water infrastructure, we expect to have approval
rights over the terms and conditions (including cost sharing, indemnification
and any restrictions resulting from regulatory limitations) pursuant to which
such additional users will be provided access to use the water infrastructure.
Finally, in consideration for our use of the Infrastructure, we expect to
enter into an agreement with and would promise to pay Panola Partnership, Inc.
(a County governmental entity) a yearly payment equal to $300,000, which
escalates annually, so long as the Inducement Agreement and the use agreements
described above remain in effect and are not terminated, other than as a result
of a default by us.
OUR PROJECT COSTS AND OUR LIQUIDITY AND CAPITAL RESOURCES. We expect that
the total cost of developing, constructing and financing our Project will be
approximately $380,000,000. Prior to the issuance of the Private Bonds, we
funded these costs with the proceeds of our loan facility. We repaid this loan
in full on May 21, 1999 with a portion of the net proceeds of the Bonds. As of
June 30, 1999, we had spent about $195,800,000 on the Project. We will use the
rest of the net proceeds of the Bonds to pay a portion of our remaining costs of
completing the Project. See "Use of Proceeds" and "Estimated Sources and Uses of
Funds."
If we transfer the construction and ownership of the Infrastructure to the
County, we will, instead of making the payments to the Infrastructure
contractors ourselves, fund an account in an amount equal to the total contract
price under each of the Infrastructure construction contracts less amounts that
we spent for Infrastructure construction prior to April 12, 1999 and less
amounts that we advance for the payment of Infrastructure construction costs
from April 12, 1999 until we transfer the Infrastructure. The County will be
able to use the amounts in this account to pay Infrastructure construction costs
until it finances the Infrastructure construction. The County will probably
finance the Infrastructure with the proceeds of general obligation bonds issued
by the State of Mississippi. Any amounts remaining in the account after the
County finances the Infrastructure should be returned to us.
The rest of our Project costs will be funded with the $54,000,000 of equity
contributions that we will receive from Holding from time to time after we have
spent all of the proceeds of the Private Bonds. Holding's obligation to
contribute equity to us under its equity contribution agreement is supported by
a letter of credit naming Cogentrix as the account party. This letter of credit
has been issued by a bank rated at least A2 by Moody's Investors Service, Inc.
and at least A by Standard & Poor's Ratings Group. See "Description of the
Principal Financing Documents--Equity Arrangements."
We are required to provide security to support our obligations under the
Virginia Power power purchase agreement. We have satisfied this requirement by
providing letters of credit for the benefit of Virginia Power. The Virginia
Power letters of credit have an initial face amount of $5,660,000. This amount
will increase to a maximum of $11,320,000 if we fail to meet certain milestones
under the Virginia Power power purchase agreement. Prior to the commercial
operation date for the Virginia Power dedicated Units, the Virginia Power
letters of credit will not be replenished if they are drawn upon. However, we
will be required to reimburse the issuing bank if these letters of credit are
drawn. Upon the commercial operation date for the Virginia Power dedicated
Units, the Virginia Power letters of credit will be adjusted to a face amount of
$5,660,000 and will be subject to replenishment if drawn. Again, we will be
required to reimburse the issuing bank if these letters of credit are drawn. See
"Description of the Principal Financing Documents--Virginia Power L/C
Agreement." We also may be required to provide security to support our
obligations under the Aquila/UtiliCorp power purchase agreement. This security
would be in the form of cash, a surety bond, or a letter of credit or guarantee
from an investment grade entity. We describe the circumstances in which we would
be required to provide this security and the amount of this security under the
caption "Description of the Principal Project Documents--Aquila/UtiliCorp Power
Purchase Agreement Security."
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REGULATION. We are subject to various federal, state and local laws and
regulations pertaining to power generation, environmental protection, employee
safety and health and other aspects of our business. We are certified as an
exempt wholesale generator, have been authorized to sell power at market based
rates and have been exempted from certain FERC requirements. As a result, we are
exempt from certain regulations that we would otherwise be subject to under the
Federal Power Act, the Public Utility Holding Company Act of 1935 and various
state laws. R.W. Beck has concluded that we have obtained the key permits and
approvals which are currently necessary to construct and test the Facility. R.W.
Beck has evaluated the additional permits and approvals that we will be required
to obtain prior to beginning to operate our Facility and is not aware of any
technical circumstances that would prevent the issuance of these remaining
permits and approvals. We are not aware of any other circumstances that would
prevent the issuance of these remaining permits and approvals. See "Risk
Factors--Regulatory Risks" and "Annex B--Independent Engineer's Report--Status
of Permits and Approvals."
COMPETITION. The Energy Policy Act of 1992 laid the groundwork for a
competitive wholesale market for electricity. Among other things, the Energy
Policy Act expanded the FERC's authority to order electric utilities to
transmit, or "wheel," third-party electricity over their transmission lines. In
addition, in 1996 the FERC issued Order 888 which requires all electric
utilities to file tariffs providing non-discriminatory, open access wholesale
wheeling service on their transmission systems. This allows qualifying
facilities, power marketers and exempt wholesale generators, a new category of
generating entity created by the Energy Policy Act, to more effectively compete
in the wholesale market.
While acting as a significant catalyst for wholesale competition, the Energy
Policy Act did not preempt state authority to regulate retail electric service.
Presently, in Mississippi and in most other states, competition for retail
customers is limited by statutes or regulations granting existing electric
utilities exclusive retail franchises and service territories. Where it exists,
retail competition arises primarily from the ability of certain business
customers to relocate among utility service territories, to substitute other
energy sources for electric power or to generate their own electricity. The
advisability of retail deregulation has been the subject of intense debate in
federal and state forums, both legislative and regulatory, since the passage of
the Energy Policy Act.
At this time we cannot predict how changing industry conditions may affect
our future operation of the Facility. However, because we have long-term
contracts to sell electric generating capacity from the Facility to Virginia
Power and Aquila/UtiliCorp, we do not expect competitive forces to have a
significant effect on our business during the terms of these contracts. After
the termination of these power purchase agreements, we may be subject to market
competition for the sale of all of the electric generating capacity and
electrical output of our Facility.
We are an exempt wholesale generator under federal law, and our Facility is
an eligible facility. As such, we are permitted to sell capacity and electricity
in the wholesale markets, but not in the retail markets. Accordingly, after the
termination of the Virginia Power and Aquila/UtiliCorp power purchase
agreements, we may sell our capacity and electrical output in the wholesale
markets or to power marketers (who could be our affiliates) who can in turn make
retail sales.
INSURANCE. We currently maintain and intend to continue to maintain a
comprehensive insurance program underwritten by recognized insurance companies
licensed to do business in Mississippi. This insurance program includes general
liability, automobile liability, workers' compensation, employer's liability,
builder's risk, all-risk property, business interruption, environmental
impairment liability, cargo liability and aircraft liability insurance. We
believe that the limits and deductibles for these insurance coverages are
comparable to those carried by comparable facilities of similar size.
LEGAL PROCEEDINGS. Other than legal proceedings involving our application
for various governmental approvals required to construct and operate the
Facility and the Infrastructure, which are described in the Independent
Engineer's Report, neither we nor the Funding Corporation is a party to any
legal proceedings. See "Annex B--Independent Engineer's Report--Status of
Permits and Approvals."
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<PAGE>
OWNERSHIP AND MANAGEMENT
OWNERSHIP
Holding holds all of our limited partnership interests and all of the shares
of capital stock of the Funding Corporation. LSP Energy, Inc., a wholly-owned
subsidiary of Holding, holds all of our general partnership interests. Holding
is owned by Granite Power Partners II, L.P. and Cogentrix/Batesville, LLC.
Granite Power Partners II, L.P. is a limited partnership, and its partners are
LS Power, LLC, which has a 21% general partnership interest and a 54% limited
partnership interest, Chase Manhattan Capital, L.P., which has a 12.5% limited
partnership interest, and Cogen Grantor Trust UA (Joseph Cogen, trustee), which
has a 12.5% limited partnership interest. Cogentrix/Batesville, LLC is
indirectly wholly owned by Cogentrix Energy, Inc. LS Power, LLC owns 100% of the
membership interest in LS Power Management, LLC, the non-member manager of
Holding and the Manager who is responsible for performing certain administrative
and management functions with respect to the Project in accordance with our
management services agreement.
The following tables set forth certain information about the beneficial
ownership of the Partnership and the Funding Corporation.
LSP ENERGY LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NAME AND ADDRESS OF BENEFICIAL OWNER TYPE OF OWNERSHIP INTEREST OWNERSHIP INTEREST
- -------------------------------------------------------- ------------------------------------ -----------------------
<S> <C> <C>
LSP ENERGY, INC......................................... General Partnership Interest 1%
c/o LS Power
Management, LLC
Two Tower Center, 20th Floor
East Brunswick, NJ 08816
LSP BATESVILLE HOLDING, LLC............................. Limited Partnership Interest 99%
c/o LS Power Management, LLC
Two Tower Center, 20th Floor
East Brunswick, NJ 08816
</TABLE>
LSP BATESVILLE FUNDING CORPORATION
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER TYPE OF SECURITY PERCENT OF CLASS
- ---------------------------------------------------------- ------------------------------------ -------------------
<S> <C> <C>
LSP BATESVILLE HOLDING, LLC............................... Common Stock 100%
c/o LS Power Management, LLC
Two Tower Center, 20th Floor
East Brunswick, NJ 08816
</TABLE>
ADJUSTMENTS TO THE OWNERSHIP OF HOLDING
Granite Power Partners II, L.P. and Cogentrix/Batesville, LLC have agreed to
recalculate their respective ownership interests in Holding upon the occurrence
of certain types of events, including the issuance of the Private Bonds. The
recalculation with respect to the Private Bonds has been made and resulted in
the percentages set forth in the chart on page 2.
MANAGEMENT
OUR MANAGEMENT. All of our management functions are the responsibility of
LSP Energy, Inc., our general partner. We have delegated some management
functions to the Manager under the
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<PAGE>
management services agreement. See "Description of the Principal Project
Documents--Management Services Agreement." The names and positions of the
executive officers and directors of LSP Energy, Inc. are shown below. Directors
are elected annually and each elected director holds office until a successor is
elected. Officers are chosen from time to time by vote of the board of
directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Mikhail Segal........................................ 48 President and Director
Clarence J. Heller................................... 43 Executive Vice President and Assistant Secretary
Frank E. Hardenbergh................................. 55 Senior Vice President, General Counsel, Secretary and
Director
Robert Brooks........................................ 52 Senior Vice President
Michael P. Witzing................................... 35 Vice President
Paul G. Thessen...................................... 31 Assistant Vice President
Mark Brennan......................................... 42 Treasurer
Andrew Stidd......................................... 42 Director
</TABLE>
MIKHAIL SEGAL. Mr. Segal, president and co-founder of LS Power and its
affiliates, has more than 20 years experience in the electric utility and
independent power industry, managing project development, financing, engineering
and marketing activities. To date, Mr. Segal has taken projects totaling 2,200
MW from concept through financing. Mr. Segal has a Masters of Science degree in
Electrical Engineering from Kharkov Polytech Institute in the Ukraine.
CLARENCE J. HELLER. Mr. Heller is an Executive Vice President of LS Power
and LSP Energy and is responsible for coordinating all development activities,
including project conceptualization, contract negotiations, environmental
permitting, regulatory approvals and project financing. Mr. Heller has served in
various management and development capacities on projects totaling more than
2,000 MW. Mr. Heller is a registered Professional Engineer in the State of
Missouri, earned his Bachelor of Science degree in Electrical Engineering from
the University of Missouri-Rolla and earned a Masters Degree in Business
Administration from Washington University.
FRANK E. HARDENBERGH. Mr. Hardenbergh, the Senior Vice President, General
Counsel and Secretary of LS Power and its affiliates, is responsible for the
finance and corporate operations of LS Power and its affiliates. Mr. Hardenbergh
has more than 13 years experience in the independent power business with
concentration in project finance and project development. During this period he
has had senior business responsibilities for the development and project
financing of independent power projects totaling more than 2,000 MW. Mr.
Hardenbergh holds a Juris Doctorate and a Bachelor of Arts degree from the
University of North Carolina at Chapel Hill.
ROBERT BROOKS. Mr. Brooks, a Senior Vice President of LS Power and certain
of its affiliates, is responsible for all new business development activities,
including the development and implementation of marketing strategies. Mr. Brooks
has a diverse background in the power generation industry. He has held various
engineering and management positions in the manufacturing, project management,
sales and marketing segments of the industry. Mr. Brooks holds a Bachelor of
Science degree in Industrial Engineering from North Carolina State University
and a Masters degree in Business Administration from Winthrop University.
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<PAGE>
MICHAEL P. WITZING. Mr. Witzing is Vice President, Project Development of
LS Power and LSP Energy and is responsible for management of the development and
construction phase of LS Power's projects. Mr. Witzing has more than 12 years
experience in the power industry and has been involved in various operational,
engineering, and performance analysis activities. Mr. Witzing graduated from the
Cooper Union with Bachelor and Masters of Engineering Degrees in Mechanical
Engineering, and is a Registered Professional Engineer in the State of New York.
PAUL G. THESSEN. Mr. Thessen is an Assistant Vice President of LS Power and
of LSP Energy and is responsible for all technical and contractual development
activities. These activities include permitting, regulatory approvals, site
acquisition, transmission line right-of-way procurement, electrical and gas
utility interfaces, coordination with the design/construction contractor, fuel
supply and transportation contracts, steam sales contracts and interface with
local officials and the general community. Mr. Thessen graduated Summa Cum Laude
with a Bachelor of Science degree in Electrical Engineering from the University
of Missouri-Rolla.
MARK BRENNAN. Mr. Brennan is the Controller and Assistant Treasurer of LS
Power and the Treasurer of LSP Energy and is responsible for the accounting,
administrative and financial reporting needs of LS Power and LSP Energy. He is a
Certified Public Accountant with over eleven years of experience in public and
private accounting. Mr. Brennan holds a Bachelor of Science degree in Commerce
from Rider University (previously Rider College).
ANDREW STIDD. Mr. Stidd is a director of LSP Energy and the Funding
Corporation and has over ten years of experience in the structured finance
industry, with an emphasis on providing management services to special purpose
vehicles and the administration of commercial paper programs. Mr. Stidd
coordinated the formation of Global Securitization Services, LLC and is
responsible for the daily operations of all special purpose vehicles managed by
that firm. Mr. Stidd handles all legal and rating agency issues for that firm
and works directly with senior management of that firm's clients in addressing
structuring and operating issues that arise in connection with their asset
securitization programs. Mr. Stidd serves as an independent director for a
number of structured finance programs which securitize assets such as credit
card pools, equipment leases and trade receivables.
Global Securitization Services, LLC will receive a nominal fee in connection
with Mr. Stidd's service as a director of LSP Energy, the Funding Corporation
and certain of their affiliates. Mr. Stidd is the only director of LSP Energy or
the Funding Corporation whose services are compensated.
THE FUNDING CORPORATION'S MANAGEMENT. The names and positions of the
executive officers and Directors of the Funding Corporation are shown below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Mikhail Segal........................................ 48 President and Director
Clarence J. Heller................................... 43 Executive Vice President and Assistant Secretary
Frank E. Hardenbergh................................. 55 Senior Vice President, General Counsel, Secretary and
Director
Michael P. Witzing................................... 35 Vice President
Mark Brennan......................................... 42 Treasurer
Andrew Stidd......................................... 42 Director
</TABLE>
For biographical information on each of these directors and officers, see
"--Our management."
61
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Operator under our operations and maintenance agreement, Cogentrix
Batesville Operations, LLC, is a wholly owned subsidiary of Cogentrix. Pursuant
to our agreement with the Operator, the Operator will receive a fee of $39,000
per month for ten months for services performed prior to the date on which the
Facility begins commercial operation and a fee of $41,667 per month on and after
the date on which the Facility begins commercial operation, in each case,
adjusted annually in accordance with the gross domestic product implicit price
deflator index, which is intended to be a measure of inflation. In addition, we
will reimburse the Operator for the budgeted and approved expenses it incurs to
operate and maintain our Project. We will pay the Operator's post-commercial
operation fees only if we have allocated the required funds to our debt service
and reserve account in accordance with the financing documents. See "Description
of the Principal Project Documents-- Operation and Maintenance Agreement" and
"Description of the Principal Financing Documents-- Common Agreement--Deposit
and Disbursement of Funds."
The Manager under our management services agreement, LS Power Management,
LLC, is a wholly owned subsidiary of LS Power. As compensation for the services
that the Manager will provide us under our management services agreement, the
Manager will receive a monthly management fee of $33,333, adjusted annually in
accordance with the gross domestic product implicit price deflator index. The
fees and reimbursable expenses payable under this management services agreement
are designated as operating expenses under the financing documents and therefore
will be paid prior to the payment of principal of and interest on the Bonds. See
"Description of the Principal Project Documents-- Management Services
Agreement."
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<PAGE>
DESCRIPTION OF THE PRINCIPAL PROJECT DOCUMENTS
THE FOLLOWING IS A SUMMARY OF SELECTED PROVISIONS OF CERTAIN PRINCIPAL
DOCUMENTS RELATED TO OUR PROJECT AND SHOULD NOT BE CONSIDERED TO BE A FULL
STATEMENT OF THE TERMS AND PROVISIONS OF THOSE AGREEMENTS. ACCORDINGLY, THE
FOLLOWING SUMMARIES ARE QUALIFIED BY REFERENCE TO EACH AGREEMENT AND ARE SUBJECT
TO THE TERMS OF THE FULL TEXT OF EACH AGREEMENT. UNLESS OTHERWISE STATED, ANY
REFERENCE IN THIS PROSPECTUS TO ANY AGREEMENT WILL MEAN THE AGREEMENT DESCRIBED
AND ALL SCHEDULES, EXHIBITS AND ATTACHMENTS THERETO AS AMENDED, RESTATED,
SUPPLEMENTED OR OTHERWISE MODIFIED (INCLUDING BY ANY CONSENT REQUIRED IN
CONNECTION WITH THE FINANCING CONTEMPLATED IN THIS PROSPECTUS) AND TO BE IN
EFFECT AS OF THE CLOSING DATE. WE ENCOURAGE YOU TO READ SUCH AGREEMENTS, COPIES
OF WHICH WILL BE AVAILABLE FOR INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE PARTNERSHIP UPON WRITTEN REQUEST OF ANY POTENTIAL INVESTOR.
VIRGINIA POWER POWER PURCHASE AGREEMENT
We are party to a power purchase agreement with Virginia Electric and Power
Company ("Virginia Power"), dated as of May 18, 1998, as amended as of July 22,
1998, August 11, 1998, and August 13, 1998 (the "Virginia Power PPA"), which
provides for the sale of committed capacity and energy to be generated from two
of the Units at our Facility dedicated to Virginia Power (each a "Virginia Power
Unit" and collectively the "Virginia Power Units").
MILESTONES AND CONSEQUENCES OF DELAY
The Virginia Power PPA contains scheduled events (the "Milestones"), which
we have agreed to achieve. The Milestones which are still to be achieved are as
follows:
<TABLE>
<CAPTION>
MILESTONE MILESTONE DATE
- ----------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
1. Completion of the foundations for the combustion turbine generator and the steam turbine
generator................................................................................. [ ]
2. Delivery of the combustion turbine generator.............................................. [ ]
3. Delivery of the steam turbine generator................................................... [ ]
4. Completion of the lateral pipeline........................................................ [ ]
5. Completion of pressure testing of the heat recovery steam generator and steam blows of the
piping system and synchronization with the Entergy system and the TVA system.............. [ ]
6. Commercial operation date................................................................. [ ]
</TABLE>
Deliveries of capacity and associated net electrical output will begin on
the earlier of the commercial operation date or the Delivery Start Date. The
Delivery Start Date is defined as [ ], subject to extensions due to a force
majeure event or a delivery excuse. The commercial operation date for any
Virginia Power Unit will occur upon completion of all Milestones relating to
such Virginia Power Unit, after successful testing of such Virginia Power Unit,
and our delivery to Virginia Power of a certificate of the achievement of
commercial operation with respect to such Virginia Power Unit. We agreed not to
declare commercial operation for either Virginia Power Unit prior to
[ ].
In the event the commercial operation date for a Virginia Power Unit is
delayed beyond the Delivery Start Date, we may be responsible, at Virginia
Power's election, for replacement power during the period of delay, subject to a
maximum amount of $[ /kW] of the committed capacity of such Virginia Power
Unit. If we become so responsible for such replacement power, we will either
arrange for the delivery of replacement power during the period of delay or
direct Virginia Power to obtain replacement power during the period of delay. If
we elect to direct Virginia Power to so obtain replacement power, we will
reimburse Virginia Power for the difference between the cost of such replacement
power and the cost of capacity and energy as if it were supplied from the
relevant Virginia Power Unit. Our obligation with respect to replacement power,
whether we procure such replacement
63
<PAGE>
power ourselves or direct Virginia Power to obtain such replacement power, shall
in any case be subject to a maximum cost to us of $[ /kW] of the committed
capacity of each Virginia Power Unit and $[ ] in aggregate for both
Virginia Power Units. Virginia Power will have the right to terminate the
Virginia Power PPA if we fail to achieve the commercial operation date by
[ ], subject to extension due to delivery excuse or force majeure. In
the case of force majeure, Virginia Power will have the right to terminate the
Virginia Power PPA if the duration of such force majeure exceeds 12 months.
SECURITY
We must post completion security in the form of one or more irrevocable
letters of credit to secure our performance under the Virginia Power PPA and
cover our replacement power obligations. On August 28, 1998, we posted
completion security in the form of a letter of credit in the amount of $[ /kW]
of the committed capacity of each Virginia Power Unit, or $[ ] in the
aggregate for both Virginia Power Units. If we fail to timely achieve any
Milestone with respect to a Virginia Power Unit, and such failure may be
reasonably likely to result in a delay of our ability to timely achieve the
commercial operation date, we will be required to post additional completion
security so that the aggregate amount of completion security then posted is
equal to the estimated incremental replacement power cost for the time of the
delay in the commercial operation date, subject to a maximum total of
$[ /kW] of the committed capacity of each Virginia Power Unit, or $[ /kW]
in the aggregate for both Virginia Power Units. In the event that Virginia Power
draws upon the completion security, we will have no obligation to replenish the
completion security prior to the commercial operation date. After the commercial
operation date, any completion security posted by us in excess of $[ /kW] of
the committed capacity of each Virginia Power Unit will be surrendered to us,
and we will have the obligation to maintain security in an amount equal to
$[ /kW] of the committed capacity of each Virginia Power Unit, or
$[ ] in the aggregate for both Virginia Power Units.
COMMISSIONING AND TESTING
Prior to the commercial operation date and every year thereafter, the
contract capacity for each Virginia Power Unit will be established according to
testing procedures contained in the Virginia Power PPA. Virginia Power will
market and sell test energy for us. We will be responsible for the cost of fuel
needed to generate the test energy and will be required to pay Virginia Power a
marketing fee of $[ /MWh] of test energy sold.
TERM
The initial term of the Virginia Power PPA extends to the date [ ] years
after the Delivery Start Date. Virginia Power may extend the term of the
Virginia Power PPA for an additional [ ] years. At any point during the
extended term, Virginia Power may terminate the Virginia Power PPA upon 18
months notice.
VIRGINIA POWER OPTION TO BUY
If Virginia Power exercises its option to extend the term of the Virginia
Power PPA and does not terminate the Virginia Power PPA prior to the end of its
[ ] year, Virginia Power will have the option to purchase the
Virginia Power Units at the end of the extended term. The purchase price will be
$[ /kW] of the capacity of such Virginia Power Unit measured over a certain
period.
SALE AND PURCHASE OBLIGATIONS
We are obligated to sell, and Virginia Power is obligated to purchase, the
capacity and associated net electrical output of the Virginia Power Units. If we
provide replacement power to Virginia Power
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<PAGE>
when the Virginia Power Units are unavailable in whole or in part, in lieu of
directing Virginia Power to so obtain such replacement power, then Virginia
Power will be required to accept the replacement power we so provide. After the
commercial operation date with respect to any Virginia Power Unit, we are not
obligated but may elect to provide replacement power during any forced outage or
force majeure event affecting such Virginia Power Unit, or when such Virginia
Power Unit is otherwise unavailable for any reason. Virginia Power will make
payments for replacement power as if such power were delivered from such
Virginia Power Unit. We are restricted from selling capacity or energy from
either of the Virginia Power Units to any third party during the term of the
Virginia Power PPA. Virginia Power must make monthly payments to us including a
reservation payment, an energy payment, start-up payments and system upgrade
credits. Virginia Power's aggregate payment to us may be increased or decreased
depending on whether the Facility produces energy above or below a specified
level of fuel efficiency or "Guaranteed Heat Rate."
RESERVATION PAYMENTS
The reservation payment for each Virginia Power Unit begins on the earlier
to occur of the Delivery Start Date and the commercial operation date. The
reservation payment for each of the Virginia Power Units is calculated pursuant
to a formula based on the tested capacity of such Unit, an availability
adjustment factor for such Unit and the reservation charges as described below.
The reservation payment for each Virginia Power Unit is calculated in the
following manner:
Reservation Payment = [ ]
The standard capacity is the maximum generating capacity of such Virginia
Power Unit without the use of duct firing or steam injection, measured by a test
conducted at least annually and based upon summer conditions. The supplemental
capacity is the additional generating capacity of such Virginia Power Unit
created by the use of duct firing or steam injection, measured by a test
conducted at least annually and based upon summer conditions. We will have the
right to re-test and re-establish the contract capacity up to four times in any
year. Virginia Power will have the right to require such a re-test once a year.
The reservation charges for each year are as follows:
<TABLE>
<CAPTION>
STANDARD CAPACITY SUPPLEMENTAL CAPACITY
RESERVATION RESERVATION
CONTRACT YEAR CHARGE ($/KW-MONTH) CHARGE ($/KW-MONTH)
- ---------------------------------------------------------- -------------------- --------------------------------
<S> <C> <C>
[ - ]........................................... [ ] [ ]
[ - ]........................................... [ ] [ ]
[ - ] (extended term)........................... [ ] [ ]
</TABLE>
If the commercial operation date of either Virginia Power Unit occurs prior
to the Delivery Start Date, the reservation charge for that Virginia Power Unit
during the period between the commercial operation date and the Delivery Start
Date will be $[ ]/kW per month for standard capacity and $0.00 for
supplemental capacity.
The availability adjustment factor is based on the number of equivalent
forced outage hours accumulated for such Virginia Power Unit during the prior
[ ] month period. Equivalent forced outage hours for each month are calculated
as the product of the forced outage hours that occurred during such month times
a monthly weighting factor as shown in the table below. Forced outage hours
include any full or prorated partial non-delivery of the net electrical output
from our Facility but exclude scheduled maintenance hours, force majeure events,
delivery excuses, TVA or Entergy electrical system emergencies, energy delivery
band deviations for which we are responsible to pay imbalance charges or
penalties imposed by Entergy or TVA and hours when we choose to deliver
replacement power. The availability tested adjustment factor for any Virginia
Power Unit is equal to [ ] (and the full reservation charge for tested standard
and supplemental capacity from such Virginia Power Unit is payable) so long as
such Virginia Power Unit's equivalent forced outage hours during the prior [ ]
65
<PAGE>
month period do not exceed certain specified limits. The availability adjustment
factor for any Virginia Power Unit will be reduced, and, therefore, the
reservation payment will be reduced, if the equivalent forced outage hours for
such Virginia Power Unit exceed such limits.
The availability adjustment factor for each Virginia Power Unit is the
following ratio:
[ ]
In other words, for each Virginia Power Unit, we can incur [ ]
equivalent forced outage hours during the first contract year and [ ]
equivalent forced outage hours in each subsequent year without any reduction in
our reservation payment. After the first contract year, each month, we will
calculate the number of equivalent forced outage hours occurring during the
prior [ ] month period. If the number so calculated exceeds [ ] and is
less than or equal to [ ] then each such hour in excess of [ ] will be
counted as [ ] equivalent forced outage hours for purposes of calculating the
adjustment availability factor for such month. If the number so calculated
exceeds [ ], then each such hour in excess of [ ] will be counted as
[ ] equivalent forced outage hours for purposes of calculating the adjustment
availability factor for such month.
66
<PAGE>
MONTHLY WEIGHTING FACTORS
<TABLE>
<CAPTION>
WEIGHTING
MONTH FACTOR
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
January................................................................................ [ ]
February............................................................................... [ ]
March.................................................................................. [ ]
April.................................................................................. [ ]
May.................................................................................... [ ]
June................................................................................... [ ]
July................................................................................... [ ]
August................................................................................. [ ]
September.............................................................................. [ ]
October................................................................................ [ ]
November............................................................................... [ ]
December............................................................................... [ ]
</TABLE>
ENERGY PAYMENTS
The energy payment is equal to the product of the net electrical output
delivered to Virginia Power at the interconnection point with TVA or Entergy
times a rate of $[ /MWh], increasing at [ ]% per calendar year.
START PAYMENTS
In the event the number of starts for any Virginia Power Unit exceeds [ ]
per contract year, Virginia Power will pay us an amount equal to the product of
$[ ] per start for such unit multiplied by the number of starts for such
unit in excess of [ ]. If a Virginia Power Unit fails to successfully start
(during testing, commissioning or otherwise thereafter), we will reimburse
Virginia Power for the fuel consumed during the failed start. If after a
successful start, a Virginia Power Unit trips, we will reimburse Virginia Power
for the fuel consumed during the start.
SYSTEM UPGRADE CREDITS
Virginia Power will pay us a system upgrade credit in the amount of any
payment, credit or discount received by Virginia Power under its transmission
service agreements with Entergy and TVA, to the extent such payment, credit or
discount is attributable to our payment for system upgrades under the Entergy
Interconnection Agreement or TVA Interconnection Agreement, as applicable.
GUARANTEED HEAT RATE PAYMENTS
Virginia Power will pay us, or we will pay Virginia Power, the difference
between the cost of fuel actually consumed by the Virginia Power Units while
they are dispatched above minimum load and the cost of fuel that would have been
consumed based on a guaranteed fuel efficiency as described below under "--Heat
Rate Guarantee."
OPERATION AND MAINTENANCE
We must operate and maintain the Virginia Power Units and the common
facilities in accordance with prudent industry practice and certain other
specified requirements of the agreement. We must inform Virginia Power on a
daily basis of the generation capacity of each Virginia Power Unit and any
limitations, restrictions, deratings or outages affecting such Virginia Power
Unit for the next day.
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<PAGE>
Each year we and Virginia Power will work together to develop a proposed
schedule for the scheduled maintenance outages of our Facility for the next year
based upon Virginia Power's projected dispatch schedule. We agreed not to
schedule maintenance during the months of June, July, August, September, January
or February without Virginia Power's consent. The number of allotted days for
scheduled maintenance outages of each Virginia Power Unit is 14 days in the
years in which a combustor inspection will occur, 21 days in the years in which
a hot gas inspection will occur and 28 days in the years in which a major
inspection will occur. We may also perform up to 120 hours per year of scheduled
maintenance outages during off-peak hours under certain circumstances with one
day's prior written notice to Virginia Power. We must use commercially
reasonable efforts to minimize any scheduled outage. We must provide Virginia
Power ongoing access to the site and various operational information.
SCHEDULING, DISPATCH AND DELIVERY
Each Virginia Power Unit will be fully dispatchable and capable of automatic
generation control, subject to certain operating limitations, and will operate
on such control if so directed by Virginia Power or the designated control
center on behalf of Virginia Power. On a daily basis, Virginia Power will
provide us with the projected hourly schedule for dispatch for the following
day. Each Virginia Power Unit must operate consistent with manufacturers'
recommendations and certain design parameters agreed upon between Virginia Power
and us.
FORCED OUTAGES
In the event of a forced outage that results in a reduction of at least [ ]
MW in the standard and supplemental capacity of any Virginia Power Unit, or a
[ ] MW or less reduction in the standard and supplemental capacity of any or
all of the Virginia Power Units that lasts for a continuous period of [ ] days
or longer, we may at our option avoid counting the outage as a forced outage in
the calculation of the availability adjustment factor to the extent we provide
replacement power to Virginia Power. For the initial period beginning at the
commencement of the outage through midnight of the second day thereafter, we may
elect to require Virginia Power to secure replacement capacity and energy and
pay Virginia Power the incremental cost of obtaining such replacement capacity
and energy in excess of the cost of capacity and energy under the Virginia Power
PPA. If we elect not to require Virginia Power to obtain replacement capacity
and energy, then the outage hours will be included as forced outage hours in the
calculation of the availability adjustment factor of the relevant Virginia Power
Unit. For any forced outage lasting longer than such initial period, we may
elect to provide replacement capacity and energy. If we elect to provide such
replacement capacity and energy, we will be paid for such replacement capacity
and energy by Virginia Power as if it were supplied from the Virginia Power
Units. On the other hand, if we elect to require Virginia Power to secure
replacement capacity and energy, we will pay Virginia Power for the incremental
cost of obtaining such replacement capacity and energy in excess of the cost of
capacity and energy under the Virginia Power PPA. If we elect not to utilize
replacement power, we will count the outage hours as a forced outage in the
calculation of availability adjustment factor.
Replacement power will consist of electric generating capacity and energy
having substantially similar characteristics to the capacity and energy to be
supplied by us under the Virginia Power PPA.
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ELECTRICAL INTERCONNECTION
We will own, operate, maintain and control all of the electrical
interconnection facilities up to the point of interconnection of our Facility
with Entergy's and TVA's systems. Virginia Power will be responsible for
obtaining and paying for the provision of transmission services and any
ancillary or control area services required by the FERC, Entergy, TVA, any
independent system operator or any other transmission utility for the delivery
and transmission of electric energy beyond the interconnection points between
our Facility and the TVA and Entergy system. Virginia Power is obligated to make
reservation payments under the Virginia Power PPA, whether or not transmission
service is available for the output of either Virginia Power Unit. We are
excused from non-performance due to disconnection of our Facility resulting from
a TVA or Entergy system emergency. See "--Force Majeure Events and Delivery
Excuse," "--Entergy Interconnection Agreement--and "--TVA Interconnection
Agreement."
FUEL ARRANGEMENTS
The Virginia Power PPA is what is referred to as a tolling arrangement,
whereby Virginia Power is obligated to supply and pay for fuel, subject to the
guaranteed heat rate, for each Virginia Power Unit. Virginia Power will continue
to make payments as provided under the Virginia Power PPA in the event of
non-delivery of fuel, provided that we have met certain obligations related to
fuel interconnection which are described below. Fuel supplied to the Virginia
Power Units will be converted to electricity at a level of efficiency which will
be measured against a specified level of efficiency, commonly referred to as a
guaranteed heat rate. See "--Heat Rate Guarantee."
Virginia Power is obligated to arrange, procure, supply, nominate, balance,
transport and deliver to the lateral natural gas pipeline the amount of fuel
necessary for each of the Virginia Power Units to generate the electrical output
expected to be dispatched by Virginia Power from such Virginia Power Unit.
We have the right to require Virginia Power to provide fuel to us during the
commissioning and testing of the Virginia Power Units prior to the commercial
operation date. We must notify Virginia Power no later than ten days prior to
the date on which such fuel will be needed and will reimburse Virginia Power for
the delivered cost including any imbalance penalties of any fuel used during the
commissioning of the Virginia Power Units.
We must obtain all governmental approvals required for the ownership,
construction, operation and maintenance of the lateral natural gas pipeline, and
we must construct or cause the construction of the lateral natural gas pipeline
in a timely manner and with a capacity sufficient to deliver fuel to operate our
entire Facility at its hourly maximum output level in accordance with the
Virginia Power PPA and applicable government approvals, operate and maintain the
lateral natural gas pipeline and reserve transportation rights on the lateral
natural gas pipeline sufficient for the delivery of fuel to operate our entire
Facility at such hourly maximum output level, with no person having a right to
transport fuel on the lateral natural gas pipeline superior to Virginia Power
except as may be required by applicable law or government approvals.
HEAT RATE GUARANTEE
A tracking account will be maintained to track, for each Virginia Power
Unit, the difference between the actual amount of fuel required to produce the
net electrical output and the amount of fuel expected to be required to produce
such net electrical output based on the guaranteed heat rate. The fuel used by
each Virginia Power Unit for operations below the minimum load during start-ups
and shutdowns is not considered in this calculation and there is no heat rate
guarantee below minimum load. If the actual amount of fuel required to produce
such net electrical output varies from the expected amount of fuel required to
produce the net electrical output at the guaranteed heat rate, then a balance
will accrue in the tracking account to credit us or Virginia Power as
appropriate. If the actual
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amount of fuel consumed is greater than the amount of fuel calculated on the
basis of the guaranteed heat rate then we will pay Virginia Power the actual or
estimated cost for the excess fuel. If the actual amount of fuel consumed is
less than the amount of fuel calculated on the basis of the guaranteed heat rate
then Virginia Power will pay us an amount equal to the actual or estimated cost
of the fuel savings. The guaranteed heat rate for each Virginia Power Unit up to
the standard capacity is [ ] BTU/kWh, adjusted for loads less than full
standard capacity. The guaranteed heat rate for supplemental capacity is [ ]
BTU/kWh.
FORCE MAJEURE EVENTS AND DELIVERY EXCUSE
The Virginia Power PPA includes provisions which excuse either party from
performing its obligations due to events which are not in its reasonable
control, subject to certain customary exceptions. If a party fails to perform
under the Virginia Power PPA because of a force majeure event, and such
nonperformance continues for a period exceeding 12 consecutive months, the other
party may terminate the Virginia Power PPA. [ ].
We are not liable for or deemed in breach of the Virginia Power PPA to the
extent performance of our obligations is delayed or prevented by any event of
default of Virginia Power, any delay or failure by Virginia Power in giving any
approval within the times required, any delay or failure by Virginia Power in
performing any of its obligations under the Virginia Power PPA, any delay or
failure of Virginia Power to deliver fuel or to accept actual contract capacity
or net electrical output as required under the agreement, any failure of
Virginia Power to maintain adequate transmission rights to take delivery of the
net electric output of the Virginia Power Units or replacement power, or any
emergency condition presenting an imminent danger or significant disruption on
the Entergy or TVA system that results directly from an act or failure to act by
Virginia Power. During such periods referred to as delivery excuses when we
cannot perform our obligations, Virginia Power will continue to make reservation
payments to us.
DEFAULTS AND REMEDIES
If not cured within the applicable cure period in the agreement, the
following constitute events of default under the Virginia Power PPA:
- the failure of either party to make undisputed payments after notice that
such payment is due;
- the failure of either party to comply with any material provision of the
Virginia Power PPA;
- a bankruptcy, insolvency or similar event affecting either party;
- our failure to provide the required completion security after notice by
Virginia Power, or our failure to maintain such required completion
security after notice by Virginia Power;
- failure to comply with the assignment provisions of the Virginia Power
PPA;
- any representation made by either party that is found to be false in any
material respect;
- our willful act of providing or selling capacity from the Virginia Power
Units to a person other than Virginia Power;
- our willful act of tampering with the metering equipment for the purpose
of defrauding Virginia Power; and
- our abandonment of the Facility.
Upon an event of default at any time during the term of the Virginia Power
PPA, the non-defaulting party may, for so long as the event of default is
continuing, establish a date on which the Virginia Power PPA will be canceled if
the event of default has not been cured, withhold any payment due to the
defaulting party under the Virginia Power PPA and pursue any other remedies.
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INDEMNIFICATION
Each party will indemnify and hold harmless the other party from all claims,
demands, losses, liabilities and expenses for personal injury or death to
persons or damage to property arising out of the indemnifying party's
performance under the Virginia Power PPA.
LIMITATION ON LIABILITY
Prior to the commercial operation date of the Virginia Power Units, our
liability to Virginia Power, other than with respect to indemnity or a liability
due to the willful sale of energy from the Virginia Power Units to a third party
or otherwise in violation of the Virginia Power PPA, will be limited to the
amount of completion security required to be provided under the Virginia Power
PPA. After the commercial operation date of either Virginia Power Unit, our
liability to Virginia Power will not exceed $[ ] million during the initial
term, $[ ] million from the end of the initial term until December 31 of
contract year [ ], and $[ ] million from January 1 of contract year 17 until
the end of the extended term. The Virginia Power PPA provides that unless
expressly provided otherwise in the Virginia Power PPA, neither party will be
liable to the other for consequential, incidental, punitive, exemplary or
indirect damages suffered by that party or by any customer or any purchaser of
that party, lost profits or other business interruption damages, by statute, in
tort or contract, under any indemnity provision or otherwise.
ASSIGNMENT
The Virginia Power PPA may not be assigned by either party without the other
party's prior written consent. No consent is required if we assign the Virginia
Power PPA to any party providing financing for the acquisition, ownership,
construction, operation, maintenance or leasing of our Facility and its
successors and assigns. No consent is required if Virginia Power assigns the
Virginia Power PPA to Dominion Resources or any wholly-owned subsidiary of
Dominion Resources, if at the time of assignment, the assignee has a long-term
debt credit rating at or above the lowest of A- from Standard and Poor's Ratings
Group, Baa1 from Moody's Investors Service, Inc. or the credit rating of
Virginia Power at the time of such assignment. In addition, the assignee must
assume all of the obligations of Virginia Power under the Virginia Power PPA and
other related agreements.
The Collateral Agent or its transferee or assignee may assume our
obligations under the Virginia Power PPA provided however that our Facility will
be maintained and operated at all times by an experienced operating entity or an
affiliate of an experienced operating entity. In addition, the consent to
assignment to our lenders requires that the transferee or assignee must have a
tangible net worth no less than our tangible net worth on August 28, 1998, and
that the transferee or assignee or any affiliate of that entity will not have
been an adverse party in litigation with Virginia Power or any of its affiliates
within the preceding 18 months. In addition, upon acceleration of certain loans,
Virginia Power will be offered the opportunity to purchase those loans.
AQUILA/UTILICORP POWER PURCHASE AGREEMENT
We are a party to a power purchase agreement with Aquila Energy Marketing
Corporation and UtiliCorp United Inc. ("Aquila") effective and dated as of May
21, 1998, and amended by letter agreements dated July 14, 1998, July 16, 1998
and August 27, 1998, (the "Aquila PPA") which provides for the sale of
electrical capacity and energy generated from one Unit (the "Aquila Unit").
UtiliCorp United Inc. has appointed Aquila Energy Marketing Corporation as its
agent under the Aquila PPA.
COMMENCEMENT OF OPERATION
Delivery of the electrical capacity and net electrical output will begin on
the Delivery Start Date. The Delivery Start Date is defined as June 1, 2000,
subject to extension for a force majeure event or a
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delivery excuse. If the commercial operation date of the Aquila Unit is delayed
beyond the Delivery Start Date then we must do one of the following:
- begin delivery by providing replacement power from another source, in
which case Aquila will pay us as though the replacement power were
delivered from the Aquila Unit,
- require Aquila to purchase the replacement power themselves from another
source and we will reimburse Aquila for the difference between the cost of
such replacement power and the cost Aquila would have paid were such power
to have been delivered from the Aquila Unit, or
- make an adjustment to the reservation payment during the period between
the Delivery Start Date and the commercial operation date of the Aquila
Unit. This adjustment to the reservation payment each month will be based
on a value factor for the month as described below under "--Reservation
Payment". Any adjustment greater than the reservation payment for a month
will be provided to Aquila as a credit toward the reservation payments in
future months. The election for this delivery delay adjustment may only be
made by us if a notice of delay of the commercial operation date is given
to Aquila at least 90 days prior to the Delivery Start Date.
We agreed not to declare commercial operation of the Aquila Unit prior to
June 1, 2000. Aquila may terminate the Aquila PPA if we are unable to achieve
the commercial operation date by June 1, 2001, subject to an extension of up to
12 months to June 1, 2002 if the commercial operation date is delayed as a
result of a force majeure event or delivery excuse and the Delivery Start Date
has occurred by June 1, 2001.
COMMISSIONING AND TESTING
Prior to the commercial operation date and every year thereafter, the
contract capacity will be established according to testing procedures contained
in the Aquila PPA. The contract capacity is the sum of the standard capacity and
the supplemental capacity. The standard capacity is the maximum generating
capacity of the Aquila Unit at summer conditions at full combustion turbine
output without the use of duct firing or steam injection. The supplemental
capacity is the generating capacity of the Aquila Unit in excess of the standard
capacity created by the use of duct firing and steam injection. The contract
capacity must be measured in increments of 1 MW, rounded down to the nearest MW.
The standard capacity can be no less than 235 MW and no greater than 260 MW. The
supplemental capacity can be no less than 20 MW and no greater than 36 MW. In
the event that the contract capacity is less than 235 MW but greater than 210
MW, Aquila's sole remedy is to reduce its reservation payment to the level based
on the tested contract capacity. In the event that the contract capacity is less
than or equal to 210 MW, we will have the opportunity to cure this capacity
shortfall while at the same time either supplying replacement power to Aquila or
paying its incremental costs of replacement power purchases up to a contract
capacity of 210 MW. In the event that we cannot cure the shortfall within 240
days, Aquila may declare us in default and terminate this agreement.
At our option, Aquila will market and sell any test energy. We must provide
any fuel at our expense to generate such test energy and an additional $0.03 per
MMBtu and we must pay Aquila a marketing fee of $0.25/MWh of test energy sold.
TERM
The initial term of the Aquila PPA extends to the date 15 years and seven
months after the Delivery Start Date. Aquila may extend the term of the Aquila
PPA for an additional 5 years, upon at least 29 months prior notice to us.
SALE AND PURCHASE OBLIGATIONS
We are obligated to sell, and Aquila is obligated to purchase, the capacity
of the Aquila Unit and associated net electrical output, other than test energy.
If we elect to provide replacement power during
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the periods when the Aquila Unit is unavailable, Aquila will be obligated to
accept such replacement power. After commercial operation of the Aquila Unit, we
are not obligated but may elect to provide replacement power during any forced
outages or force majeure events or when Aquila's Unit is unavailable for any
reason. Aquila must make monthly payments to us that include a reservation
payment, an energy payment, start-up payments and system upgrade credits.
Aquila's aggregate payment to us may be increased or decreased depending on
whether the Aquila Unit produces energy above or below a specified level of fuel
efficiency or "guaranteed heat rate".
RESERVATION PAYMENTS
The reservation payments begin on the Delivery Start Date. The reservation
payments for the Aquila Unit are calculated according to a formula based on the
tested capacity of the Aquila Unit and the reservation charge as described
below:
Reservation payment = (contract capacity up to 267 MW X reservation
charge) + (surplus supplemental capacity greater
than 267 MW X surplus reservation rate)
The reservation charge for the first five years after the Delivery Start
Date is $4.90 and is $5.00 for any time thereafter including the extended term.
The surplus reservation rate is $2.50. The contract capacity is the sum of the
standard capacity and supplemental capacity at summer conditions, measured by a
test conducted at least annually. We will have the right to retest and
reestablish the contract capacity at any time upon 48 hours notice and Aquila
will have the right to require such a retest upon five days notice if Aquila
believes that the contract capacity is overstated by at least 10 MW for a period
of at least 90 days.
The reservations payments after the commercial operation date of the Aquila
Unit will be adjusted according to the availability of the Aquila Unit. The
availability adjustment occurs monthly with an annual availability adjustment
true-up. The monthly availability adjustment is calculated according to the
formula below:
Monthly availability adjustment = (the sum of the unadjusted reservation
payments for each month of the calendar
year in which the monthly availability
adjustment is being computed) X the
value factor for each month shown in
the table below X (1 MINUS an
availability adjustment factor)
The availability adjustment factor for any month in which forced outage
hours are less than 4% of the hours during which the Aquila Unit would have been
available had no forced outage occurred is 1.00 and decreases on a 1:1 basis for
forced outage hours greater than 4%. Forced outage hours include any full or
prorated partial non-delivery of the net electrical output from the Unit but
exclude scheduled maintenance hours, force majeure events, delivery excuses,
energy delivery band deviations for which we are responsible to pay imbalance
charges, penalties imposed by Entergy or TVA and hours when we are delivering or
paying for replacement power in lieu of accruing forced outage hours at our
option. The annual availability adjustment true-up is calculated in the same
manner as the availability adjustment for a month, but with an allowance of 3%
of the hours during which the Aquila Unit that would have been available during
such year had no forced outage occurred. If the annual availability adjustment
credit for any year is greater than the sum of monthly availability credits
previously determined for that year, then the difference is due Aquila as a
credit against the reservation payments otherwise due.
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The value factors for each month are as shown below:
<TABLE>
<CAPTION>
YEAR 2000 VALUE FACTOR
- --------------------------------------------------------------------------------- ---------------
<S> <C>
June............................................................................. 14.4%
July............................................................................. 26.3%
August........................................................................... 24.2%
September........................................................................ 10.2%
October.......................................................................... 9.4%
November......................................................................... 7.7%
December......................................................................... 7.8%
<CAPTION>
YEAR 2001-TERM
- ---------------------------------------------------------------------------------
<S> <C>
January.......................................................................... 8.3%
February......................................................................... 7.1%
March............................................................................ 4.5%
April............................................................................ 3.9%
May.............................................................................. 6.2%
June............................................................................. 10.0%
July............................................................................. 18.3%
August........................................................................... 17.2%
September........................................................................ 7.3%
October.......................................................................... 6.1%
November......................................................................... 5.6%
December......................................................................... 5.5%
</TABLE>
The reservation payments may be adjusted as a result of any delay in
achieving commercial operation of the Aquila Unit beyond the Delivery Start
Date. If such a delay occurs, we may adjust the reservation payments during the
period after the Delivery Start Date but before the commercial operation date in
lieu of providing for or paying for replacement power. Each month during such
period the delivery delay adjustment would be calculated and subtracted from the
reservation payment due to us for such month.
<TABLE>
<S> <C> <C> <C>
Delivery Delay Adjustment = [(reservation charge) X (months in the X number of days of delay in such month
year) X 267MW X (relative factor for the number of days in the month
month shown in the table above)]
</TABLE>
If the delivery delay adjustment is greater than the reservation payment due to
us for such month, any remaining amounts of such delivery delay will be used as
a credit to Aquila toward the reservation payment in future months.
ENERGY PAYMENTS
The energy payment is equal to the product of the net electrical output
delivered to Aquila at the interconnection point with TVA or Entergy times a
rate of $1.00/MWh multiplied by an index based on the gross domestic product
implicit price deflator index.
START PAYMENTS
If the number of starts of the Aquila Unit exceeds 200 per year, then Aquila
must pay us the product of $5,000 and the number of starts in excess of 200.
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SYSTEM UPGRADE CREDITS
Aquila will pay to us a system upgrade credit in the amount of any payment,
credit or discount received by them under its agreements with Entergy and TVA,
to the extent such credit is attributable to our payment for system upgrades.
GUARANTEED HEAT RATE PAYMENTS
Aquila will pay us, or we will pay Aquila, the difference between the cost
of fuel actually consumed by the Aquila Unit while it is dispatched above
minimum load and the cost of fuel that would have been consumed based on a
guaranteed fuel efficiency as described below under "--Heat Rate Guarantee."
OPERATION AND MAINTENANCE
We must operate and maintain the Aquila Unit and common facilities in
accordance with prudent industry practice and the other requirements of the
Aquila PPA. We must inform Aquila on a daily basis of the generating capacity of
the Aquila Unit and any limitations, restrictions, deratings or outages
affecting the Aquila Unit for the next day.
Each year we and Aquila will work together to develop a schedule for the
maintenance outages of the Aquila Unit based upon Aquila's projected dispatch
schedule. We agreed not to perform any scheduled maintenance on the Aquila Unit
during the period from June 15 through September 15 without Aquila's consent.
The number of hours allotted for scheduled maintenance hours of the Aquila Unit
is 336 hours in the years in which a combustion inspection will occur, 480 hours
in the years in which a hot gas inspection will occur and 840 hours in the years
in which a major inspection will occur. We may also reschedule up to 120 hours
per year of scheduled maintenance outages with at least two days notice. We must
provide Aquila with ongoing access to the site and various operational
information concerning the Facility.
SCHEDULING, DISPATCH AND DELIVERY
The Aquila Unit will be fully dispatchable by Aquila, subject to certain
operating limitations, and will operate on automatic generation control if so
directed by Aquila or the designated control center on behalf of Aquila. On a
daily basis, Aquila will provide us with the projected hourly scheduled dispatch
of the following day. The Aquila Unit must operate consistent with
manufacturers' recommendations and certain design parameters agreed upon by
Aquila and us.
FORCED OUTAGES
In the event Aquila's Unit is unable to partially or fully generate its
output, other than due to scheduled maintenance, force majeure or a delivery
excuse, we may, at our option, avoid incurring the forced outage hours by
providing or paying for replacement power. For the initial period beginning at
the commencement of the outage through midnight of the second day thereafter, we
may elect to either pay Aquila for the incremental cost of obtaining replacement
capacity and energy in excess of the costs of capacity and energy under the
Aquila PPA or incur the forced outage hours and potential reduction in, the
reservation payment. See "--Reservation Payments." For the duration of any
forced outage lasting longer than such initial period, we may elect to provide
replacement capacity and energy, and if we elect to provide such replacement
capacity and energy, we will be paid for such replacement capacity and energy as
if it were supplied from the Aquila Unit. In the alternative we may elect to pay
Aquila's incremental cost of obtaining replacement capacity and energy in excess
of the cost of capacity and energy under the Aquila PPA. If we elect not to
utilize replacement power we will count the outage hours as forced outage hours
on calculating the availability adjustment factor.
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Replacement power will consist of electric generating capacity and energy
having substantially similar characteristics to the capacity and energy to be
supplied under the Aquila PPA.
ELECTRICAL INTERCONNECTION
We will own, operate, maintain and control all of the interconnection
facilities up to the point of interconnection of our Facility with Entergy's
and/or TVA's systems. Aquila will be responsible for obtaining and paying for
the provision of transmission services and any ancillary or control area
services required by the FERC, Entergy, TVA, any independent system operator or
any other transmission utility for the delivery and transmission of electric
energy beyond the interconnection points between our Facility and the TVA and
Entergy systems. Aquila is obligated to continue to make reservation payments
under the Aquila PPA whether or not transmission service is available for the
output of the Aquila Unit. We are excused from non-performance due to
disconnection of our Facility resulting from a TVA or Entergy system emergency.
See "--Force Majeure Event and Delivery Excuse," "--Entergy Interconnection
Agreement" and "--TVA Interconnection Agreement."
FUEL ARRANGEMENTS
The Aquila PPA is what is referred to as a tolling arrangement, whereby
Aquila is obligated to supply and pay for fuel, subject to the guaranteed heat
rate, for the Aquila Unit. Aquila will continue to make payments under the
Aquila PPA in the event of non-delivery of fuel, provided that we have met
certain obligations related to fuel interconnection which are described below.
Fuel supplied to the Aquila Unit will be converted to electricity at a level of
efficiency which will be measured against a specified level of efficiency,
commonly referred to as "guaranteed heat rate." See "--Heat Rate Guarantee."
Aquila is obligated to arrange, procure, supply, nominate, balance,
transport and deliver to the lateral natural gas pipeline the amount of fuel
necessary for the Aquila Unit to generate the net electrical output dispatched
by Aquila from such Aquila Unit.
We have the right to require Aquila to provide fuel to us during the
commissioning and testing of the Aquila Unit prior to the commercial operation
date.
Aquila must use all commercially reasonable efforts to cause any fuel
delivered to be in conformity with the quality requirements under the ANR and
Tennessee Gas agreements. Aquila must pay for any costs resulting from cleaning
and clearing the Facility due to our acceptance of fuel not conforming to such
quality requirements. In addition, Aquila will use commercially reasonable
efforts to deliver gas at a specified pressure level. As to fuel not conforming
to such pressure requirements, depending upon the degree of nonconformity, we
may either declare a force majeure and not accept such fuel due to such
nonconformity or elect to accept such fuel despite such nonconformity. If we
elect to declare force majeure due to such nonconformity, Aquila will be
relieved from its obligation to pay the reservation payment. If any portion of
the capacity of the Aquila Unit is not available as a result of such force
majeure event for more than 336 consecutive hours or 505 cumulative hours in any
calendar year, Aquila shall have the right to cause the installation of gas
compression at the Facility, such costs to be shared equally by Aquila and us.
If Aquila elects not to cause the installation of such gas compression, then
Aquila shall be obligated to pay us the reservation payment associated with all
hours of such force majeure event for such calendar year.
We must obtain all governmental approvals required for the ownership,
construction, operation and maintenance of the lateral natural gas pipeline, and
we must construct or cause the construction of the lateral natural gas pipeline
in a timely manner and with a capacity sufficient to deliver fuel to operate our
entire Facility at its hourly maximum output level in accordance with the Aquila
PPA and applicable government approvals, operate and maintain the lateral
natural gas pipeline and reserve transportation rights on the lateral natural
gas pipeline sufficient for the delivery of fuel to operate our entire Facility
at such hourly maximum output level, with no person having a right to transport
fuel on
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the lateral natural gas pipeline superior to Aquila except as may be required by
applicable law or government approvals. We will supply Aquila with access to the
Trunkline Gas Company pipeline as long as such access does not increase our
costs or affect our schedule.
HEAT RATE GUARANTEE
A tracking account will be maintained to track the difference between the
actual amount of fuel required to produce the net electrical output and the
amount of fuel expected to be required to produce such net electrical output
based on the guaranteed heat rate. The fuel used for operations below the
minimum load during start-ups and shutdowns is not considered in this
calculation, and there is no heat rate guarantee below minimum load. If the
actual amount of fuel required to produce such net electrical output varies from
the expected amount of fuel required to produce the net electrical output at the
guaranteed heat rate, then a balance will accrue in the tracking account to
credit us or Aquila as appropriate. If the actual amount of fuel consumed is
greater than the amount of fuel calculated on the basis of the guaranteed heat
rate, then we will pay Aquila the actual or estimated cost for the excess fuel.
If the actual amount of fuel consumed is less than the guaranteed heat rate,
then Aquila will pay us an amount equal to the actual or estimated cost of the
fuel savings. The guaranteed heat rate is determined by the product of a
seasonal standard heat rate (7.000 MMBtu/ MWh for June through September and
6.900 MMBtu/MWh for October through May) multiplied by a predetermined heat rate
adjustment factor for partial load. The guaranteed heat rate for the
supplemental capacity is 9.500 MMBtu/MWh.
CREDIT SUPPORT
We must provide Aquila documentation showing our debt service coverage ratio
that we provide to those parties providing our financing. If the debt service
coverage ratio for each of the pervious four consecutive calendar quarters is
less than 1.25 to 1.00 then we must provide Aquila, upon their request,
reasonable security for our obligations under this agreement. The security must
be in an amount equal to $5.00/kW of the contract capacity or approximately
$1,300,000. This security must be maintained until the earlier of our showing
Aquila that for a period of four consecutive calendar quarters our debt service
coverage ratio was 1.25 to 1.00 or greater or the termination of this agreement.
If the agreement terminates, we must still maintain the security until all
amounts owed by us to Aquila under the agreement are paid in full.
FORCE MAJEURE EVENTS AND DELIVERY EXCUSE
The Aquila PPA includes provisions which excuse either party from performing
its obligations due to events which are not in its reasonable control, subject
to certain customary exceptions. If a party fails to perform under the Aquila
PPA because of a force majeure event, and such nonperformance continues for a
period exceeding 18 consecutive months, the other party may terminate the Aquila
PPA. If we fail to achieve the Delivery Start Date or commercial operation date
for a period exceeding 12 months due to a force majeure event, Aquila may
terminate the Aquila PPA. If we are unable to deliver all or part of the actual
contract capacity of the Aquila Unit due to a force majeure event affecting us,
then Aquila will not be obligated to make the payment associated with the
capacity which was not available due to that force majeure event. A force
majeure event will not affect Aquila's obligation to pay the reservation payment
for replacement power and will not affect any other payment obligation of
Aquila.
We are not liable for or deemed in breach of the Aquila PPA to the extent
performance of our obligations is delayed or prevented by any event of default
of Aquila, any delay or failure by Aquila in giving any approval within the
times required, any delay or failure by Aquila in performing any of its
obligations under the Aquila PPA, any delay or failure of Aquila to deliver fuel
or to accept actual contract capacity or net electrical output as required under
the agreement, any failure of Aquila to maintain adequate transmission rights to
take delivery of the net electric output of the Aquila Unit or
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replacement power, or any emergency condition presenting an imminent danger or
significant disruption on the Entergy or TVA system that results directly from
an act or failure to act by Aquila. During such periods referred to as delivery
excuses when we cannot perform our obligations due to delivery excuse, Aquila
will continue to make reservation payments to us.
DEFAULTS AND REMEDIES
If not cured within the applicable cure period in the agreement, any of the
following events constitute events of default under the Aquila PPA:
- the failure of either party to make payments after notice that such
payment is due;
- the failure of either party to comply with any material provision;
- any bankruptcy, insolvency or similar event affecting either party;
- the failure of either party to comply with the assignment provisions;
- any representation made by either party found to be false in any material
respect; or
- our failure to remedy a capacity shortfall.
Upon an event of default with respect to a defaulting party at any time
during the term of this agreement, the non-defaulting party may, for so long as
the event of default is continuing, establish a date on which the Aquila PPA
would be canceled if the event of default has not been cured, withhold any
payment due and pursue any other remedies available at law or in equity.
INDEMNIFICATION
Each party must indemnify and hold harmless the other party from all claims,
demands, losses liabilities and expenses for personal injury or death to person
or damage to property arising out of the indemnifying party's performance under
the Aquila PPA.
LIMITATION ON LIABILITY
Prior to the commercial operation of the Aquila Unit, our liability to
Aquila is limited to paying only the incremental costs of any replacement power
through the termination date of the Aquila PPA. After the commercial operation
date of the Aquila Unit we have no obligation to supply replacement power other
than as reflected in the calculation of the availability adjustment factors or
the termination remedies available under the Aquila PPA. Aquila's liability to
us is limited only to the reservation payments through the term of the
Agreement. The Aquila PPA provides that, unless expressly provided otherwise in
the Aquila PPA, neither party is liable to the other for consequential,
incidental, punitive, exemplary or indirect damages, lost profits or other
business interruption damages, by statute, in tort or contract or any other
indemnity provision or otherwise.
ASSIGNMENT
Aquila Energy Marketing Corporation may assign the Aquila PPA to any
affiliate of UtiliCorp without our consent provided that UtiliCorp remains a
party to the Aquila PPA and remains jointly and severally liable for the
assignee's obligations in the Aquila PPA.
Subject to the foregoing, neither party may assign the Aquila PPA without
the other party's prior written consent, such consent not to be unreasonably
withheld, and it shall not be reasonable to withhold its consent to an
assignment to a party with a credit rating equal to or greater credit rating
than the assigning party.
If the Collateral Agent forecloses on our interests in the Facility based on
a breach under a power purchase agreement relating to the output of any Unit
other than the Aquila Unit, then, so long as the Aquila PPA is a valid and
binding agreement, such party will agree to assume and perform our obligations
under this agreement on a prospective basis, but will not be required to assume
any outstanding liability under this agreement.
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CONSTRUCTION CONTRACT
We are party to the Turnkey Engineering, Procurement and Construction
Contract (the "Construction Contract") dated as of July 22, 1998 with BVZ Power
Partners--Batesville (the "Contractor"), a joint venture between Black & Veatch
Construction, Inc. and H.B. Zachry Company, to provide for the design,
engineering, procurement, construction, start-up and testing of the Facility
other than the electrical substation and transmission lines (the "Work"). We
issued a notice to proceed to the Contractor commencing the Contractor's work on
August 28, 1998.
The Construction Contract has been amended by the notice to proceed and
Change Order 001 effective as of October 22, 1998, Change Order 002 effective
November 2, 1998, Change Order 003 effective November 5, 1998, Change Order 004
effective November 5, 1998, Change Order 005 effective December 10, 1998, Change
Order 006 effective February 1, 1999 and Change Order 007 effective April 12,
1999.
The fixed price under this Construction Contract (the "Contract Price") is
$239,967,233, which reflects a net reduction in the Contract Price resulting
from the seven change orders we have issued. We are also considering change
orders that would increase the Construction Contract price by approximately
$1,600,000.
The guaranteed completion date, as adjusted by the change orders, for the
first Unit is July 16, 2000, for the second Unit is July 26, 2000 and for the
third Unit is July 31, 2000.
JOINT AND SEVERAL LIABILITY; SURETY
H.B. Zachry Company and Black & Veatch Construction, Inc. are jointly and
severally liable under this contract. Black & Veatch, LLP, the parent of Black &
Veatch Construction, Inc., has executed a guarantee agreement dated July 22,
1998, guaranteeing all performance and payments by the Contractor under this
Construction Contract.
A performance and payment bond has been supplied for the Construction
Contract with Continental Casualty Company (whose insurer financial strength
rating is A1 from Moody's Investors Services and A+ (outlook negative) from
Standard & Poor's Ratings Group) acting as surety for Black & Veatch
Construction, Inc. and the United States Fidelity and Guaranty Company (whose
insurer financial strength rating is A1 from Moody's Investors Services and AA
from Standard & Poor's Ratings Group) acting as surety for H.B. Zachry Company.
CONTRACTOR'S RESPONSIBILITIES
The Contractor is responsible for all aspects of the Work other than our
responsibilities under the Construction Contract.
In connection with its undertakings, the Contractor acknowledges the
satisfactory nature, location, character and accessibility of the site for the
Work. The Contractor also acknowledges any existence of surface or subsurface
obstacles to the Work, the location and character of existing or adjacent work
or structures and other general and local conditions which might effect the Work
or the performance of the Work. The Contractor also acknowledges that the
Contract Price and construction schedule are based on and reflect the existence
of these conditions and that the Contractor will not be entitled to a change
order as a result of the existence of these conditions. However, if any
pre-existing hazardous materials or archeological remains or artifacts are
discovered, the Contractor has no obligation to remove, handle or transport
those items. To the extent that these pre-existing items or their removal delays
the Work, the Contractor may request a change in the schedule and/or the
Contract Price.
The Contractor must provide to us a list of spare parts and expendable
materials for all major machinery, equipment, materials, supplies and other
goods supplied under the Construction Contract.
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OUR RESPONSIBILITIES
We are responsible for:
- payment for certain machinery, equipment, materials, supplies and other
goods, including the combustion turbine generators, the steam turbine
generators, the heat recovery steam generators and the transformers
("Owner Purchases"); and
- the availability and completion of the electrical, natural gas, water and
other interconnection facilities not within the Contractor's
responsibility.
Additionally, we must provide and, except as noted below, pay for all of the
consumable items required for the commission, operation and testing of the
Facility. These consumable items include all fuel, water, electricity and other
utilities, chemicals and lubricants. The Contractor must pay for any fuel
consumed in excess of an allocated test fuel quantity of 2,924,000 MMBtu. The
gross revenue received by us from the sale of the test energy during a run or
re-run of any acceptance test (acceptance tests are described below under
"--Performance Guarantees/Performance Liquidated Damages") will be credited to
the Contractor up to the aggregate cost incurred by the Contractor for the test
fuel in excess of 2,924,000 MMBtu. We must also use reasonable efforts to
purchase and deliver the spare parts and expendable materials for all major
machinery, equipment, materials, supplies and other goods supplied under the
Construction Contract prior to the substantial completion of the first Unit.
PRICE AND PAYMENT
The current Contract Price of $239,967,233 is the sum of the Contractor's
direct costs and our costs of approximately $160,000,000 for Owner Purchases.
The Contract Price excludes any tax reimbursements to be made by us to the
Contractor and is subject to adjustment by change order.
Payments are made to the Contractor based upon a schedule of values for the
construction of the Facility according to the construction schedule for the
completion of the scheduled item of the Facility. The Contractor must submit
monthly invoices detailing its progress toward meeting each scheduled item on
the construction schedule. We will pay accordingly. However, the Contractor
cannot submit an invoice for any amount in excess of 105% of the estimated cash
flow schedule set forth in the Construction Contract or include in the invoice
any work that it or we reject. As of March 31, 1999 payments to the Contractor
totaled $96,000,000 (excluding the tax reimbursement).
As security for the Contractor's performance under the Construction
Contract, we will retain 5% of each monthly payment until the later of
substantial completion of the Work, including completion of the acceptance tests
or completion or expiration of any remedial construction plan and the payment of
any liquidated damages. A remedial construction plan is a new construction plan
created if the Contractor gives us notice that it will not complete the Work by
the guaranteed completion date, however we will still assess liquidated damages
for the delay during such remedial period. At the time of the payment of this
retained amount we will withhold an amount equal to twice the estimated cost of
the punchlist items. The punchlist items are a list of items required to be
completed under the Construction Contract but are not required to operate the
Facility commercially in a safe manner. We will then pay the Contractor
quarterly the retained amounts for the punchlist items as such items are
completed.
We may withhold payment for any defective work not remedied and any liens or
claims that the Contractor is liable for other than third party claims provided
for and accepted by an insurance company, uninsured damages, default by the
Contractor, overpayment or a good faith dispute.
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TITLE TO WORK/RISK OF LOSS
The Contractor guarantees that the legal title to the Work and the materials
and equipment utilized pursuant to the Construction Contract covered under each
monthly payment will pass free and clear of any liens, claims security interests
or other encumbrances upon each progress payment. With respect to each Unit, the
Contractor will bear the risk of loss, care and custody and control of any
equipment, materials and any equipment utilized pursuant to the Construction
Contract until the substantial completion of such Unit and its common
facilities.
WARRANTIES AND GUARANTEES
The Contractor warrants that:
- the work and equipment will be new when installed and free from defects or
deficiencies in materials, workmanship, title or otherwise;
- each Unit and that portion of the Facility covered by the Construction
Contract will be designed, engineered and constructed in accordance with
the requirements of the Construction Contract;
- the installation of the materials and equipment will be in substantial
accordance with the manufacturer's requirements;
- the work will be year 2000 compliant; and
- the work will be performed in accordance with all laws and capable of
operating in compliance with all laws.
Each Unit's warranty extends one year after its substantial completion. For
the common facilities the warranty extends one year from substantial completion
of the Facility. We may extend the warranty on the three Units for an additional
year for an additional $1,539,000. The warranties do not extend to defects or
deficiencies resulting from ordinary wear and tear or failure to operate or
maintain the Facility properly or our negligence unless such negligence results
from our reliance upon information or instructions provided by the Contractor.
LIQUIDATED DAMAGES FOR DELAYS
The current guaranteed completion dates for the three Units are July 16,
2000, July 26, 2000 and July 31, 2000, respectively, subject to adjustment by
change order. If the Contractor fails to substantially complete a Unit by the
day following its guaranteed completion date then the Contractor must pay
liquidated damages to us for each 24-hour period thereafter that the Contractor
does not substantially complete that Unit. The liquidated damages accrue in the
amount of $43,333 per Unit per day from May through September and $33,333 per
Unit per day from October through April.
If we cannot operate a Unit by the day following the guaranteed completion
date due to interference, damage or hindrance by the Contractor caused by, or
relating to, the construction and achievement of substantial completion of any
other Unit or the common facilities, the Contractor must pay delay liquidated
damages during the non-operation of that Unit:
- if prior to the guaranteed completion date, in an amount payable on the
guaranteed completion date equal to the liquidated damages rate less
$21,667 per Unit per day from May through September and $16,667 per Unit
per day from October through April and
- if after the guaranteed completion date then at a rate $43,333 per Unit
from May through September and $33,333 from October through April.
If we cannot operate any Unit or the Facility due solely to the failure of
any acceptance tests conducted after the substantial completion of that Unit or
the Facility then the Contractor must pay
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delay liquidated damages for the duration of the non-operation period at a rate
of $43,333 per Unit from May through September and $33,333 from October through
April.
PERFORMANCE GUARANTEES/LIQUIDATED DAMAGES FOR PERFORMANCE
The Contractor must achieve certain guaranteed values (the "Guaranteed
Values") for maximum Unit power output, Unit power output, Unit heat rate,
auxiliary load, maximum auxiliary load, cooling tower performance, availability,
reliability, start-up, sound level, emissions and equipment capabilities, each
in accordance with various established acceptance tests. The Guaranteed Values
for Unit power output, maximum Unit power output and Unit heat rate, auxiliary
load, and maximum auxiliary load (collectively the "Performance Guarantees") are
as follows:
<TABLE>
<CAPTION>
PERFORMANCE GUARANTEE GUARANTEED VALUE CONDITIONS
- ------------------------------------------ ------------------------- ------------------------------------------
<S> <C> <C>
Maximum Unit Power Output Guarantee (1)... 285,400 kW 95 DEG.F, 60% relative humidity, duct
burner in service, evaporative cooler in
service, power augmentation in service
Unit Power Output Guarantee (1)........... 248,290 kW 95 DEG.F, 60% relative humidity, duct
burner not in service, evaporative cooler
in service, power augmentation out of
service
Unit Heat Rate Guarantee (2).............. 6,769 Btu/kWh (HHV ) 95 DEG.F, 60% relative humidity, duct
burner not in service, evaporative cooler
in service, power augmentation out of
service
Auxiliary Load Guarantee.................. 15,300 kW 95 DEG.F, 60% relative humidity, duct
burner not in service, evaporative cooler
in service, power augmentation out of
service
Maximum Auxiliary Load Guarantee.......... 18,900 kW 95 DEG.F, 60% relative humidity, duct
burner in service, evaporative cooler in
service, power augmentation in service
</TABLE>
As one of the requirements to achieve substantial completion of a Unit, the
performance tests will have to demonstrate for that Unit at least 96.25% of the
Unit Power Output Guarantee, 94.25% of the Maximum Unit Power Output Guarantee
and not more than 104.25% of the Unit Heat Rate Guarantee (these three
performance levels are collectively the "Performance Minimums").
If a Unit achieves the Performance Minimums but not the Performance
Guarantees by its specified completion date, the Contractor will have an
additional 300 days from the specified completion date to achieve the
Performance Guarantees. If the Contractor still fails to achieve those
Performance Guarantees then the Contractor must pay certain performance
liquidated damages. These performance liquidated damages vary by acceptance test
and the level of deviation from the respective Performance Guarantee.
- ------------------------
(2) The Guarantee Value represents "gross" performance. To obtain "net"
auxilliary loads must be subtracted.
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BONUSES FOR EARLY COMPLETION AND PERFORMANCE
If the Contractor substantially completes all three Units prior to the
guaranteed completion date specified for the third Unit then we must pay the
Contractor a bonus of $50,000 for each 24-hour period of early completion. The
Contractor is also entitled to certain performance bonuses for exceeding certain
output related Guaranteed Values.
The aggregate bonus that the Contractor can earn for early completion cannot
exceed $3,000,000. The aggregate bonuses that the Contractor can earn for early
completion and performance bonuses, together, cannot exceed $5,000,000.
LIMITATION ON LIABILITY
The aggregate liability of the Contractor to pay delay liquidated damages
cannot exceed 5% of the Contract Price on account of any individual Unit. The
aggregate liability of the Contractor to pay all delay and performance
liquidated damages cannot exceed 15% of the Contract Price on account of any
individual Unit. The aggregate liability of the Contractor to pay all delay and
performance liquidated damages for the Facility cannot exceed 30% of the
Contract Price, plus the full amount of any bonuses received by the Contractor.
These limitations do not apply to delay liquidated damages resulting from our
inability to operate a Unit due to interference, damage or hindrance by the
Contractor caused by or resulting from its construction and substantial
completion of another Unit or from the failure of any acceptance tests performed
after the substantial completion of a Unit.
The Contractor's aggregate liability, including all liquidated damages for
delay and performance, whether arising out of tort (including negligence),
strict liability or any other cause of action (other than the indemnification of
third parties) is limited to 100% of the Contract Price.
CONTRACTOR EVENTS OF DEFAULT AND TERMINATION
We may terminate the Construction Contract if the Contractor fails to cure
the following defaults within the applicable cure periods provided in the
Construction Contract:
- a transfer or sale of all or substantially all of its assets;
- a merger with or into another entity;
- the institution of bankruptcy proceedings seeking to adjudicate the
Contractor bankrupt or insolvent;
- a general assignment for the benefit of creditors (or of a receiver is
appointed for the Contractor due to its insolvency);
- the institution of a voluntary bankruptcy or other similar reorganization;
- the failure, neglect, refusal or inability to provide sufficient material,
equipment, services or labor to perform under the terms of the
Construction Contract;
- the failure to make prompt payment of undisputed invoices due to
subcontractors;
- a disregard for or breach of any laws;
- a breach of any representation or warranty given to us;
- a failure to correct any defective work performed under this contract or
within the warranty period; or
- a default of a material obligation under the Construction Contract.
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We may also terminate the Construction Contract if the Contractor fails to
substantially complete the Facility by the guaranteed completion date and cannot
thereafter present a remedial plan that reasonably demonstrates that the
Contractor can achieve substantial completion of the Facility by a date 300 days
after the guaranteed completion date.
If we terminate the Construction Contract early for cause then we may employ
any other contractor to complete the Work. The Contractor will be liable for any
costs above the Contract Price. Upon termination by us, all liquidated damages
then due must be paid by the Contractor.
In addition, we may terminate the Construction Contract for convenience in
whole or in part at any time. If this occurs then the Contractor will
immediately cease the Work, place no further orders, attempt to cancel any
pending orders and execute only that work necessary for the preservation and
protection of the already completed Work. Upon such cancellation we are only
liable to the Contractor for any unpaid aspects of the Work properly performed
by the Contractor, all retained amounts and all necessary costs of the
termination.
The Contractor may terminate the Construction Contract if we fail to pay
undisputed amounts more than 90 days after they are due or if we fail to remedy
any non-monetary default under this contract within 30 days of notice of such
default.
CHANGES IN WORK
No changes to the work or adjustments to the schedule, price or other agreed
upon conditions may occur under the Construction Contract, except in accordance
with a change order in writing, describing the change and its effect, if any,
approved by the parties and the lender, as required.
SUSPENSION
We may suspend the performance of all or any portion of the Work. At any
time thereafter, we may require the Contractor to resume performance of the
suspended Work. If this occurs we will extend the guaranteed completion dates
and the construction schedule by a reasonable amount of time necessary to
account for the suspended period and the Contract Price will be subject to
increase. The Contractor may suspend the Work during any period that we fail to
pay to Contractor any undisputed amounts 10 days after such payments are due.
INDEMNIFICATION
The Contractor must indemnify us, our lenders and the independent engineer
from any third party actions, proceedings, claims, damages, liabilities,
interest, attorney's fees, costs and expenses arising in connection with bodily
injury or property damage caused by the Contractor's or its subcontractor's
negligent act or omission or the presence, discharge, release or threatened
releases of any hazardous materials brought onto the site by the Contractor or a
subcontractor.
We and the Contractor must defend and indemnify the each other against all
claims made by any governmental authority claiming taxes, duties or fees that we
or the Contractor, respectively, are responsible for. These tax indemnification
obligations survive the completion of the Facility and the expiration or
termination of this Construction Contract. It continues for the period of the
applicable statute of limitations for the assessment and collection of these
taxes.
FORCE MAJEURE
An event of force majeure under this Construction Contract means any act or
event beyond the control of, and without the fault or negligence of, the entity
relying on the act or event if it prevents performance of an obligation by that
entity and is reasonably unforeseeable. The Contractor must give us notice
within 24 hours after the Contractor has actual knowledge of a force majeure
event. In this
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notice the Contractor must also include the event, the effect, the anticipated
delay and additional costs due to the force majeure event. If it is
impracticable to give such information the Contractor will provide us will
supplemental notices as is reasonably possible. Within 10 days of receipt of the
notice we will alter the Construction Contract to account for the increased
costs of performance and/or extension of time. If we do not accept the
Contractor's force majeure finding then the propriety of the change order must
be submitted to dispute resolution.
ASSIGNMENT
We may assign all or part of our right, title and interest in the
Construction Contract to any of our affiliates, our lenders or successors to the
ownership of the Facility without the prior written consent of the Contractor;
otherwise the prior written consent of the Contractor is required for an
assignment. The Contractor cannot assign any part or all of its interest in this
contract without our prior written consent.
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OTHER CONSTRUCTION AND ENGINEERING CONTRACTS
We have entered into design, engineering, procurement, construction,
start-up and testing agreements with other contractors with respect to the
project's substation and transmission lines, the water intake system at Enid
Lake, the water pipeline, the wastewater discharge line and the lateral gas
pipeline. These contracts are described in the following paragraphs
ENGINEERING SERVICES AGREEMENT
We entered into a contract with Black & Veatch, LLP dated as of July 24,
1998 for the engineering services and engineering consulting services related to
construction of the gas pipeline, the water intake system at Enid Lake, the
water pipeline, the wastewater discharge line and the project's substation and
transmission lines (the "Off-Site Infrastructure"). In this capacity Black &
Veatch, LLP must:
- develop the conceptual design and the engineering, procurement and
construction bid packages for these facilities; and
- develop the conceptual design for the interconnection of the Facility to
these facilities.
We must:
- obtain all necessary permits and licenses;
- provide all of the specifications that Black & Veatch, LLP require as
engineers;
- provide Black & Veatch, LLP with any soil data; and
- advise Black & Veatch, LLP of the existence and of any plans to dispose of
all hazardous materials.
We must pay to Black & Veatch, LLP the sum of 2.1 times its payroll costs plus
any out of pocket expenses incurred by Black & Veatch, LLP. Black & Veatch, LLP
must send us an invoice that we must pay upon receipt plus an addition carrying
charge of 1.5% per month on all amounts unpaid 30 days following an invoice.
This contract also contains rights and obligations customary to engineering
services agreements of this type with respect to damages, indemnification and
insurance.
ELECTRICAL SUBSTATION AND TRANSMISSION LINE
We have entered into a contract with Lauren Constructors, Inc. dated as of
January 13, 1999 for the design, engineering, procurement, construction and
testing of our electrical substation and transmission lines that will
interconnect to the TVA and Entergy transmission systems. The lump sum price for
this contract is approximately $4,479,015. The contractor is obligated to pay us
$1,000 for each day that the initial operation of the substation and
transmission line is delayed beyond October 1, 1999 and $5,000 for each day that
completion of the substation and transmission lines is delayed beyond December
1, 1999. As of June 30, 1999, approximately 26% of the dollar value of the
contract has been completed and invoiced to us. The obligations of the
contractor are secured by a performance bond and a payment bond.
We have entered into a contract with North American Transformer, Inc. dated
as of January 13, 1999 for the supply of four single phase transformers to be
incorporated into our electrical substation. The lump sum price for this
contract is approximately $3,682,001. The contractor is obligated to pay us
$5,000 for each day that delivery of the transformers is delayed beyond October
30, 1999. The obligations of the supplier are secured by a performance bond and
a payment bond.
We have entered into a contract with Siemens Power Transmission and
Distribution, LLC dated as of January 13, 1999 for the supply of thirteen
circuit breakers to be incorporated into our electrical
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substation. The lump sum price for this contract is approximately $722,370. The
contractor is obligated to pay us $2,500 for each day that delivery of the
circuit breakers is delayed beyond June 1, 1999. To date, all breakers have been
delivered to the site. The obligations of the supplier are secured by a
performance bond and a payment bond.
Each of the three contracts contain rights and obligations customary to
design/construction and/or supply contracts of this type with respect to title
and risk of loss, liabilities, defaults, rights of termination, indemnification
and insurance.
WATER INTAKE INFRASTRUCTURE
We have entered into a contract with Robinson Mechanical Contractors, Inc.
dated as of January 13, 1999 for the design, engineering, procurement,
construction and testing of intake facilities that will withdraw water from Enid
Lake and pump it to the Facility. The lump sum price for this contract is
approximately $4,948,002. The contractor is obligated to pay us $5,000 for each
day that completion of the water intake infrastructure is delayed beyond
November 1, 1999. As of June 30, 1999, approximately 47% of the dollar value of
the contract has been completed and invoiced to us. The obligations of the
contractor are secured by a performance bond and a payment bond. If we transfer
the water intake infrastructure to Panola County, we will no longer be entitled
to receive liquidated damages under this contract.
The contract also contains rights and obligations customary to
design/construction contracts of this type with respect to title and risk of
loss, liabilities, defaults, rights of termination, indemnification and
insurance.
WATER SUPPLY AND WASTEWATER DISCHARGE PIPELINES INFRASTRUCTURE
We have entered into a contract with Garney Companies, Inc. dated as of
March 1, 1999 for the design, engineering, procurement, construction and testing
of a water supply pipeline to transport water from Enid Lake to the Facility and
a wastewater discharge pipeline to transport wastewater from the Facility to the
Little Tallahatchie River. The lump sum price for this contract is approximately
$4,475,000. The contractor is obligated to pay us $1,000 for each day that
initial operation of the water and wastewater pipelines is delayed beyond June
1, 1999 and $5,000 for each day that final completion is delayed beyond November
1, 1999. As of June 30, 1999, approximately 96.5% of the dollar value of the
contract has been completed and invoiced to us. The obligations of the
contractor are secured by a performance bond and a payment bond. If we transfer
the lateral natural gas pipeline to Panola County, we will no longer be entitled
to receive liquidated damages under this contract.
The contract also contains rights and obligations customary to
design/construction contracts of this type with respect to title and risk of
loss, liabilities, defaults, rights of termination, indemnification and
insurance.
LATERAL NATURAL GAS PIPELINE INFRASTRUCTURE
We have entered into a contract with Big Warrior Corporation dated as of
February 4, 1999 for the design, engineering, procurement, construction and
testing of a lateral gas pipeline and related facilities to transport natural
gas from two interstate gas pipelines to our Facility. The lump sum price for
this contract is approximately $8,114,845. The contractor is obligated to pay us
$5,000 for each day that initial operation of the gas pipeline is delayed beyond
October 1, 1999 and $10,000 for each day that final completion is delayed beyond
November 1, 1999. As of June 30, 1999, approximately 60% of the dollar value of
the contract has been completed and invoiced to us. The obligations of the
contractor are secured by a performance bond and a payment bond. If we transfer
the lateral natural gas pipeline to Panola County, we will no longer be entitled
to receive any liquidated damages under this contract.
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The contract also contains rights and obligations customary to
design/construction contracts of this type with respect to title and risk of
loss, liabilities, defaults, rights of termination, indemnification and
insurance.
COMBUSTION TURBINE PARTS BLANKET ORDER
Through the combustion turbine parts order, a letter agreement dated July
20, 1998, we commit to purchase and Westinghouse Power Generation
("Westinghouse") agrees to sell the combustion turbine parts for the Facility.
SPARE PARTS
We must purchase from Westinghouse all combustion turbine spare parts
required during the earlier of the first 48,000 equivalent base load operating
hours of each combustion turbine or the period ending eight years from
commercial operation of such combustion turbine. The spare parts must be
delivered by Westinghouse within Westinghouse's standard lead times not to
exceed twelve months. In the event of unplanned maintenance or if we require the
spare parts earlier than the standard lead times Westinghouse must attempt to
expedite the delivery and both parties must attempt to agree on any additional
charges to be paid by us for expediting the order. In the event that
Westinghouse cannot deliver the parts quick enough or neither party can agree on
the additional charges then we may purchase the spare parts from another source
that can deliver such parts substantially earlier.
PRICE
The price for the initial order of parts is $2,020,056 and may be adjusted
upward according to the Bureau of Labor Statistics price indices at the time of
invoice. We will receive a 20% discount from the price listed in the letter
agreement for any part or for any subsequent order of such part, though the
price may be adjusted upward according to the Bureau of Labor Statistics price
indices at the time of invoice. We may elect to re-negotiate this letter
agreement if the market price of the spare parts significantly decreases.
WARRANTIES
Westinghouse warrants that all parts will be free of defects in workmanship
and materials for the earlier of:
- 42 months from delivery,
- 12 months from installation in the combustion turbine,
- 8,000 equivalent base load operating hours after installation in the
combustion turbine, or
- 400 equivalent starts.
However, the warranty will not extend longer than one year after the expiration
of the term of the letter agreement.
OPERATION AND MAINTENANCE AGREEMENT
We entered into an Operation and Maintenance Agreement with Cogentrix
Batesville Operations, LLC (the "Operator") on August 24, 1998, to provide
operation and maintenance services to most of the Project. Operation and
maintenance services consist of two phases, the pre-commencement phase and the
operational phase. The term of the agreement is 27 years following substantial
completion of the first Unit.
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The pre-commencement phase provides for the transition of the Project from
construction to completion and ends upon the substantial completion of the first
Unit. The Operator's responsibilities include:
- staffing and hiring;
- recruiting and training the personnel to operate the Project;
- developing the on-site rules, regulations and procedures;
- operating and maintaining the Project (where not the obligation of the
Contractor); and
- a pre-commencement phase budget and monthly progress reports.
The Operator's responsibilities from the substantial completion of a Unit
throughout the operational phase of the Project include:
- performing all operation and maintenance for each Unit and the Project;
- arranging for the procurement of all materials and services required for
the operation and maintenance;
- performing the daily administration and coordination of the power purchase
agreements and the electrical interconnection agreements;
- performing the daily administration and coordination of the fuel supply;
- providing all reports, data and other information required by any
agreements or permits; and
- providing an annual operating budget and an annual operating plan.
BUDGETING AND REPORTING
The Operator must submit a proposed pre-commencement phase budget that
contains itemized estimates of payroll, relocation and recruitment costs of
employees, subcontractor costs and Operator insurance costs, the Operator's
management fees and all material and service costs (the "Reimbursable Costs").
Prior to the operational phase of the Project the Operator must propose an
annual operating budget that contains estimates of the Reimbursable Costs and a
proposed inventory plan. We must approve any variation in the agreed upon
pre-commencement phase budget or in any line item of the annual operating budget
that is the greater of 10% of that line item or $25,000.
The Operator must submit the following reports:
- monthly progress reports covering all maintenance and operations for that
month, any procurements, capital improvement, labor relations and
significant interactions with power purchasers, other utilities or
governmental authorities and reimbursable costs;
- an annual operating plan that, subject to our approval, describes the
annual operation and maintenance plan for the Project including hours of
operation, holidays to be observed, schedule of services, consumption of
fuels, projections of electricity sales and any other information that we
may require;
- an annual report comparing the Projects operations with the annual
operating plan and annual operating budget;
- a monthly report summarizing the daily amounts of fuel delivered and
accepted at the Project and consumed by each Unit; and
- a proposed operation and maintenance plan, including scheduled outages,
major maintenance plans and a budget, for the next three years.
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PAYMENT
We must pay the Operator all reimbursable costs, a fee of $390,000, payable
in ten monthly installments for the work performed during the pre-commencement
phase and an annual operating phase fee of $500,000 payable in equal monthly
installments, which operating phase fee will be multiplied by the ratio of Gross
Domestic Product Implicit Price Deflator index on August of the previous years
and the value of the gross domestic product implicit price deflator index on
August 1998. However, we agreed to pay the monthly fee to the Operator only if
we have allocated the required funds to our debt service and reserve accounts in
accordance with the financing documents. We must also pay certain subcontractors
for materials and services outside the scope of the Operator's obligation under
this agreement.
TERMINATION
We may terminate this agreement if:
- the Operator fails to perform under this agreement in accordance with
prudent operating practices and, as a result thereof, an availability
adjustment factor of 92% is not maintained for any fifteen consecutive
month period and cash distributions are prohibited from being distributed
for two consecutive quarters;
- an availability adjustment factor of 90% is not maintained for a 15
consecutive month period and during such period the Senior Debt Service
Coverage Ratio is less than 1. 10/1.00 for two consecutive quarters;
- damage to a substantial portion of the Project that cannot be repaired
within one calendar year occurs; or
- a work stoppage occurs by the Operator's on-site personnel and the
Operator fails to provide replacement workers within ten days.
Upon termination, the Operator must discontinue its services, make reasonable
efforts to cancel, or assign to us, or another operator responsible for
operation and maintenance of the Project, any subcontractor contracts, and take
any other action as may be reasonably requested by us. We must pay the Operator
those amounts due under this contract through the time of termination and for
those reasonable costs incurred by the Operator in implementing the termination.
DEFAULT
The following constitutes a default by either party:
- a material breach of this agreement;
- the voluntary filing of a bankruptcy petition, liquidation or
reorganization;
- admission of insolvency or inability to pay debts;
- the filing of an involuntary bankruptcy petition liquidation or
reorganization;
- failure to maintain good standing in the state of organization; or
- assignment for the benefit of creditors.
If the default is not cured during the applicable cure periods provided in
the agreement then the non-defaulting party may terminate this agreement,
exercise any other remedy available to it under our agreement and/or pursue
another remedy under law or in equity subject to the limits set forth in our
agreement.
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INDEMNIFICATION/LIMITATION ON LIABILITY
Both parties indemnify, hold harmless and defend the other against all
liabilities, claims, demands, suits, legal proceedings, judgments, awards,
losses, damages, costs or expenses (including reasonable legal fees and
expenses) for bodily injuries, death or tangible property damage of third
parties caused by any negligent act or omission, willful misconduct or strict
liability of the indemnifying party or of anyone acting under that party's
direction and control, including subcontractors. With the exception of
indemnities to third parties, neither parties' liability can exceed the
pre-commencement phase fee if the liability accrues during the pre-commencement
phase or the management fee for the year in which the liability accrues if the
liability accrues during the operational phase.
HAZARDOUS MATERIALS
We must indemnify, hold harmless and defend the Operator against all
liability or cost incurred or under environmental laws based on or related to
preexisting hazardous materials at the site. The Operator must indemnify, hold
harmless and defend us against all liability or costs with respect to hazardous
materials introduced on the site or in the services provided by them in
violation of applicable law. The Operator must arrange for the proper
collection, removal and disposal of any hazardous materials furnished, used,
applied, generated or stored at the site. All costs associated with the
transporting and disposing of the hazardous materials to or from the site are
considered reimbursable costs.
ASSIGNMENT
The Operator cannot assign this agreement without our prior written consent,
except for the assignment to:
- a successor as the result of a merger, consolidation or reorganization;
- a purchaser of the Operator that is experienced in the operation and
maintenance of facilities like ours; or
- an affiliate of the Operator, provided such transfer shall not release the
Operator of its obligations.
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MANAGEMENT SERVICES AGREEMENT
We entered into a Management Services Agreement with LS Power Management,
LLC (the "Manager") on August 24, 1998, to provide for the management and
administrative services to the Project. This agreement commences upon the notice
to proceed under the Construction Contract and ends 27 years after substantial
completion of the first Unit.
In providing the management and administrative services, the Manager must:
- handle all financial matters;
- perform all accounting tasks necessary to maintain accurate financial
records of the business and prepare and file all necessary tax returns in
cooperation with an independent public accounting firm;
- prepare and submit all filings required under any laws, regulations or
ordinances and procuring and maintaining all governmental approvals
required;
- engage and supervise any independent contractors;
- purchasing any materials, supplies and equipment required;
- procuring and maintaining all insurance required; and
- supervising and monitoring all of our contracts pertaining to the
construction and operation of the Project.
PAYMENTS
We must pay the Manager $33,333.33 per month, in 1998 dollars, adjusted
annually according to the gross domestic product implicit price deflator index
for its services. Additionally, we must pay a portion of the annual salaries of
the Manager's employees and all of the Manager's reasonable and necessary
expenses incurred in the performance of its duties under this contract. The
Manager must submit a yearly budget to us for our approval detailing these
expenses and salaries. We must also approve any variation in that budget.
TERMINATION
A material breach of this agreement or failure to cure a non-monetary breach
within a reasonable period of time constitutes grounds for termination of this
agreement by the nondefaulting party. However, our failure to pay a disputed
amount is not grounds for termination. Additionally, the Manager may terminate
this agreement after the first 10 years of service under the agreement. In
addition to this right to terminate, we may terminate this agreement if the
Manager and its affiliates' ownership interest in us equals or falls below 10%
although we must pay the Manager's fee for 12 months after the termination.
INDEMNIFICATION
The Manager must indemnify us or any affiliate and any party providing
senior debt financing from any claim, suit or judgment and costs and expenses
that arise in connection with any act or omission on its part, up to a limit of
$500,000. We must indemnify the Manager, or its affiliates, from any claim, suit
or judgment and costs and expenses that arise in connection with any act or
omission on our part or anyone, including the Manager's, acting on our behalf up
to a limit of $500,000. However, our indemnity excludes any act or omission
caused by a breach of this management services agreement or any gross negligence
or willful misconduct on the part of the Manager.
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DISPUTE RESOLUTION
Any dispute involving matters of accounting treatment must be resolved
through the binding resolution of a three member accounting panel consisting of
an accountant appointed by each party and a third party accountant. Any other
claims must first be mediated by a senior manager of each party. Failing that,
either party may seek legal remedies or arbitration.
ENTERGY INTERCONNECTION AGREEMENT
We are a party to an Interconnection and Operation Agreement with Entergy
Mississippi, Inc. ("Entergy"), dated as of May 18, 1998, as amended as of August
18, 1998 (the "Entergy Interconnection Agreement"), which allows us to
interconnect our Facility to Entergy's transmission system.
TERM
The term of this agreement is 35 years, commencing on the date our Facility
is interconnected to Entergy's transmission system. The agreement automatically
renews for succeeding five-year terms unless either party gives three years
written notice prior to the date of termination.
OUR INTERCONNECTION FACILITIES
We must design, construct, install, own, operate and maintain our
interconnection facilities. Our interconnection facilities include all electric
metering, protection and other facilities which are located on our side of the
interconnection point and required to interconnect the Facility with Entergy's
transmission system. The interconnection point is located at Entergy's existing
substation. The design specifications and requirements for our interconnection
facilities must be reviewed and approved by Entergy.
ENTERGY INTERCONNECTION FACILITIES
Entergy must design, construct, install, own, operate and maintain the
Entergy interconnection facilities and system upgrades. Entergy's
interconnection facilities will include all the necessary equipment required to
interconnect Entergy's system with our interconnection facilities. We will
reimburse Entergy for all reasonable costs associated with performing this work.
Both parties will make changes to our respective interconnection facilities as
may be reasonably required to comply with the Entergy Interconnection Agreement
in response to the changing requirements of Entergy's system. Each of us will
make these changes at our own expense, unless the facilities are determined to
be Entergy interconnection facilities, in which case Entergy will install, own
and maintain the facilities, but at our expense. In addition, we and Entergy
will install, own and maintain metering equipment. We are responsible for all
costs of administration, initial installation and changes associated with
metering.
TRANSMISSION
The Entergy Interconnection Agreement does not cover transmission service.
Under our power purchase agreements with Virginia Power and Aquila/Utilicorp,
the power purchasers are responsible for arranging the transmission services
necessary for delivery from the interconnection point into and across Entergy's
system. To the extent energy produced by our Facility is transmitted over
Entergy's transmission system, the transmission service will be purchased at the
rates established by Entergy's tariff.
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UPGRADED FACILITIES
System upgrades include all upgrades or improvements made to Entergy's
existing transmission system in order to interconnect and deliver energy from
our Facility to Entergy's system. We will reimburse Entergy for all reasonable
costs associated with performing this work. Entergy will credit us or our power
purchasers with a system upgrade credit equal to the charges we or our power
purchasers pay for the transmission service under Entergy's tariff used to
deliver power from the Facility. The Entergy system upgrade credit will not
exceed the cost of the Entergy system upgrades paid for by us.
CONTROL AND OPERATION
We must operate our Facility so as to meet the voltage schedules designated
by Entergy's operation personnel, which must be within the normal operating
range of our Facility and consistent with the voltage schedules provided by the
TVA. To the extent energy produced by our Facility is transmitted across
Entergy's transmission system, consistent with Entergy's current effective
transmission tariff, an appropriate adjustment to the charge for reactive supply
and voltage control will be made to reflect the contribution of reactive supply
and voltage support made by our Facility.
We must install and maintain, at our own expense, adequate equipment
required to protect Entergy's system and its customers from faults occurring at
our Facility and to protect our interconnection facilities and our Facility and
our interconnection facilities from faults occurring on the Entergy system or
the system of others to which the Entergy system is connected. At our own
expense, we will maintain operating communications with Entergy's system
dispatcher and will install a remote terminal unit to gather and transmit data
from our meters to a location designated by Entergy. We and Entergy agree that
the implementation of the Entergy Interconnection Agreement will comply with
applicable standards, rules and policies of agencies with responsibilities
related to the operation and reliability of the Entergy transmission grid.
Entergy has the right to disconnect our interconnection facilities without
notice if in Entergy's reasonable opinion a hazardous condition exists and
immediate disconnection is necessary to protect persons, Entergy facilities, or
other customer facilities from damage caused by our interconnection facilities
and/or our Facility, or the lack of properly operating the Entergy system
protection facilities. Entergy will use reasonable care and cooperate reasonably
with us to avoid and minimize interruptions in the acceptance of capacity and
energy from our Facility, keep us fully informed as to the anticipated duration
of each interruption, and restore connection and resume acceptance of capacity
and energy from us as soon as practicable.
Entergy has the right to curtail deliveries of energy from us or disconnect
our interconnection facilities for our failure to comply with the material
provisions of the Entergy Interconnection Agreement. Entergy can also curtail
delivery of energy from us or disconnect our interconnection facilities to the
extent this is required to overcome system reliability problems caused by an
emergency, repairs, maintenance, construction or inspection of any part of
Entergy's equipment or transmission system, facilitate restoration of line or
equipment outages, overcome system reliability problems caused by an outage of
Entergy's equipment or generation facilities, or for any reason otherwise
permitted by applicable rules or regulations.
Entergy will use reasonable care to avoid and minimize curtailments or
disconnections and to coordinate any curtailments or disconnections with
scheduled outages or maintenance of our Facility. Any interruption, curtailment
or disconnection of our interconnection facilities will be done in accordance
with good utility practice, will not be inconsistent with the open access
transmission policies of FERC and will be limited to the extent necessary to
effectively relieve the condition causing such interruption, curtailment or
disconnection. Entergy will keep us fully informed as to the anticipated
duration of each curtailment or disconnection, and will resume acceptance of
deliveries of capacity and energy from us as soon as practicable.
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Entergy has the right to file rate schedules with FERC concerning any
services Entergy deems necessary for reliable and orderly bulk power supply
system management, including, but not limited to, any standby or related
services that may arise from our failure to meet our schedule of deliveries
across facilities covered by the Entergy Interconnection Agreement.
PAYMENTS
We will reimburse Entergy for all actual costs reasonably incurred and
properly documented by Entergy with respect to the design, construction, and
installation of Entergy's interconnection facilities, system upgrades, and all
related equipment. If we fail to make our monthly payments, Entergy has the
right to suspend its performance of work or other obligations under the Entergy
Interconnection Agreement until such time as any overdue amounts have been paid
in full.
FORCE MAJEURE
Entergy will not be responsible for any non-performance under the Entergy
Interconnection Agreement to the extent due to a cause beyond Entergy's control
whether occurring on Entergy's electric system or any connecting electric system
to the extent affecting Entergy's operations, as long as Entergy attempts in
good faith and reasonable diligence to alleviate such situation.
We will not be responsible, to the extent due to a cause beyond our control,
if we are unable to perform an obligation imposed on us by the agreement, except
for the obligation to make payments of money, as long as we attempt in good
faith and reasonable diligence to alleviate such situation.
INDEMNITY
We will indemnify and hold harmless Entergy from and against any and all
claims, demands, liability, losses, damages, costs or expenses (including
attorney's fees and other costs of defense), of any nature or kind whatsoever
arising out of or otherwise resulting from the use, ownership, maintenance or
operation of our Facility or our interconnection facilities. The indemnity will
not apply if the injury or damage is held to have been caused by the sole
negligence or willful misconduct of Entergy.
ASSIGNMENT
With the exception of specific circumstances outlined below, the Entergy
Interconnection Agreement cannot be assigned without the written consent of the
other party, which consent will not be unreasonably withheld. Each party may
assign the Entergy Interconnection Agreement without our consent in connection
with the sale or merger of a substantial portion of its properties. We may
assign the Entergy Interconnection Agreement to our lenders in connection with a
financing of our Facility without Entergy's consent.
TVA INTERCONNECTION AGREEMENT
We are party to an Interconnection Agreement with the Tennessee Valley
Authority ("TVA"), dated as of July 22, 1998 (the "TVA Interconnection
Agreement") which allows us to interconnect our Facility to TVA's transmission
system.
TERM
The primary term of the TVA Interconnection Agreement is 35 years from the
first day after the TVA interconnection facilities and our interconnection
facilities are ready for use. TVA may, from time to time after an initial period
ending five years from the beginning of the primary term, offer us amendments to
the TVA Interconnection Agreement which would make the terms and conditions of
the TVA Interconnection Agreement consistent with those then being offered by
TVA under
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interconnection agreements with companies with generating facilities similar to
our Facility. If, despite good faith negotiation, we and TVA fail to reach
agreement on such an amendment within six months, TVA may terminate the TVA
Interconnection Agreement upon giving us one years' prior notice.
OUR INTERCONNECTION FACILITIES
We must design, install, own, operate and maintain our interconnection
facilities, provide the battery and station service power requirements for
certain TVA interconnection facilities and make available to TVA a portion of
our switchhouse to be maintained and used by TVA in connection with the
operation of the facilities. We must provide the technical specifications and
design drawings for the TVA system protection facilities to TVA for review,
inspection and approval.
TVA INTERCONNECTION FACILITIES
At our expense and consistent with applicable rules and policies, TVA must
install and thereafter own, operate, and maintain the TVA interconnection
facilities. The TVA interconnection facilities include the communication
facilities and other equipment located on TVA's side of the interconnection
point and necessary to accept electrical energy from our Facility. The
interconnection point with TVA is located at a TVA substation existing in
Batesville, Mississippi.
If TVA determines that changes or additions to our interconnection
facilities are necessary to meet the changing conditions and requirements on
TVA's electric system and for the continued safe and reliable operation of our
Facility in parallel with TVA's system, such changes will be made at our
expense. When changes to the TVA interconnection facilities become necessary to
ensure the protection and continued safe and reliable operation of TVA's system,
or when we request them, the changes will be made at our expense.
TRANSMISSION
The TVA Interconnection Agreement does not cover transmission service. Under
our power purchase agreements with Virginia Power and Aquila/Utilicorp, the
power purchasers are responsible for arranging transmission services across
TVA's system for the term of the power purchase agreements. To the extent energy
produced by our Facility is transmitted over TVA's transmission system, the
transmission service will be purchased at the rates established by TVA's tariff.
UPGRADED FACILITIES
TVA will need to upgrade certain of its facilities in conjunction with the
establishment of the point of interconnection. We will be responsible for all
actual costs incurred by TVA in connection with its design, construction and
installation of the upgraded facilities. When changes to the upgraded facilities
become necessary to ensure the protection and continued safe and reliable
operation of TVA's system, or when we request them, TVA must make the changes at
our expense.
TVA will credit us or our power purchasers with a system upgrade credit
equal to the charges we or our power purchasers pay for the transmission service
under TVA's tariff used to deliver power from the Facility. The TVA system
upgrade credit will not exceed the cost of the TVA system upgrades paid for by
us.
CONTROL AND OPERATION
TVA must prepare and submit to us a written voltage schedule which shall be
coordinated and be consistent with the voltage schedules provided by Entergy. We
must comply with the schedule and install, operate and maintain the equipment
needed for compliance. If energy produced by our Facility is transmitted across
the TVA system, an appropriate adjustment to the charge for reactive supply and
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voltage control will be made to reflect the contribution to reactive supply and
voltage support made by our Facility.
Each day we must inform TVA as to the forecasted hourly generation levels of
our Facility for the following day, including any anticipated outages. We must
ensure that there are a sufficient number of qualified personnel for operating
and monitoring our Facility and for coordinating operations of our Facility with
TVA's system.
Subject to good utility practice, TVA may require us to disconnect the
Facility from the TVA system or to interrupt, suspend or curtail deliveries from
the Facility in the following circumstances:
- if, in TVA's sole opinion, a condition exists which presents a physical
threat to persons or property such that disconnection appears necessary;
- to overcome system reliability problems caused by an emergency or an
outage of TVA equipment or generation facilities;
- if necessary to construct, install, maintain, inspect or test any part of
the interconnection facilities or any other affected part of the TVA
system;
- to facilitate restoration of line or equipment outages;
TVA will restore connection and resume performance of its obligations under
the TVA Interconnection Agreement, as soon as practicable.
We must take all actions that are within our control and the capabilities of
our Facility to assure that during each hour the amount of designated output is
equal to or greater than the schedule of energy delivered by TVA to third
parties. In the event a difference occurs between the scheduled amount and the
designated output, we will be required to pay the appropriate charges or other
compensation applied to the difference, which charges or compensation will be
consistent with the charges or other compensation applied to similar power
production facilities, under comparable circumstances, located in the TVA
control area.
DEFAULT
TVA has the right to terminate the TVA Interconnection Agreement upon
certain defaults by us which include bankruptcy or insolvency, delinquency in
payments, refusal to comply with any material provision of the TVA
Interconnection Agreement regarding the balancing on an hourly basis of
electrical output from our Facility and scheduling of energy to third parties,
or failure to comply with any other material provision of the TVA
Interconnection Agreement, if such default is not cured within the cure periods
specified in the TVA Interconnection Agreement, which vary with the nature of
the default.
When the TVA Interconnection Agreement is terminated, other than by TVA's
breach, we must pay TVA for the cost of retiring the TVA interconnection
facilities. TVA must abandon any land rights to property owned or controlled by
us from which TVA interconnection facilities are removed and for which TVA no
longer has any need.
PAYMENTS
We are responsible for and must reimburse TVA for all actual costs
reasonably incurred and properly documented by TVA with respect to the design,
construction, and installation of the TVA interconnection facilities, upgraded
facilities, and all related equipment.
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FORCE MAJEURE
Neither party can be held responsible or liable for any non-performance of
their respective obligations under the agreement to the extent due to a force
beyond the non-performing party's reasonable control, as long as the
non-performing party uses its best efforts to remedy its inability to perform.
INDEMNITY
We must indemnify and hold harmless TVA from and against any and all claims,
demands, liability, losses, damages, costs or expenses of any nature or kind
whatsoever arising out of or otherwise resulting from the use, ownership,
maintenance or operation of our Facility or our interconnection facilities. The
indemnity will not apply if the injury or damage is caused by the sole
negligence or willful misconduct of TVA.
ASSIGNMENT
Neither party may assign the agreement without the written consent of the
other party, which consent cannot be unreasonably withheld. No consent is
required for assignments to an affiliate of the assignor, where the assignee has
assumed all of the obligations of the assignor, provided that the assignee has
demonstrated financial capacity at least equal to that of the assignor, or
assignments due to the sale or merger of a substantial portion of a party's
properties including interconnection facilities it owns. We can also assign the
agreement to our lenders without the consent of TVA.
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ANR GAS INTERCONNECTION AGREEMENT
We are party to an Interconnection Agreement with ANR Pipeline Company
("ANR"), dated July 29, 1998 (the "ANR Interconnection Agreement") to establish
an interconnection in Sardis, Mississippi between the ANR interstate natural gas
pipeline system and our lateral natural gas pipeline.
DESIGN, ENGINEERING AND CONSTRUCTION
Under the ANR Interconnection Agreement, we are responsible for the design,
engineering and construction of our interconnection facilities. In addition, we
are responsible for the design and installation of a pressure control device to
protect and isolate any pipeline facilities of third parties located downstream
from our interconnection facilities. Each party must design, engineer, construct
and install its portion of the interconnection facilities in accordance with
applicable rules, standards and policies. Each party will own title to its
interconnection facilities and is responsible for insuring those interests.
These interconnection facilities will be constructed and installed on land owned
by ANR at ANR's Sardis Compressor Station.
Prior to constructing its portion of the interconnection facilities, each
party must submit to the other party for review and approval drawings,
specifications and construction procedures with respect to its portion of the
interconnection facilities. Each party must use commercially reasonable efforts
to have its portion of the interconnection facilities constructed and ready to
be placed in service by the in-service date of our lateral pipeline, which the
parties expect to occur on or about October 1, 1999.
OWNERSHIP, COSTS AND EXPENSES
We will be required to fully reimburse ANR for all reasonable direct and
indirect costs (up to $250,000) incurred by ANR with respect to the design,
engineering, construction, testing and placing in service of the ANR
interconnection facilities. We will also be required to reimburse ANR for, and
indemnify and hold ANR harmless against, any incremental federal taxes that will
be due and owing by ANR to the Internal Revenue Service if the costs of the ANR
interconnection facilities are deemed to be a contribution in aid of
construction under the Internal Revenue Code. ANR must use commercially
reasonable efforts to minimize such costs.
OPERATION AND MAINTENANCE
Each party is generally responsible for the operation, maintenance, repair
and replacement of its portion of the interconnection facilities, and for all
cost, expense and risk associated therewith. However, ANR will operate and
perform minor maintenance within the capability of ANR's field technicians on
the gas measurement equipment and operate, but not maintain, that portion of our
interconnection facilities located on ANR owned land at the Sardis Compressor
Station. In the case of an emergency involving our interconnection facilities,
ANR will take such steps and incur such expense as ANR determines, are necessary
to abate the emergency and to safeguard life and property. We will reimburse ANR
for all costs and expenses reasonably incurred by ANR with respect to such
emergencies.
All gas delivered by ANR to us at the interconnection facilities will
conform to the specifications set forth in the General Terms and Conditions of
ANR's Federal Energy Regulatory Commission Gas Tariff, Second Revised Volume 1
or any successor thereto. The gas will be delivered at ANR's prevailing line
pressure; however, we and ANR will each make reasonable efforts to control its
respective prevailing line pressure to permit gas to enter our lateral pipeline.
Custody of the gas will transfer from ANR to us after it passes through the
custody transfer point which is the point at which the ANR interconnection
facilities and our interconnection facilities are
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connected. The actual quantity of gas delivered by ANR to us will be determined
using the recorded meter information at this custody transfer point.
PERMITS
We and ANR are responsible for securing and paying for all approvals,
permits, certificates and authorizations required for the construction and
operation of our individual portions of the interconnection facilities.
EASEMENT
ANR will grant us, on a fee-free basis, an easement for the parcels of land
required for the installation, operation and maintenance of our interconnection
facilities and to otherwise permit us to fulfill our rights and obligations
under the ANR Interconnection Agreement.
TERM; TERMINATION
The ANR Interconnection Agreement is in full force and effect until it is
terminated by the mutual agreement of both parties or our final removal and/or
abandonment of our interconnection facilities. Upon notice, either party may
terminate the ANR Interconnection Agreement if the other party has materially
breached its obligations.
LIABILITY AND INDEMNIFICATION
Each party will indemnify the other party for losses, claims, liens,
expenses and damages arising out of its performance or failure of performance of
its obligations under the ANR Interconnection Agreement.
ASSIGNMENT
Neither party may assign the agreement without the written consent of the
other party, which consent shall not be unreasonably withheld, except that each
party has the right to assign the agreement, without consent, in connection with
an assignment to a financially responsible affiliate (with equal or higher
credit rating), an assignment in connection with its financing or, in our case,
an assignment to a public or governmental entity in connection with such
entity's financing of infrastructure related to our Facility.
FORCE MAJEURE EVENT
Neither party will be responsible or liable for any non-performance of their
respective obligations under the agreement to the extent due to an event of
force majeure, so long as the non-performing party attempts in good faith and
with reasonable diligence to remedy its inability to perform.
TENNESSEE GAS INTERCONNECTION AGREEMENT
We are party to a Facilities Agreement with Tennessee Gas Pipeline Company
("Tennessee Gas"), dated June 23, 1998 (the "Tennessee Interconnection
Agreement"), to establish the tap facilities and connecting facilities for the
interconnection between the Tennessee Gas natural gas pipeline system and our
lateral natural gas pipeline.
TAP FACILITIES
Tennessee Gas or its designee must design, install, construct, inspect and
test the tap facilities in accordance with Tennessee Gas' design specifications,
sound and prudent natural gas industry practice and in accordance with
applicable laws. Tennessee Gas must apply for and obtain any applicable
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regulatory or environmental approvals required for the construction, operation
and maintenance of the tap facilities. Tennessee Gas will own the tap
facilities. Tennessee Gas must make reasonable efforts to complete and place
in-service the tap facilities by October 1, 1999.
Tennessee Gas must operate, repair, replace and maintain the tap facilities
at its own cost and expense in accordance with Tennessee Gas' design
specifications, sound and prudent natural gas industry practice and in
accordance with applicable laws. We must provide support for any regulatory
authorization or permitting requirements necessary for the tap facilities.
CONNECTING FACILITIES
We must design, install, construct and test the connecting facilities in
accordance with Tennessee Gas' design specifications, sound and prudent natural
gas industry practice and in accordance with applicable laws. We must submit
drawings, required permits and documentation to Tennessee Gas for approval to
verify compliance with such specifications. We must also make changes and
modifications required to comply with Tennessee Gas, specifications and
reimburse Tennessee Gas the costs associated with the inspection, to the extent
requested by us, and installation of the connecting facilities. We must provide
support for any regulatory authorization or permitting requirements necessary
for the connecting facilities in the event Tennessee Gas installs any connecting
facilities. We are responsible for the acquisition of all necessary
rights-of-way and permits for the connecting facilities and for the site upon
which the connecting facilities will be located. We must provide pressure
regulation and over-pressure protection for our facilities downstream of the
connecting facilities. We will be responsible for the injection of all odorant,
if any, at levels required by all regulatory authorities.
We must also operate, repair, replace and maintain the connecting facilities
at our own cost and expense in accordance with Tennessee Gas' design
specifications, sound and prudent natural gas industry practice and in
accordance with applicable laws. However, Tennessee Gas is responsible for the
operation of the measurement facilities. We will have title to the connecting
facilities.
Tennessee Gas has the right of access to the connecting facilities installed
by us to install tap facilities and to inspect, test and witness our testing of
the connecting facilities. Tennessee Gas also has the right to inspect the
connecting facilities at all reasonable times to ensure that the facilities are
constructed, installed, operated, maintained, inspected and tested in accordance
with Tennessee Gas' design specifications, sound and prudent natural gas
industry practice and in accordance with applicable laws.
PAYMENT
We must pay Tennessee Gas for all costs they incur in connection with the
pre-construction phase, material acquisition phase and the construction phase
for the design, installation, construction, inspection and testing of the tap
facilities, inspection of the connecting facilities and any expenses incurred by
Tennessee Gas in connection with the installation of the connecting facilities.
The total cost is estimated to be $231,000. If Tennessee Gas anticipates that
the total cost will exceed the total estimated cost by 20% or more, Tennessee
Gas must notify us in writing.
TERM; TERMINATION
The term of the Tennessee Interconnection Agreement is from April 15, 1998
until the final removal and/or FERC approved abandonment of any tap facilities
and connecting facilities, unless sooner terminated by us or by Tennessee Gas:
- as a result of our failure to make timely payments;
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- if gas has not flowed through the connecting facilities for the previous
period of 12 consecutive months; or
- in the event we or our designee have caused the connecting facilities to
be disconnected or removed.
LIABILITY AND INDEMNIFICATION
Each party agrees to protect, defend, indemnify and hold harmless the other
party from losses, claims, liens, demands and causes of action arising out of
its negligence, gross negligence or willful misconduct solely related to
activities performed under the Tennessee Interconnection Agreement.
LIENS
Either party must notify the other of a lien upon property of the other,
upon which interconnection related work is located. The other party can require
a bond to indemnify it from the lien.
ASSIGNMENT
Neither party may assign the agreement without the written consent of the
other party, except that either party may assign to any subsidiary or affiliated
company the performance and exercise of its obligations or rights as long as the
assignee performs its obligations. We may assign to a public government entity
without Tennessee Gas' consent.
FORCE MAJEURE
Neither party is liable in damages for acts, omissions or circumstances as a
result of force majeure, provided that suspension of performance is no longer
than the duration of force majeure.
WATER SUPPLY STORAGE AGREEMENT
The water supply storage agreement with the United States of America (the
"Government") represented by the District Engineer of the Vicksburg District of
the United States Army Corps of Engineer (the "District Engineer"), dated June
8, 1998, and amended March 15, 1999, provides for storage in Enid Lake of our
industrial water supply. Enid Lake is approximately 15 miles south of the site
of the Facility. The United States Army Corps of Engineers pursuant to the Flood
Control Act of March 28, 1928, as amended, constructed and now operates the lake
to control flooding in the region.
TERM
This agreement became effective upon approval by the Secretary of the Army
on June 8, 1998, and continues for the life of the Government's Enid Lake
project. In the event the Government no longer operates Enid Lake, our rights
associated with storage may continue subject to the execution of a separate
agreement or additional supplemental agreement with the new operator.
OUR RIGHTS
We have an undivided 7.8% of the storage space in Enid Lake between the
elevations of 205.0 and 230.0 feet. This is estimated to contain 4,500 acre-feet
after adjustments for sediment deposits. We may withdraw water from Enid Lake to
the extent that our storage space allows and we may construct any required
works, plants and pipelines necessary for diverting or withdrawing such water.
The Government must reserve 4,500 acre-feet of storage for us for up to 24
months while we design and construct our water intake storage structure. If we
cannot complete construction within that time, we may terminate this agreement.
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RIGHTS OF THE GOVERNMENT
The Government reserves the right to control and use all of the allocated
storage in Enid Lake in order to control flooding in the area. The Government
further reserves the right to take any necessary measures in its operation of
Enid Lake to preserve life and any property, including the right not to make
downstream releases as the Government deems necessary. The Government makes no
representations to us with respect to the quality or availability of the water
and assumes no responsibility for the treatment of the water. Nothing in this
agreement effects or diminishes the Government's statutory or sovereign powers
with respect to the operation and maintenance of Enid Lake.
SEDIMENTATION SURVEYS
The District Engineer will make sedimentation surveys during the term of
this agreement at intervals not to exceed 15 years unless the District Engineer
determines that such surveys are unnecessary. If the District Engineer
determines that Enid Lake has been affected by unanticipated sedimentation
distribution then it will redistribute the sediment reserve storage space among
all of the parties utilizing and served by Enid Lake including our storage
space. The total available storage space will be reallocated maintaining each
parties' proportionate share of Enid Lake.
USE OF WATER AND METERING
We are solely responsible for the regulation of our water use. We must
install metering devices to measure the amount of water withdrawn from Enid Lake
and give monthly statements of such withdrawals to the Government. We must
acquire any water rights required by state law or regulation for utilization of
the storage. Prior to construction, the District Engineer must approve the
design, location and installation of any facility built to withdraw water from
the storage space.
PAYMENTS
For the period of up to 24 months that we use the Government reserved 4,500
acre-feet of storage while its water intake structure is designed and
constructed, we must pay to the Government $1.00 per acre-foot per year for the
use of the Government reserved 4,500 acre-feet storage while we construct our
water intake structure ($4,500 yearly).
We must pay to the Government an amount equal to the cost allocated to the
water storage rights acquired by us, which is 7.8% of the water storage rights
at Enid Lake. Our cost is estimated to be $1,111,898, subject to adjustments for
the year the initial payment is made. This cost is payable over the life of the
Enid Lake flood control project, but not to exceed 30 years from the due date of
the first annual payment. The first payment must be made the earlier of 30 days
after our initial use of the storage or within 24 months after our notification
by the District Engineer that this water supply storage agreement is effective.
The unpaid balance of our storage cost will accrue interest at a rate
determined pursuant to Section 932 of the 1986 Water Resources Development Act.
In 1998, the rate was 6.75%. At this interest rate our combined yearly principal
and interest payments would total $81,800 with the first payment to be applied
solely against the principal. The interest rate will be adjusted prior to the
first payment to reflect the appropriate interest rate. Thereafter, the interest
rate will be adjusted at five year intervals.
In addition to the annual water storage cost, we must pay, annually, 0.682%
of (i) the costs of any repair, rehabilitation or replacement of Enid Lake
features as a result of any joint use with another entity utilizing Enid Lake
("joint-use") and (ii) the annual joint-use operation and maintenance expenses.
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Upon completion of all of our payments we have the permanent right to use
the water supply storage space in Enid Lake so long as we continue to pay the
annual operation and maintenance costs and costs of any necessary repairs,
rehabilitation or replacement that Enid Lake requires.
ENVIRONMENTAL QUALITY
During the construction, operation and maintenance of the water supply
storage space we must prevent environmental pollution particularly through the:
- reduction of air pollution;
- reduction of water pollution;
- minimization of noise levels;
- on-site and off-site disposal of waste; and
- prevention of landscape damage and defacement.
RELEASE OF CLAIMS
We release the Government, its officers, agents and employees from any
liability for any claim of damages which may be asserted as a result of storage
in Enid Lake, the withdrawal or release of the water from Enid Lake or the
construction, operation and maintenance of our water supply facilities except
for damages due to the Government's negligence or fault.
ASSIGNMENT
We cannot transfer or assign any rights or grant any interest, privilege or
license in this agreement without the approval of the Secretary of the Army or
his duly authorized representative. Credit Suisse First Boston, as agent for the
lenders, is a third party beneficiary of this agreement.
AD VALOREM TAX CONTRACT
Pursuant to an Ad Valorem Tax Contract dated as of August 28, 1998, with the
County of Panola, Mississippi, the City of Batesville, Mississippi, the
Mississippi Department of Economic and Community Development acting for and on
behalf of the State of Mississippi and the Panola County Tax Assessor/ Collector
(the "Government Entities") the Government Entities grant to us several tax
reductions and incentives to construct the Project in Batesville. The Government
Entities have agreed that we are eligible for a fee-in-lieu-of-taxes of not less
than one-third of our state and local taxes.
FEE-IN-LIEU OF TAXES AMOUNT
The fee-in-lieu-of-taxes amount which we must pay equals one-third of the
taxes assessed against us, the Facility, our inventories and any assessable
interest of the industrial water supply system, the wastewater disposal system,
the fire protection system and the lateral gas pipeline provided that the
fee-in-lieu-of-taxes amount will never be less than $1,900,000 per year. The
fee-in-lieu-of-taxes is also subject to all millage changes.
TERM
The fee-in-lieu-of-taxes is for a 10 year period beginning on the first
January 1st after the Facility has been substantially completed and we have
spent at least $100,000,000 on the construction of the Facility. However, if
both of these events occur between January 1st and March 1st of the same year
then the term will commence on January 1st of that year.
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FUTURE ADDITIONS
To the extent lawfully available, the Government Entities will apply this
agreement to any expansions, improvements or equipment replacements provided
that we comply with our material obligations under this ad valorem tax
agreement. If any of the exemptions or credits expire pursuant to statute, then
we are "grandfathered" into such exceptions or credits to the extent permissible
under law.
TERMINATION
We must maintain the Facility and keep it capable of being operated other
than during periods when the Facility is not available because of maintenance or
repair or for reasons beyond our control. If we fail to do so, this agreement
will terminate on the January 1st following our failure.
ASSIGNABILITY
We may assign this agreement as long we substantially comply with the terms
of this agreement and obtain written approval from the county.
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DESCRIPTION OF THE EXCHANGE BONDS
GENERAL
The Partnership and the Funding Corporation will issue the Exchange Bonds
under the Indenture dated May 21, 1999 (the "Indenture") among the Partnership,
the Funding Corporation and The Bank of New York, as trustee (the "Trustee").
The Exchange Bonds will evidence the same indebtedness as the Bonds which they
replace, and will be entitled to the benefits of the Indenture. The form and
terms of the Exchange Bonds are the same as the form and terms of the Bonds
except that (i) the Exchange Bonds will have been registered under the
Securities Act, and, therefore, the Exchange Bonds will not bear legends
restricting the transfer thereof and (ii) Holders of the Exchange Bonds will not
be entitled to certain rights of Holders of the Bonds under the Registration
Rights Agreement, which rights will terminate upon the consummation of the
Exchange Offer. The terms of the Exchange Bonds include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "TIA"), as in effect on the date of the Indenture.
You can find the definitions of certain terms used in this description in Annex
A to this prospectus. The following description is a summary of the material
provisions of the Exchange Bonds and the Indenture. It does not restate the
Exchange Bonds and the Indenture in their entirety. We urge you to read the
Exchange Bonds and the Indenture because they, and not this description, define
your rights as a holder of the Exchange Bonds. You may obtain a copy of the
Exchange Bonds and the Indenture from the Issuers.
PRINCIPAL, MATURITY AND INTEREST
The Partnership and the Funding Corporation will issue the Exchange Bonds in
two series in the following total principal amounts: $150,000,000 7.164% Series
C Senior Secured Bonds due 2014 (the "Senior C Bonds"); and $176,000,000 8.160%
Series D Senior Secured Bonds due 2025 (the "Series D Bonds"). The Series C
Bonds will mature on January 15, 2014; and the Series D Bonds will mature on
July 15, 2025.
Each series of Exchange Bonds will bear interest at the annual rate
applicable to that series stated on the cover of this prospectus from May 21,
1999. The Issuers will be required to pay interest on the Bonds on each January
15 and July 15, commencing January 15, 2000, to the holders of record on the
immediately preceding January 1 and July 1. Interest on the Exchange Bonds will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months. The
interest rate on the Exchange Bonds may be increased under the circumstances
described under the caption "--Registration Rights."
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The Issuers will be required to pay principal of the Series C Bonds as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
- ------------------------------------------------------------------------------------------- -------------------------
<S> <C>
July 15, 2001.............................................................................. 2.75%
January 15, 2002........................................................................... 2.75%
July 15, 2002.............................................................................. 2.30%
January 15, 2003........................................................................... 2.30%
July 15, 2003.............................................................................. 2.45%
January 15, 2004........................................................................... 2.45%
July 15, 2004.............................................................................. 2.60%
January 15, 2005........................................................................... 2.60%
July 15, 2005.............................................................................. 3.80%
January 15, 2006........................................................................... 3.80%
July 15, 2006.............................................................................. 4.15%
January 15, 2007........................................................................... 4.15%
July 15, 2007.............................................................................. 4.20%
January 15, 2008........................................................................... 4.20%
July 15, 2008.............................................................................. 4.35%
January 15, 2009........................................................................... 4.35%
July 15, 2009.............................................................................. 4.50%
January 15, 2010........................................................................... 4.50%
July 15, 2010.............................................................................. 4.70%
January 15, 2011........................................................................... 4.70%
July 15, 2011.............................................................................. 5.10%
January 15, 2012........................................................................... 5.10%
July 15, 2012.............................................................................. 5.10%
January 15, 2013........................................................................... 5.10%
July 15, 2013.............................................................................. 4.00%
January 15, 2014........................................................................... 4.00%
</TABLE>
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The Issuers will be required to pay principal of the Series D Bonds as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C>
July 15, 2014.............................................................................. 2.65%
January 15, 2015........................................................................... 2.65%
July 15, 2015.............................................................................. 2.85%
January 15, 2016........................................................................... 2.85%
July 15, 2016.............................................................................. 2.85%
January 15, 2017........................................................................... 2.85%
July 15, 2017.............................................................................. 3.00%
January 15, 2018........................................................................... 3.00%
July 15, 2018.............................................................................. 2.90%
January 15, 2019........................................................................... 2.90%
July 15, 2019.............................................................................. 3.45%
January 15, 2020........................................................................... 3.45%
July 15, 2020.............................................................................. 2.15%
January 15, 2021........................................................................... 2.15%
July 15, 2021.............................................................................. 5.25%
January 15, 2022........................................................................... 5.25%
July 15, 2022.............................................................................. 5.35%
January 15, 2023........................................................................... 5.35%
July 15, 2023.............................................................................. 5.40%
January 15, 2024........................................................................... 5.40%
July 15, 2024.............................................................................. 6.90%
January 15, 2025........................................................................... 6.90%
July 15, 2025.............................................................................. 14.50%
</TABLE>
The principal of, premium, if any, and interest on the Exchange Bonds will
be payable, and the Exchange Bonds will be exchangeable and transferable, at the
office or agency that the Issuers maintain in the Borough of Manhattan, The City
of New York for such purposes. Initially that office will be the office of the
Trustee located at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration. Alternatively, the Issuers, at their
option, may make interest payments on the Exchange Bonds by check mailed to the
addresses of the persons entitled to payment as those addresses appear in the
security register.
The Exchange Bonds will not be entitled to the benefit of any sinking fund.
ISSUANCE OF ADDITIONAL BONDS
The Issuers may issue additional Bonds under the Indenture (the "Additional
Bonds") in accordance with the conditions described therein. Any Additional
Bonds will rank equivalent in right of payment to the Bonds and will vote on all
matters with the Exchange Bonds. For purposes of this "Description of the
Bonds," reference to the Bonds does not include Additional Bonds unless
otherwise indicated. No offering of any Additional Bonds is being or will in any
manner be deemed to be made by this prospectus. For a description of the
conditions under which the Issuers may issue Additional Bonds, see "Description
of Principal Financing Documents--Indenture--Certain Covenants--Limitation on
Indebtedness of the Partnership."
NONRECOURSE OBLIGATIONS
The obligations to pay principal of, premium, if any, and interest on the
Exchange Bonds will be obligations only of the Partnership and the Funding
Corporation. None of the Issuers' partners,
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shareholders, affiliates, employees, officers, directors or any other person or
entity will guarantee the Exchange Bonds or have any obligation to make any
payments on the Exchange Bonds.
SECURITY
The Exchange Bonds will be secured by:
- a mortgage on the Site and the Easements;
- a security interest in substantially all of the personal property of the
Partnership and the Funding Corporation (other than the Aquila PPA Reserve
Account and any account the Partnership may establish for the benefit of
Panola County or another governmental entity in connection with the
transfer of the Infrastructure);
- a pledge by Holding and LSP Energy of all of their interests in the
Partnership;
- a pledge by Holding of all of the capital stock of LSP Energy; and
- a pledge by Holding of all of the capital stock of the Funding
Corporation.
Any Additional Bonds issued will share equally and ratably in the Collateral
with the Exchange Bonds. Certain other Indebtedness may also share equally and
ratably in the Collateral with the Exchange Bonds. See "Description of Principal
Financing Documents--Indenture--Certain Covenants--Limitation on Liens." In
addition, the Lien in favor of the Collateral Agent under the Security Documents
will automatically be released upon conveyance or disposition of certain of the
Partnership's assets which the Financing Documents permit the Partnership to
convey or dispose of.
RANKING
The Exchange Bonds:
- will be senior secured obligations of the Partnership and the Funding
Corporation;
- will rank equivalent in right of payment to all other senior secured
obligations of the Partnership and the Funding Corporation; and
- will rank senior in right of payment to all existing and future
subordinated debt of the Partnership and the Funding Corporation.
RATINGS
Moody's and S&P have assigned the Exchange Bonds ratings of "Baa3" and
"BBB--", respectively. Each such rating reflects only the view of the applicable
Rating Agency at the time the rating was issued, and any explanation of the
significance of such rating may be obtained only from such Rating Agency. There
can be no assurance that any such rating will remain in effect for any given
period of time or that such rating will not be lowered, suspended or withdrawn
entirely by the applicable Rating Agency, if, in such Rating Agency's judgment,
circumstances so warrant. Any such lowering, suspension or withdrawal by any
Rating Agency may have an adverse effect on the market price or marketability of
the Bonds.
OPTIONAL REDEMPTION
Each series of the Exchange Bonds and Additional Bonds will be redeemable,
at the option of the Issuers, at any time in whole or from time to time in part,
on not less than 30 nor more than 60 days' prior notice to the holders of that
series of Exchange Bonds or Additional Bonds, on any date prior to its maturity
(a "Redemption Date"), at a redemption price equal to:
- 100% of the outstanding principal amount of the Exchange Bonds being
redeemed; plus
- accrued and unpaid interest on the Exchange Bonds being redeemed to but
not including the Redemption Date; PLUS
- a Make-Whole Premium.
In no event will the redemption price ever be less than 100% of the
principal amount of the Exchange Bonds being redeemed plus accrued and unpaid
interest thereon to the Redemption Date.
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MANDATORY REDEMPTION
IF A CASUALTY EVENT OCCURS
If:
- a Casualty Event occurs,
- the Partnership receives more than $5,000,000 of Casualty Proceeds because
of the Casualty Event, and
- either:
- the Partnership decides not to rebuild, repair or restore the Project
after the Casualty Event, or
- the Project cannot be rebuilt, repaired or restored to operate on a
Commercially Feasible Basis and the Independent Engineer confirms this
fact,
then the Issuers will have to use the Casualty Proceeds that the Partnership
receives to redeem Exchange Bonds and prepay some of the other Senior Secured
Obligations. The redemption price for the Exchange Bonds being redeemed will be
equal to 100% of the outstanding principal amount of the Exchange Bonds being
redeemed PLUS accrued and unpaid interest on the Exchange Bonds being redeemed
to but not including the date of redemption.
If:
- a Casualty Event occurs,
- the Partnership receives Casualty Proceeds because of the Casualty Event,
- the Project can be rebuilt, repaired or restored to operate on a
Commercially Feasible Basis and the Independent Engineer confirms this
fact, and
- more than $5,000,000 of Casualty Proceeds are left over after the
Partnership finishes rebuilding, repairing or restoring the Project,
then, after giving effect to the cost of such rebuilding, repairing or
restoring of the Project, the Issuers will have to use the remaining Casualty
Proceeds that the Partnership receives in excess of $5,000,000 to redeem
Exchange Bonds and prepay some of the other Senior Secured Obligations unless
the Issuers receive written confirmation that the Casualty Event (after taking
into consideration the rebuilding, repair or restoration) will not result in a
Rating Downgrade. The redemption price for the Exchange Bonds being redeemed
will be equal to 100% of the outstanding principal amount of the Exchange Bonds
being redeemed PLUS accrued and unpaid interest on the Exchange Bonds being
redeemed to but not including the date of redemption.
IF AN EXPROPRIATION EVENT OCCURS
If:
- an Expropriation Event occurs,
- the Partnership receives more than $5,000,000 of Expropriation Proceeds
because of the Expropriation Event, and
- either:
- the Partnership decides not to rebuild, repair or restore the Project
after the Expropriation Event, or
- the Project cannot be rebuilt, repaired or restored to operate on a
Commercially Feasible Basis and the Independent Engineer confirms this
fact,
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then the Issuers will have to use the Expropriation Proceeds that the
Partnership receives to redeem Exchange Bonds and prepay some of the other
Senior Secured Obligations. The redemption price for the Exchange Bonds being
redeemed will be equal to 100% of the outstanding principal amount of the
Exchange Bonds being redeemed PLUS accrued and unpaid interest on the Exchange
Bonds being redeemed to but not including the date of redemption.
If:
- an Expropriation Event occurs,
- the Partnership receives Expropriation Proceeds because of the
Expropriation Event,
- the Project can be rebuilt, repaired or restored to operate on a
Commercially Feasible Basis and the Independent Engineer confirms this
fact, and
- more than $5,000,000 of Expropriation Proceeds are left over after the
Partnership finishes rebuilding, repairing or restoring the Project,
then, after giving effect to the cost of such rebuilding, repairing or restoring
the Project, the Issuers will have to use the remaining Expropriation Proceeds
that the Partnership receives in excess of $5,000,000 to redeem Exchange Bonds
and prepay some of the other Senior Secured Obligations unless the Issuers
receive written confirmation that the Expropriation Event (after taking into
consideration the rebuilding, repair or restoration) will not result in a Rating
Downgrade. The redemption price for the Exchange Bonds being redeemed will be
equal to 100% of the outstanding principal amount of the Exchange Bonds being
redeemed PLUS accrued and unpaid interest on the Exchange Bonds being redeemed
to but not including the date of redemption.
IF A TITLE EVENT EXISTS
If:
- a Title Event exists,
- the Collateral Agent receives more than $5,000,000 of Title Proceeds
because of such Title Event, and
- either:
- the Partnership decides not to fix the Title Event, or
- the Title Event cannot be fixed so that the Project is able to operate on
a Commercially Feasible Basis and the Independent Engineer confirms this
fact,
then the Issuers will have to use the Title Proceeds that the Collateral Agent
receives to redeem Exchange Bonds and prepay some of the other Senior Secured
Obligations. The redemption price for the Exchange Bonds being redeemed will be
equal to 100% of the outstanding principal amount of the Exchange Bonds being
redeemed PLUS accrued and unpaid interest on the Exchange Bonds being redeemed
to but not including the date of redemption.
If:
- a Title Event exists,
- the Collateral Agent receives Title Proceeds because of such Title Event,
- the Title Event can be fixed so that the Project can operate on a
Commercially Feasible Basis and the Independent Engineer confirms this
fact, and
- more than $5,000,000 of Title Proceeds are left over after the Title Event
is fixed,
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then, after giving effect to the fixing of the Title Event, the Issuers will
have to use the remaining Title Proceeds that the Collateral Agent receives in
excess of $5,000,000 to redeem Exchange Bonds and prepay some of the other
Senior Secured Obligations unless the Issuers receive written confirmation that
the Title Event (after taking into consideration the fixing of the Title Event)
will not result in a Rating Downgrade. The redemption price for the Exchange
Bonds being redeemed will be equal to 100% of the outstanding principal amount
of the Exchange Bonds being redeemed PLUS accrued and unpaid interest on the
Exchange Bonds being redeemed to but not including the date of redemption.
IF ONE OR MORE OF THE PARTNERSHIP'S POWER CONTRACTS IS BOUGHT-OUT
If the Partnership receives more than $10,000,000 of proceeds from PPA
Buy-Outs, the Issuers will have to use these proceeds to redeem Exchange Bonds
and prepay some of the other Senior Secured Obligations unless the Issuers
receive written confirmation that the PPA Buy-Outs will not result in a Rating
Downgrade. The redemption price for the Exchange Bonds being redeemed will be
equal to 100% of the outstanding principal amount of the Exchange Bonds being
redeemed PLUS accrued and unpaid interest on the Exchange Bonds being redeemed
to but not including the date of redemption.
IF THE PARTNERSHIP RECEIVES PERFORMANCE LIQUIDATED DAMAGES
If the Partnership receives more than $10,000,000 of Performance Liquidated
Damages under the Construction Contract, the Issuers will have to use these
proceeds to redeem Exchange Bonds and prepay some of the other Senior Secured
Obligations unless the Issuers receive written confirmation that the
circumstance which resulted in the Partnership's receipt of Performance
Liquidated Damages will not result in a Rating Downgrade. The redemption price
for the Exchange Bonds being redeemed will be equal to 100% of the outstanding
principal amount of the Exchange Bonds being redeemed PLUS accrued and unpaid
interest on the Exchange Bonds being redeemed to but not including the date of
redemption.
IF THE PARTNERSHIP RECEIVES DEFAULT EQUITY CONTRIBUTIONS
If the Partnership receives Default Equity Contributions and the Senior
Secured Parties decide to apply these Default Equity Contributions to the
redemption or prepayment of Senior Secured Obligations in accordance with the
Intercreditor Agreement, the Issuers will have to use these proceeds to redeem
Exchange Bonds and prepay some of the other Senior Secured Obligations. The
redemption price for the Exchange Bonds being redeemed will be equal to 100% of
the outstanding principal amount of the Exchange Bonds being redeemed PLUS
accrued and unpaid interest on the Exchange Bonds being redeemed to but not
including the date of redemption.
REDEMPTION AT THE OPTION OF THE BONDHOLDERS
IF A CHANGE OF CONTROL OCCURS
If a Change of Control occurs, any Bondholder can request that the Issuers
redeem all or a portion of the Exchange Bonds held by that Bondholder. In
response to any such request, the Issuers will be required to redeem all
Exchange Bonds which are subject to the request at a redemption price equal to
101% of the outstanding principal amount of the Exchange Bonds being redeemed
plus accrued and unpaid interest on the Exchange Bonds being redeemed to but not
including the date of redemption.
IF MONIES REMAIN ON DEPOSIT IN THE DISTRIBUTION SUSPENSE ACCOUNT
If:
- funds remain on deposit in the Distribution Suspense Account for at least
12 months in a row,
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- the Issuers decide to have the Bondholders vote on whether the Issuers
should use these funds to redeem Bonds, and
- Bondholders holding at least 66 2/3% of the outstanding Bonds vote to have
the Issuers use these funds to redeem Bonds,
then the Issuers will have to use the funds which have remained on deposit in
the Distribution Suspense Account for at least 12 months in a row to redeem
Exchange Bonds and prepay some of the other Senior Secured Obligations. The
redemption price for the Exchange Bonds being redeemed will be equal to 100% of
the outstanding principal amount of the Exchange Bonds being redeemed PLUS
accrued and unpaid interest on the Exchange Bonds being redeemed to but not
including the date of redemption. If the Issuers are not required to redeem
Bonds and prepay other Senior Secured Obligations with those funds following the
vote of the Bondholders, then the Partnership will be permitted to distribute
those funds to its partners without regard to the satisfaction of any
Distribution Conditions relating to the Senior Debt Service Coverage Ratio or
the Projected Senior Debt Service Coverage Ratio.
TERMS OF MANDATORY REDEMPTION
If the Exchange Bonds are redeemed pursuant to any of the foregoing
provisions, the proceeds used to redeem the Exchange Bonds will be applied:
- pro rata to the Exchange Bonds and the other Senior Secured Obligations
which require redemption or repayment, based upon the then outstanding
principal amounts of the Exchange Bonds and such other Senior Secured
Obligations; and
- pro rata among each of the series of the Bonds and Additional Bonds, based
upon the then outstanding principal amounts of each series of Bonds and
Additional Bonds.
The Issuers will mail a notice of redemption to each holder of the series of
Bonds or Additional Bonds being redeemed at such holder's address of record.
Interest will cease to accrue on any series of Bonds or Additional Bonds on and
after the Redemption Date.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Bonds will be represented by one or more global bonds in
registered form (the "Global Bonds") issued to The Depository Trust Company
("DTC") and registered in the name of Cede & Co., as nominee of DTC. The Trustee
will act as custodian (the "Custodian") of each Global Bond for DTC or will
appoint a sub-custodian to act in that capacity. Because a nominee of DTC will
be the holder of record of each Global Bond, each person owning a beneficial
interest in each Global Bond must rely upon the procedures of the institutions
having accounts with DTC to exercise or be entitled to any of the rights of a
holder.
If you are an Institutional Accredited Investor, the Issuers will issue your
Exchange Bonds to you or your nominee as registered definitive Exchange Bonds,
without coupons ("Definitive Bonds"), rather than to Cede & Co. The Issuers will
also issue Definitive Bonds instead of Global Bonds if:
- the Partnership or the Funding Corporation advise the Trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depositary for the Exchange Bonds and the Partnership
and the Funding Corporation do not locate a qualified successor within 120
days;
- the Partnership or the Funding Corporation elect to terminate the
book-entry system through DTC for the Exchange Bonds; or
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- after an Event of Default occurs, beneficial owners of not less than 51%
of the outstanding principal amount of the Bonds represented by the Global
Bonds advise the Trustee through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) with respect to the
Bonds is no longer in such beneficial owners' best interest.
DTC has advised the Partnership and the Funding Corporation as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act; and
- DTC was created to hold securities of institutions that have accounts with
DTC participants and to facilitate the clearance and settlement of
securities transactions among its participants in those securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates.
Upon the issuance of the Global Bonds, DTC will credit on its book-entry
registration and transfer system the respective principal amounts of the
Exchange Bonds represented by such Global Bonds to the accounts of participants.
Ownership of beneficial interests in the Global Bonds will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Bonds will be shown on, and the transfer
of those ownership interests will be effected only through, records maintained
by DTC (with respect to participants' interests) and such participants (with
respect to the owners of beneficial interests in the Global Bonds other than
participants).
Payment of principal of and interest on Exchange Bonds represented by the
Global Bonds registered in the name of and held by DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the registered owner and
holder of the Global Bonds.
The Partnership and the Funding Corporation expect that DTC or its nominee,
upon receipt of any payment of principal or interest in respect of a Global
Bond, will credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Bond as shown on the records of DTC or its nominee. The Partnership and the
Funding Corporation also expect that payments by participants to owners of
beneficial interests in such Global Bonds held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in street name, and will be the responsibility of such participants. Neither the
Partnership, the Funding Corporation, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Bonds
for any Exchange Bonds or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or the relationship between such
participants and owners of beneficial interests in the Global Bonds owning
through such participants.
TRANSFER AND EXCHANGE
A Bondholder may transfer or exchange Exchange Bonds only in accordance with
and subject to the restrictions on transfer contained in the Indenture. The
security registrar and the Trustee may require a Bondholder, among other things,
to furnish appropriate endorsements and transfer documents and the Issuers may
require a Bondholder to pay any taxes and fees required by law or permitted by
the Indenture. The Issuers are not required to transfer or exchange any Exchange
Bond for a period of 15 days before a selection of Exchange Bonds to be
redeemed.
The registered holder of an Exchange Bond will be treated as the owner of it
for all purposes.
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DESCRIPTION OF THE PRINCIPAL FINANCING DOCUMENTS
The following summaries of certain provisions of the Financing Documents do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions thereof, including definitions
therein of certain terms. Copies of the Financing Documents will be available
for inspection at the principal executive offices of the Partnership upon
written request of any potential investor.
INDENTURE
GENERAL
The Partnership and the Funding Corporation issued the Private Bonds, and
will issue the Exchange Bonds, under the Indenture. The Private Bonds were
issued in two series pursuant to two supplemental indentures which set forth the
terms of each series, and the Exchange Bonds will be issued in two series
pursuant to two supplemental indentures which set forth the terms of each
series.
CERTAIN COVENANTS
The Indenture contains various covenants, including the following:
LIMITATION ON INDEBTEDNESS OF THE PARTNERSHIP
The Partnership will not create or incur or suffer to exist any
Indebtedness, other than the following Indebtedness ("Permitted Indebtedness"):
- the Senior Secured Obligations;
- purchase money or capital lease obligations up to $5,000,000 incurred to
finance readily replaceable personal property;
- trade accounts payable (other than for borrowed money) which arise in the
ordinary course of business and which are payable within 90 days;
- guarantees of Permitted Indebtedness;
- replacements for or financings of the Virginia Power letters of credit;
- subordinated indebtedness issued to the Partnership by a partner or an
affiliate of the Partnership which is not secured by the Collateral;
- working capital loans up to $10,000,000 that are used to pay O&M Costs;
- subject to certain restrictions contained in the Financing Documents,
Indebtedness incurred under any agreement providing for the issuance of
one or more Debt Service Reserve L/Cs or Aquila Reserve L/Cs;
- Indebtedness incurred for Required Modifications, as long as either of the
following conditions is satisfied:
(a) the minimum Projected Senior Debt Service Coverage Ratio for each
fiscal year for the remaining term of the Bonds (after taking into
account such Indebtedness, and provided that for purposes of this
calculation operating revenues will be based on the assumption that
each Power Purchase Agreement expires at the end of its initial term
unless an extension notice has been given pursuant to such agreement)
is greater than or equal to (x) 1.20/1.00 during the 100% PPA Period,
(y) 1.35/1.00 during the Two-Thirds PPA Period
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and (z) 1.50/1.00 during the One-Third PPA Period and the Merchant
Period, as certified by the Partnership and confirmed by the
Independent Engineer, or
(b) the incurrence of such Indebtedness will not result in a Rating
Downgrade;
- Indebtedness incurred for Optional Modifications, as long as either of the
following conditions is satisfied:
(a) after taking into account such Indebtedness:
(1) the minimum Projected Senior Debt Service Coverage Ratio for each
fiscal year during the remaining term of the Bonds (provided that
for purposes of this calculation operating revenues will be based
on the assumption that each Power Purchase Agreement expires at
the end of its initial term unless an extension notice has been
given pursuant to such agreement) is greater than or equal to (x)
1.45/1.00 during the 100% PPA Period, (y) 1.70/1.00 during
Two-Thirds PPA Period and (z) 2.00/1.00 during the One-Third PPA
Period and the Merchant Period, as certified by the Partnership
and confirmed by the Independent Engineer, and
(2) the average annual Projected Senior Debt Service Coverage Ratio
during the remaining term of the Bonds (provided that for
purposes of this calculation operating revenues will be based on
the assumption that each Power Purchase Agreement expires at the
end of its initial term unless an extension notice has been given
pursuant to such agreement) is greater than or equal to (x)
1.45/1.00 during the 100% PPA Period, (y) 1.75/1.00 during the
Two-Thirds PPA Period and (z) 2.25/1.00 the One-Third PPA Period
and the Merchant Period, as certified by the Partnership and
confirmed by the Independent Engineer, or
(b) the incurrence of such Indebtedness will not result in a Rating
Downgrade;
- Indebtedness incurred for Expansion Modifications, as long the incurrence
of such Indebtedness will not result in a Rating Downgrade;
- Bonding Arrangements for a Good Faith Contest or as otherwise permitted
under the Transaction Documents; and
- indemnities and similar obligations arising under the Transaction
Documents.
LIMITATION ON LIENS
The Partnership will not create or suffer to exist or permit any Lien upon
any of its properties, other than the following Liens ("Permitted Liens"):
- Liens specifically created or required to be created by the Indenture or
any other Financing Document;
- Liens securing Senior Secured Obligations;
- Liens for Bonding Arrangements permitted by the Indenture consisting of
Liens on cash collateral and related investments held as cash cover for
the Bonding Arrangements in an aggregate amount, at any time outstanding,
not exceeding $7,000,000 plus monies from amounts otherwise available to
the partners of the Partnership as a distribution permitted in accordance
with the terms described under the caption "Distributions";
- Liens for taxes which are either not yet due or are due but payable
without penalty or are the subject of a Good Faith Contest;
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- any exceptions to title existing on the Closing Date and set forth on the
Title Policy;
- defects, easements, rights of way, restrictions, irregularities,
encumbrances and clouds on title and statutory Liens that do not
materially impair the property affected and that do not individually or in
the aggregate materially impair the value of the security interests
granted under the Security Documents;
- deposits or pledges to secure statutory obligations or appeals, release of
attachments, stay of execution or injunction, performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or
leases, or for purposes of like general nature in the ordinary course of
business;
- Liens for worker's compensation, unemployment insurance or other social
security or pension or similar obligations;
- legal or equitable encumbrances deemed to exist because of the existence
of any litigation or other legal proceeding if they are the subject of a
Good Faith Contest;
- mechanics', workmen's, materialmen's, suppliers', construction or other
similar Liens arising in the ordinary course of business or incident to
the construction, operation, repair, restoration or improvement of any
property for obligations which are not yet due or which are the subject of
a Good Faith Contest;
- Liens on assets acquired with the proceeds of permitted purchase money or
capital lease obligations and Liens on cash collateral and related
investments held as cash cover with respect to replacements for the
Virginia Power Letter of Credit or Aquila/UtiliCorp letters of credit;
- a Lien in favor of Aquila/UtiliCorp on the Aquila PPA Reserve Account;
- a Lien in favor of the County and/or the State of Mississippi in an
account that the Partnership may establish in connection with its transfer
of the Infrastructure to the County;
- Liens to secure any other Permitted Indebtedness, so long as such Liens:
(a) are not superior in right to the Liens provided to the Bondholders
under the Security Documents, and
(b) secure such Indebtedness equally and ratably with the Bonds or on a
basis subordinated to the Bonds; and
- Liens substantially similar to certain of the Liens described above so
long as any such Lien, if foreclosed upon, would not reasonably be
expected to result in a Material Adverse Effect.
DISTRIBUTIONS
The Partnership will not make a distribution to its equity holders unless
the following conditions (the "Distribution Conditions") are satisfied on the
distribution date:
- all required transfers and payments described under the caption "--Common
Agreement-- Deposit and Disbursement of Funds" have been completed;
- immediately after giving effect to the proposed distribution, the Account
Balance Amount will be equal to or greater than the Account Reserve
Requirement (this condition applies only if the distribution date is not a
Scheduled Payment Date);
- no Default or Event of Default has occurred and is continuing or will
result from the distribution;
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- if the Test Period consists entirely of the Two-Thirds PPA Period and/or
the 100% PPA Period, the following conditions must be satisfied:
(a) the Senior Debt Service Coverage Ratio is greater than or equal to
the Required Ratio for the six-month period (or, with respect to the
distribution dates that occur within six months after the Commercial
Operation Date, the period commencing on the Commercial Operation
Date and ending on such distribution date) preceding the distribution
date, and
(b) the Projected Senior Debt Service Coverage Ratio is greater than or
equal to the Required Ratio for the six-month period succeeding the
distribution date;
- if a portion of the Test Period consists of the 100% PPA Period and/or the
Two-Thirds PPA Period and a portion of the Test Period consists of the
One-Third PPA Period and/or the Merchant Period, the following conditions
must be satisfied:
(a) for the portion of the Test Period which consists of the 100% PPA
Period and/or the Two-Thirds PPA Period:
(1) the Senior Debt Service Coverage Ratio for such portion is
greater than or equal to the Required Ratio during the period
beginning on the date which is six months prior to the
distribution date and ending on the distribution date;
(2) the Projected Senior Debt Service Coverage Ratio for such portion
is greater than or equal to the Required Ratio during the period
beginning on the distribution date and ending on the date which
is six months after the distribution date; and
(b) for the portion of the Test Period which consists of the One-Third
PPA Period and/or the Merchant Period:
(1) the Senior Debt Service Coverage Ratio for such portion is
greater than or equal to the Required Ratio during the period
beginning on the date which is one year prior to the distribution
date and ending on the distribution date, PROVIDED that such
portion will not be taken into account unless it consists of at
least two fiscal quarters;
(2) the Projected Senior Debt Service Coverage Ratio for the portion
of the period described below which consists of the One-Third PPA
Period and/or the Merchant Period is greater than or equal to the
Required Ratio during the period beginning on the distribution
date and ending on the later of (x) the date which is two years
after the distribution date if such portion includes at least one
year which consists entirely of the One-Third PPA Period and/or
the Merchant Period and (y) the earliest date after the date
described in clause (x) which results in such portion including
at least one year which consists entirely of the One-Third PPA
Period and/or the Merchant Period;
- if the Test Period consists entirely of the One-Third PPA Period and/or
the Merchant Period, the following conditions must be satisfied:
(a) the Senior Debt Service Coverage Ratio is greater than or equal to
the Required Ratio for the one-year period preceding the distribution
date, and
(b) the Projected Senior Debt Service Coverage Ratio is greater than or
equal to the Required Ratio for the two-year period succeeding the
distribution date;
- the funds in the Revenue Account, the O&M Account, the Major Maintenance
Account and, after giving effect to the proposed distribution, the
Distribution Suspense Account, will be
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sufficient, in the Partnership's reasonable judgment, to meet the
Partnership's ongoing working capital needs;
- the Completion Date has occurred; and
- the distribution date is on or after the last business day of September
2000.
Notwithstanding the foregoing, if, as described under the caption
"Description of the Exchange Bonds--Redemption at the Option of the
Bondholders," the Bondholders elect not to require the Partnership to redeem
Bonds with amounts that have been on deposit in the Distribution Suspense
Account for at least 12 months in a row, then the Partnership may, subject to
the terms of other facilities which may constitute Senior Secured Obligations
(other than Additional Bonds), distribute such amounts to its equity holders
without regard to the satisfaction of the Senior Debt Service Coverage Ratio and
the Projected Senior Debt Service Coverage Ratio tests set forth above, but
subject to satisfaction of the other Distribution Conditions.
AMENDMENTS TO PROJECT DOCUMENTS
The Partnership will not:
- terminate, amend, waive or modify any of the Project Documents to which it
is a party,
- exercise any rights it may have to consent to any assignment of any of the
Project Documents by the other Project Parties, or
- exercise any option under any of the Project Documents to which it is a
party
unless such termination, amendment, waiver, modification, assignment or
exercise:
- would not reasonably be expected to result in a Material Adverse Effect,
as certified in an officer's certificate of the Partnership; or
- is reasonably necessary in order to maintain a Power Purchase Agreement in
full force and effect, as certified in an officer's certificate of the
Partnership; or
- is necessary in order for the Partnership to be in compliance with
applicable law or to be able to obtain or maintain, or comply with the
terms and conditions of, any governmental approval necessary for the
Partnership to conduct its business as currently conducted or as proposed
to be conducted or to permit the Project to maintain its certification as
an Eligible Facility or the Partnership to maintain its certification as
an EWG, as certified in an officer's certificate of the Partnership; or
- is the result of:
(a) a change in tariffs or similar publicly promulgated rates approved by
any governmental authority which are incorporated by reference into a
Project Document, or
(b) implementation of provisions requiring adjustments to price or volume
under, and in accordance with, the terms of a Project Document, if
the Partnership exercises good faith and commercially reasonable
efforts to negotiate price changes under such provisions for
adjustments to price so as not to result in a Material Adverse
Effect; or
- is reasonably necessary in order to implement an Expansion Modification in
connection with which it has been determined that no Rating Downgrade will
occur; or
- is permitted by the covenant described under the caption "--Change
Orders."
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PROHIBITION ON FUNDAMENTAL CHANGES AND DISPOSITION OF ASSETS
The Partnership will not enter into any transaction of merger or
consolidation, change its form of organization or its business, or liquidate or
dissolve itself (or suffer any liquidation or dissolution) unless
contemporaneously reconstituted with no adverse effect on the Senior Secured
Parties.
The Partnership will not purchase or otherwise acquire all or substantially
all of the assets of any other person except as contemplated by the Transaction
Documents.
In addition, except as contemplated by the Transaction Documents, the
Partnership will not sell, lease (as lessor) or transfer (as transferor) any
property or assets material to the operation of the Project except:
- in the ordinary course of business to the extent that:
(a) such property is worn out or is no longer useful or necessary for the
operation of the Project, or
(b) such sale, lease or transfer is required to comply with any
applicable law or to obtain, maintain or comply with the terms and
conditions of any governmental approval necessary for the Partnership
to conduct its business pursuant to the Project Documents;
- pursuant to the Infrastructure Financing Documents or the Common
Facilities Agreement; and
- real property and related personal property and rights to be transferred
to an Expansion Party for purposes of developing an Expansion, PROVIDED
that such transfer (a) does not result in a Rating Downgrade or (b) (1)
would not reasonably be expected to result in a Material Adverse Effect
(as certified by the Partnership) and (2) will not have an adverse effect
on the operation or technical integrity of the Project, including, without
limitation, as to availability and anticipated financial performance (as
certified by the Independent Engineer).
Notwithstanding the foregoing, the Partnership may amend or otherwise modify
any easement agreement in order to substitute certain easements or specify the
location of an easement, subject to certain conditions contained in the
Indenture.
INFRASTRUCTURE FINANCING DOCUMENTS
The Partnership will not enter into Infrastructure Financing Documents which
are not in all material respects in form and substance the same as the documents
attached as exhibits to the Indenture, unless such action would not result in a
Rating Downgrade.
The Partnership will not approve, consent to or agree to any decision to
permit any person to use the Infrastructure pursuant to the terms of the
Infrastructure Financing Documents, to the extent the Partnership has the right
to do so under the Infrastructure Financing Documents, unless (1) the
Partnership is required to permit the use of the Infrastructure by such person
pursuant to the Infrastructure Financing Documents or (2) such approval, consent
or agreement would not reasonably be expected to result in (x) a Material
Adverse Effect (as certified by the Partnership) or (y) a material adverse
effect on the operation of the Project (as confirmed in writing by the
Independent Engineer).
REPLACEMENT POWER
The Partnership will not elect to provide Replacement Power unless it enters
into an Acceptable Replacement Power Arrangement and it is physically
constrained from generating and delivering power. However, if during any period
the Partnership's provision of Replacement Power causes it to incur cumulative
losses of more than $5,000,000 over the losses it would have incurred if, during
such period, the Partnership had elected a derating of capacity of the Project
under any Power Purchase Agreement, the Partnership will not be permitted to
continue to provide Replacement Power unless such provision of Replacement Power
would not reasonably be expected to result in a Material Adverse Effect (as
certified by the Partnership).
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ADDITIONAL DOCUMENTS
The Partnership will not enter into any material agreements, contracts or
other arrangements or commitments other than the following:
- the Transaction Documents;
- such power purchase agreements, fuel supply and transportation agreements,
transmission agreements and other agreements, contracts or other
arrangements entered into by the Partnership for the purchase of fuel for
or the sale of electricity from the Project, which, in each case, do not
result in the breach of, or conflict with the terms of, any then-existing
Power Purchase Agreement;
- Acceptable Replacement Power Arrangements;
- a Common Facilities Agreement, as long as the execution, delivery and
performance by the Partnership of such agreement (a) does not result in a
Rating Downgrade or (b) (1) would not reasonably be expected to result in
a Material Adverse Effect (as certified by the Partnership) and (2) will
not have an adverse effect on the operation or technical integrity of the
Project, including without limitation as to anticipated financial
performance (as certified by the Independent Engineer);
- the Infrastructure Financing Documents; and
- agreements, contracts or other arrangements or commitments which are:
(a) contemplated by the Transaction Documents, or
(b) entered into by the Partnership with respect to the disposition of
assets which the Financing Documents permit the Partnership to sell,
transfer, assign, lease or sublease, or
(c) entered into by the Partnership in the ordinary course of business
and which are included in the construction budget or the annual
operating budget, or
(d) in substitution for existing agreements, contracts or other
arrangements which are on substantially similar terms and conditions,
or
(e) entered into in connection with an Expansion and which (a) do not
result in a Rating Downgrade or (b) would not reasonably be expected
to result in a Material Adverse Effect.
CHANGE ORDERS
The Partnership will not initiate or consent to any change order under the
Construction Contract, unless either:
- each of the following conditions is satisfied:
(a) the Partnership certifies to the Trustee and the Collateral Agent
that:
(1) such change order would not reasonably be expected to result in a
Material Adverse Effect;
(2) the implementation of such change order is not reasonably
expected to cause the Completion Date to occur after the Date
Certain; and
(3) such change order is reasonable and is consistent with sound
engineering practice; and
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(b) unless the Independent Engineer has concurred in writing with the
certifications set forth in clauses (a)(1), (2) and (3), such change
order does not individually exceed $3,000,000, or, when aggregated
with all other change orders that have not been concurred with in
writing or otherwise approved or ratified by the Independent
Engineer, exceed $6,000,000; or
- each of the following conditions is satisfied:
(a) such change order is for an Expansion and (1) does not result in a
Rating Downgrade or (2) would not reasonably be expected to result in
a Material Adverse Effect; and
(b) unless the Independent Engineer has approved such change order, such
change order does not individually exceed $3,000,000, or, when
aggregated with all other change orders that have not been concurred
with in writing or otherwise approved or ratified by the Independent
Engineer, exceed $6,000,000.
FUEL PLAN
The Partnership will deliver to the Trustee, the Collateral Agent and the
Rating Agencies a fuel plan reasonably acceptable to the Independent Engineer
and the Independent Electricity Market and Fuel Consultant no later than six
months prior to the earlier of (1) the expiration of the term of the Virginia
Power PPA or (2) the expiration of the term of the Aquila PPA.
ELECTRICITY MARKET UPDATES
The Partnership will be required to cause the Independent Electricity Market
and Fuel Consultant to provide updated electricity price projections (1) if the
Partnership reasonably believes that such updated projections are necessary to
allow the Partnership to make certifications for purposes of making
distributions and (2) every three years if required to support such
certifications. Under certain circumstances, the Partnership will also be
required to obtain a forecast prepared by the Independent Electricity Market and
Fuel Consultant supporting the operating revenue calculations prepared for the
purpose of determining whether the Partnership is permitted to incur Additional
Indebtedness.
ADDITIONAL COVENANTS OF THE PARTNERSHIP
The Partnership will also be required to: (1) maintain its existence and
properties; (2) obtain, maintain and comply with all necessary governmental
approvals; (3) comply with applicable laws; (4) maintain insurance for the
Project; (5) keep the Bonds equivalent in right of payment and ability to share
in the Collateral with its other senior debt; (6) deliver financial statements,
notices of default, construction reports, notices of power purchase agreement
buy-outs and other documents to the Trustee; (7) construct the Project in a
timely manner in accordance with applicable law, prudent utility practices,
governmental approvals and the Project Documents; (8) operate and maintain the
Project in compliance with prudent utility practices, applicable laws,
governmental approvals and the Project Documents; (9) deliver annual operating
budgets to the Trustee, the Collateral Agent, the Independent Engineer and the
Rating Agencies; (10) prepare a major maintenance plan; (11) submit an annual
report covering the status of the insurance for the Project; (12) provide the
Independent Engineer, the Trustee and the Collateral Agent reasonable inspection
rights and the right to witness the performance tests; (13) maintain its EWG
status and the Project's Eligible Facility status; (14) pay its taxes; and (15)
use the proceeds from the sale of the Bonds only for the purposes set forth in
the Indenture.
The Partnership also will be restricted from engaging in the following
activities: (1) conducting any business other than the construction, ownership,
operation, maintenance, administration, financing and expansion of the Project;
(2) making investments other than Permitted Investments; (3) entering into
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non-arm's-length transactions with affiliates; and (4) establishing employee
benefit plans which result in the imposition of material liabilities on the
Partnership.
The affirmative and negative covenants of the Partnership described above
are subject to a number of important qualifications and exceptions which are set
forth in full in the Indenture.
COVENANTS OF THE FUNDING CORPORATION
The Funding Corporation will be required to: (1) maintain its existence and
properties; (2) obtain, maintain and comply with governmental approvals; (3)
comply with applicable laws; and (4) pay its taxes.
The Funding Corporation will be restricted from engaging in the following
activities: (1) incurring any Indebtedness other than Permitted Indebtedness
(which will be aggregated with all Permitted Indebtedness incurred by the
Partnership whenever any such Permitted Indebtedness is subject to an aggregate
dollar limitation); (2) creating any Liens on its properties other than
Permitted Liens; (3) engaging in any business other than the financing of the
Project; (4) merging, consolidating, changing its form of organization or
liquidating or dissolving itself; (5) entering into non-arm's-length
transactions with affiliates; and (6) making any investments other than
Permitted Investments.
The affirmative and negative covenants of the Funding Corporation described
above are subject to a number of important qualifications and exceptions which
are set forth in full in the Indenture.
EVENTS OF DEFAULT AND REMEDIES
Each of the following events is an event of default under the Indenture (an
"Event of Default"):
- the Partnership or the Funding Corporation fails to pay or cause to be
paid any principal of, premium, if any, or interest on any Bond when the
same becomes due and payable, whether by scheduled maturity or required
redemption or by acceleration or otherwise, and such failure continues
uncured for 15 or more days; or
- any representation or warranty made by the Partnership or the Funding
Corporation in the Indenture, or in any certificate furnished to the
Senior Secured Parties or the Independent Consultants in accordance with
the terms of the Financing Documents, proves to have been false or
misleading in any respect as of the time made, and the fact, event or
circumstance that gave rise to such misrepresentation has resulted in or
is reasonably expected to result in a Material Adverse Effect and such
misrepresentation or such Material Adverse Effect continues uncured for 30
or more days from the date the Partnership or the Funding Corporation, as
applicable, obtains knowledge thereof; PROVIDED that if the Partnership or
the Funding Corporation, as applicable, commences efforts to cure (or to
cause to be cured) such misrepresentation by curing (or causing to be
cured) the factual situation resulting in such misrepresentation or such
Material Adverse Effect within such 30-day period, the Partnership or the
Funding Corporation, as applicable, may continue to effect (or cause) such
cure (and such misrepresentation will not be deemed an Event of Default)
for an additional 90 days so long as an authorized representative of the
Partnership or the Funding Corporation, as applicable, certifies to the
Trustee and the Collateral Agent that such misrepresentation or such
Material Adverse Effect is reasonably capable of being cured within such
period and that the Partnership or the Funding Corporation, as applicable,
is diligently pursuing (or causing) such cure; or
- the Partnership fails to perform or observe its covenant in the Indenture
to maintain adequate insurance for the Project; PROVIDED, HOWEVER, that
the Partnership will have five Business Days to correct or cause to be
corrected any error in any endorsement (without regard to the date that
the Partnership obtained knowledge of such error) before an Event of
Default occurs; or
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- either the Partnership or the Funding Corporation fails to perform or
observe in any material respect any covenant or agreement contained in the
Indenture related to maintenance of existence, use of proceeds,
Indebtedness, Liens, nature of business, fundamental changes, sales of
assets, investments or additional documents, and such failure continues
uncured for 30 or more days after the Partnership or the Funding
Corporation, as applicable, has knowledge of such failure; or
- the Partnership or the Funding Corporation fails to perform or observe in
any material respect any of its covenants contained in any other provision
of the Indenture (other than those referred to above) or any other
Financing Document and such failure continues uncured for 30 or more days
after the Partnership or the Funding Corporation, as applicable, has
knowledge of such failure; PROVIDED that if the Partnership or the Funding
Corporation, as applicable, commences efforts to cure such default within
such 30-day period, the Partnership or the Funding Corporation, as
applicable, may continue to effect such cure of the default (and such
default will not be deemed an Event of Default) for an additional 180 days
so long as an authorized representative of the Partnership or the Funding
Corporation, as applicable, provides an officer's certificate to the
Trustee and the Collateral Agent stating that such default is reasonably
capable of being cured within such period and that the Partnership or the
Funding Corporation, as applicable, is diligently pursuing the cure; or
- certain events of bankruptcy or insolvency with respect to the Partnership
or the Funding Corporation occur; or
- any Lien granted in the Security Documents ceases to be a perfected Lien
in favor of the Collateral Agent on any material portion, taken
individually or in the aggregate, of the Collateral described therein
(other than with respect to property or assets which the terms of the
Financing Documents permit the Partnership to convey or transfer) with the
priority purported to be created by the Security Documents; or
- with respect to any Transaction Document:
(a) a term of such Transaction Document (1) ceases to be a valid and
binding obligation of the parties thereto or (2) is declared
unenforceable by a governmental authority, or
(b) such Transaction Document is terminated (prior to its normal
expiration, which, in the case of any Power Purchase Agreement, shall
be deemed to be its initial term, without giving effect to any
extension), or
(c) a Project Party denies its liability with respect to a Project
Document or such Project Party defaults on its obligations under such
Project Document (and any grace or cure period with respect to such
failure has expired), and in each case such event described in
clauses (a), (b) or (c) would reasonably be expected to result in a
Material Adverse Effect;
PROVIDED that none of the events described in clauses (a), (b) or (c) will be an
Event of Default with respect to a Project Document if within 180 days from the
occurrence of any such event, the Partnership has (1) cured or caused the
relevant Project Party to cure the circumstances described in clauses (a), (b)
or (c), as applicable, and caused the relevant Project Party to resume
performance in accordance with the relevant Project Document, or (2) entered
into a replacement Project Document in substitution of the relevant Project
Document which is reasonably satisfactory to the Independent Engineer; or
- the Partnership or the Funding Corporation fails to make any payment in
respect of any Indebtedness, including Permitted Indebtedness, having an
outstanding principal amount of more
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than $10,000,000 (other than any amount referred to above) when due
(subject to any applicable grace period), and a default and acceleration
is declared with respect to such Indebtedness; or
- a final and non-appealable judgment or judgments for the payment of money
in excess of $10,000,000 is rendered against the Partnership or the
Funding Corporation, and the same remains unpaid or unstayed for a period
of 90 or more consecutive days after such payment is due and payable; or
- Holding fails to pay or cause to be paid when due any portion of the Total
Equity Amount; or
- an Event of Abandonment occurs.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency with respect to the Partnership or the Funding Corporation, all
outstanding Bonds will become immediately due and payable without further action
or notice. In the case of an Event of Default arising from a failure to pay
principal of, premium, if any, or interest on the Bonds, holders of at least
33 1/3% in principal amount of the then outstanding Bonds may declare the Bonds
to be immediately due and payable. In the case of any other Event of Default,
holders of at least a majority in principal amount of the then outstanding Bonds
may declare the Bonds to be immediately due and payable. However, the exercise
of remedies by the Trustee or the Holders following an Event of Default will be
subject to the provisions of the Intercreditor Agreement, which are described
below under the caption "--Intercreditor Agreement."
The holders of not less than a majority in aggregate principal amount of the
Bonds outstanding may on behalf of the holders of all Bonds waive any past
Default or Event of Default and its consequences, except that (1) only the
holders of all Bonds affected may waive a Default or an Event of Default in the
payment of the principal of and interest on, or other amounts due under, any
outstanding Bond, and (2) except as provided in clause (1), only the holders of
all outstanding Bonds affected may waive a Default or an Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Bond affected.
DEFEASANCE
The Partnership and the Funding Corporation may, at any time, terminate all
of their obligations under the Indenture, the Bonds and the other Financing
Documents which the Bonds enjoy the benefit of, and may terminate the Liens of
the Security Documents on the Collateral to the extent that such Liens run to
the benefit of the Trustee, the Bondholders or other agents under the Indenture
(a "Legal Defeasance"). In addition, the Partnership and the Funding Corporation
may terminate, at any time, their obligations under any of their covenants under
the Indenture, the Bonds and the other Financing Documents which the Bonds enjoy
the benefit of, and may terminate the Liens of the Security Documents on the
Collateral to the extent that such Liens run to the benefit of the Trustee, the
Bondholders or other agents under the Indenture, other than their covenants to
maintain their existence and to make payments on the Bonds out of the trusts
described below (a "Covenant Defeasance").
Each of the Legal Defeasance or the Covenant Defeasance may be exercised
only if:
- the Funding Corporation or the Partnership has irrevocably deposited or
caused to be deposited in trust with the Trustee cash, non-callable United
States government obligations or a combination thereof in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent accountants, to pay the principal of and interest on the Bonds
when due;
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- the Funding Corporation or the Partnership has delivered to the Trustee an
opinion of counsel to the effect that as of the date of such opinion, (1)
the trust funds will not be subject to the rights of holders of
Indebtedness other than the Bonds and (2) subject to certain assumptions
and exceptions, the trust funds will not, on the 91st day following the
deposit, be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally;
- no Default or Event of Default has occurred and is continuing on the date
of such deposit (other than from the incurrence of debt the proceeds of
which will be used to defease the Bonds);
- such Legal Defeasance or Covenant Defeasance does not result in a breach
or violation of, or constitute a default under, any material agreement or
instrument (other than the Financing Documents) to which the Partnership
or the Funding Corporation is a party or by which the Partnership or the
Funding Corporation is bound;
- in the case of a Legal Defeasance, the Funding Corporation or the
Partnership has delivered to the Trustee an opinion of counsel confirming
that (a) the Funding Corporation or the Partnership has received from, or
there has been published by, the Internal Revenue Service a ruling or (b)
since the date of the Indenture there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel will confirm that, the holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
- in the case of a Covenant Defeasance, the Funding Corporation or the
Partnership has delivered to the Trustee an opinion of counsel confirming
that the holders of the Bonds will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; and
- the Funding Corporation or the Partnership has delivered to the Trustee an
officer's certificate and opinion of counsel, each stating that all
conditions precedent which relate to either the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.
VIRGINIA POWER L/C AGREEMENT
GENERAL
The Partnership has entered into the Virginia Power L/C Agreement under
which the Virginia Power L/C Provider has issued and will issue letters of
credit for the account of the Partnership in favor of Virginia Power to satisfy
the Partnership's obligation to provide credit support under the Virginia Power
PPA. The Partnership's obligations under the Virginia Power L/C Agreement are
Senior Secured Obligations and rank equal in right of payment with, and share
equally and ratably in the Collateral with, the Bonds.
VIRGINIA POWER LETTERS OF CREDIT
The Virginia Power letters of credit available to the Partnership under the
Virginia Power L/C Agreement include:
- a letter of credit in an initial amount of $5,660,000 issued in favor of
Virginia Power to satisfy the Partnership's obligation to provide
completion security for the Virginia Power Dedicated
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Units prior to the Commercial Operation Date for the Virginia Power
Dedicated Units (the "Pre-COD Virginia Power L/C");
- a letter of credit in an initial amount of $5,660,000 in favor of Virginia
Power to satisfy the Partnership's obligation to provide completion
security for its replacement power obligations prior to the Commercial
Operation Date for the Virginia Power Dedicated Units (the "Replacement
Power Virginia Power L/C"); and
- a letter of credit in an initial amount of $5,660,000 in favor of Virginia
Power to satisfy the Partnership's obligation to provide completion
security for the Virginia Power Dedicated Units on and after the
Commercial Operation Date for the Virginia Power Dedicated Units (the
"Post-COD Virginia Power L/C").
The Pre-COD Virginia Power L/C was issued on August 28, 1998 and will
terminate on the earlier of (1) June 1, 2001 and (2) the Commercial Operation
Date for the Virginia Power Dedicated Units. The Replacement Power Virginia
Power L/C will be available on any date on which the Partnership is obligated to
provide completion security for its replacement power obligations under the
Virginia Power PPA until the earlier of (1) June 1, 2001 and (2) the Commercial
Operation Date for the Virginia Power Dedicated Units. The Post-COD Virginia
Power L/C will be available on the Commercial Operation Date for the Virginia
Power Dedicated Units until three years after the earlier of (1) June 1, 2000
and (2) the Commercial Operation Date for the Virginia Power Dedicated Units.
REPAYMENT
Any drawings under the Pre-COD Virginia Power L/C or the Replacement Power
Virginia Power L/C will be converted to loans ("LOC Loans") made to the
Partnership by the banks under the Virginia Power L/C Agreement. The Partnership
will not be required to make principal payments on outstanding LOC Loans prior
to the earlier of (1) June 1, 2001 and (2) the Commercial Operation Date for the
Virginia Power Dedicated Units. On and after such earlier date, the Partnership
will be required to make quarterly payments of principal and interest on each
LOC Loan in 20 mortgage type installments. Each LOC Loan will bear interest on
the outstanding principal amount thereof from the date such LOC Loan is made
until such principal amount is paid in full, at a rate per annum equal to (1)
the Base Rate plus the Applicable Margin or (2) the LIBOR Rate plus the
Applicable Margin, at the election of the Partnership.
The "Base Rate" will be equal to the higher of (x) the prime commercial
lending rate published in the Eastern Edition of The Wall Street Journal and (y)
the rate equal to the Federal Funds Rate plus 1/2 of 1%.
The "LIBOR Rate" will be determined by the agent under the Virginia Power
L/C Agreement and will be equal to the offered rate for deposits in U.S. dollars
in the London Interbank Market at approximately 11:00 a.m. (London time), which
appears on the Reuters Monitor Money Rates Services, two Business Days prior to
the first day of the interest period for such LIBOR Rate LOC Loan, divided by
100% minus the reserve requirement for such LIBOR Rate LOC Loan for such
interest period.
The "Applicable Margin" for Base Rate LOC Loans ranges from 0.625% to 0.875%
per annum and the "Applicable Margin" for LIBOR Rate LOC Loans ranges from 1.50%
to 1.75% per annum.
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COMMON AGREEMENT
GENERAL
The Administrative Agent, the Collateral Agent, the Intercreditor Agent, the
Partnership and the Funding Corporation entered into the Common Agreement on the
Closing Date. The Common Agreement sets forth, among other things, the terms
upon which Operating Revenues, Equity Contributions and other amounts received
by or on behalf of the Partnership are disbursed to pay construction costs,
operation and maintenance costs, debt service and other amounts due from the
Partnership.
DEPOSIT AND DISBURSEMENT OF FUNDS
The Partnership will deposit into the Revenue Account all Operating
Revenues, all post-completion delay damages under the Construction Contract and
all other amounts required to be transferred to the Revenue Account pursuant to
the Common Agreement or the Intercreditor Agreement. The Administrative Agent
will disburse funds from the Revenue Account on the 15th day of each calendar
month, or, if such day is not a business day, on the next succeeding business
day (or more frequently if necessary to pay amounts described under clauses (1)
and (2) of priority THIRD) as follows:
- FIRST:
(1) to the O&M Account in an amount sufficient to pay all O&M Costs
(other than Operator Fees) due and payable on the disbursement date or
reasonably expected to be due and payable within the next 30 days, to the
extent such O&M Costs will not be paid for with the proceeds of loans made
under the Working Capital Agreement; and
(2) at the election of the Partnership, to the prepayment of amounts
outstanding under the Working Capital Agreement if and to the extent that
the Partnership is entitled to re-borrow such prepaid amounts under the
Working Capital Agreement;
- SECOND, if the disbursement date occurs prior to the Completion Date, to
the Construction Account in an amount equal to all amounts then remaining
in the Revenue Account;
- THIRD:
(1) to the agent under the Virginia Power L/C Agreement in an amount
sufficient to pay all reimbursement obligations (other than reimbursement
obligations which have been converted into a term loan) then due under the
Virginia Power L/C Agreement,
(2) to the agent under any agreement providing for an Aquila Reserve L/C
(if the Partnership or the Funding Corporation is obligated for the
reimbursement of any draw under such letter of credit) in an amount
sufficient to pay all reimbursement obligations (other than reimbursement
obligations which have been converted into a term loan) then due under such
agreement, and
(3) if then required pursuant to the Aquila PPA, to the Aquila PPA
Reserve Account in an amount which, together with all funds in such account
and all amounts available for drawing under any Aquila Reserve L/C, is equal
to the then current Aquila PPA Reserve Requirement;
- FOURTH, to the Debt Service Payment Account in an amount equal to the
following with respect to each credit facility (including each series of
Bonds) constituting Senior Indebtedness: (1) an amount equal to Senior
Secured Obligations Payments for such month, PLUS (2) interest, principal
and other amounts scheduled to come due on any Senior Indebtedness during
the period from and including such disbursement date through but excluding
the next disbursement date and not otherwise accounted for under clause
(1) (together with such additional amount under this clause (2) as the
Partnership deems prudent to deposit in respect of Senior
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Indebtedness not otherwise accounted for under this clause (2)); PROVIDED,
HOWEVER, that principal of Debt Service Reserve LOC Loans shall not be
paid under this priority FOURTH, but principal of Debt Service Reserve LOC
Bonds shall be so paid under this priority FOURTH;
- FIFTH, to the Major Maintenance Reserve Account in an amount equal to the
Major Maintenance Reserve Requirement;
- SIXTH:
(1) first to the Debt Service Reserve Account in an amount which,
together with all funds in such account and all amounts available for
drawing under any Debt Service Reserve L/C, is equal to the then current
Debt Service Reserve Requirement; and
(2) second, to the DSRA LOC Payment Account in an amount which, together
with all funds in such account, is equal to the principal amount of
outstanding Debt Service Reserve LOC Loans for which the Partnership or the
Funding Corporation is obligated;
- SEVENTH, to the Operator in an amount sufficient to pay the Operator Fee
then due and payable to the Operator under the O&M Agreement; and
- EIGHTH, to the Distribution Suspense Account in an amount equal to all
monies left over in the Revenue Account after application of priority
FIRST through priority SEVENTH.
CONSTRUCTION ACCOUNT
The Partnership has deposited the net proceeds of the Private Bonds, and
will deposit all Ordinary Equity Contributions, all Net Pre-Completion Revenues
and all delay liquidated damages and similar payments received prior to
Completion into the Construction Account. Until the Completion Date, all amounts
in the Construction Account will be available for withdrawal only (1) for the
payment of Project Costs due and payable on the date of withdrawal or reasonably
expected to be due and payable within the next 30 days and (2) to make the
deposit into the account which Partnership may establish for the benefit of the
State of Mississippi and/or Panola County, as described under the caption "Use
of Proceeds".
The Partnership will be permitted to withdraw funds from the Construction
Account to pay Project Costs if it delivers to the Administrative Agent:
- a requisition certificate signed by an authorized officer of the
Partnership which, among other things, (a) specifies the Project Costs due
and payable or reasonably expected to be due and payable within the next
30 days, (b) certifies that construction of the Project and the
Infrastructure are proceeding in accordance with the budgets and schedules
therefor, (c) certifies that no Default or Event of Default has occurred
and is continuing and (d) certifies that the amounts on deposit in or
credited to the Construction Account, together with all other funds
available to pay Project Costs, are sufficient to achieve Completion on or
prior to the Date Certain; and
- a certificate of the Independent Engineer which, among other things, (a)
states that Completion is estimated to occur on or prior to the Date
Certain, (b) confirms that no errors in the requisition certificate
described above have come to the attention of the Independent Engineer,
(c) certifies that construction of the Facility and the Infrastructure is
proceeding in a workmanlike manner in accordance with the budgets and
schedules therefor and (d) confirms that the remaining funds available to
pay the remaining Project Costs are sufficient to achieve Completion on or
prior to the Date Certain. On the Completion Date, all amounts on deposit
in or credited to the Construction Account will be transferred first to
the Debt Service Reserve Account until the amounts on deposit in or
credited to such account are equal to the Debt Service Reserve Requirement
and then to the Revenue Account for application in accordance
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with the priority of payments described above under the caption "--Deposit
and Disbursement of Funds."
O&M ACCOUNT
Amounts on deposit in the O&M Account will be available to the Partnership
to pay O&M Costs which are due and payable at the time of withdrawal, or are
reasonably expected to be due and payable within the next 30 days, other than
the Operator Fee and the major maintenance expenditures funded through the Major
Maintenance Reserve Account. The Administrative Agent will be required to
disburse amounts from the O&M Account upon delivery by the Partnership of an
officer's certificate specifying the amount to be disbursed and the name of, and
wire transfer or other payment instructions for, each person to whom such
amounts should be paid. Funds may be disbursed from the O&M Account more often
than monthly if necessary to pay O&M Costs (other than the Operator Fee) which
are due and payable on the date of disbursement.
DEBT SERVICE PAYMENT ACCOUNT
All amounts on deposit in the Debt Service Payment Account will be used to
pay the principal of, premium (if any), interest, fees, indemnities and other
amounts then due in respect of the Bonds, the Virginia Power Letters of Credit
and the other Senior Indebtedness (other than the principal of Debt Service
Reserve LOC Loans).
DSRA LOC PAYMENT ACCOUNT
All amounts on deposit in the DSRA LOC Payment Account will be used to pay
the principal of Debt Service Reserve Loans then due.
RESERVE ACCOUNTS
DEBT SERVICE RESERVE ACCOUNT
The "Debt Service Reserve Requirement" for any disbursement date will be an
amount equal to (a) one-sixth of the difference between (x) (1) if the
disbursement date is not a Scheduled Payment Date for the Bonds, the principal
and interest which will be due on the Senior Secured Obligations on or before
the next Scheduled Payment Date for the Bonds and (2) if the disbursement date
is a Scheduled Payment Date for the Bonds, the principal and interest which is
due and payable on the Senior Secured Obligations on such date and (y) the
amount of funds already on deposit in the Debt Service Reserve Account on the
previous Scheduled Payment Date for the Bonds, PLUS (b) any shortfall in the
funding of such amounts from any previous month since the previous Scheduled
Payment Date for the Bonds. The Partnership and the Funding Corporation, or any
of their affiliates, may fund the Debt Service Reserve Requirement with cash or
one or more Debt Service Reserve L/Cs as and to the extent provided under
"--Letters of Credit." Funds in the Debt Service Reserve Account will be used to
pay Senior Debt Service if funds in the Debt Service Payment Account are
insufficient to make the payments. The Collateral Agent will withdraw funds from
the Debt Service Reserve Account and draw on any Debt Service Reserve L/C on a
pro rata basis to the extent possible.
MAJOR MAINTENANCE RESERVE ACCOUNT
The "Major Maintenance Reserve Requirement" initially will be equal to
$1,215,000 per month. The Major Maintenance Reserve Requirement may be adjusted
as follows. The Partnership may, from time to time, provide the Independent
Engineer with a proposed schedule of monthly deposits (which may, but need not,
be equal monthly deposits) to the Major Maintenance Reserve Account which
provide, in the aggregate (inclusive of interest estimated to accrue thereon),
sufficient funds for the completion of all turbine overhauls through and
including the next major overhaul. Such proposed
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schedule will become the then applicable schedule, and the monthly deposits
reflected therein will become, for each month, the Major Maintenance Reserve
Requirement, if the Independent Engineer confirms, based on then available
information, that the Partnership is reasonably expected to have sufficient
funds to fully fund each monthly Major Maintenance Reserve Requirement through
the term of such proposed schedule. In addition, at such time or times as the
Partnership determines that the then applicable schedule will not provide
sufficient funding for the completion of all turbine overhauls through and
including the next major overhaul, then the Partnership will be required to
provide the Independent Engineer with a revised proposed schedule of monthly
deposits (which may, but need not, be equal monthly deposits) which is
reasonably calculated to enable the Partnership to fund the Major Maintenance
Reserve Account in an amount sufficient to provide for the completion of all
turbine overhauls through and including the next major overhaul. Such proposed
schedule will become the then applicable schedule, and the monthly deposits
reflected therein will become, for each such month, the Major Maintenance
Reserve Requirement, if the Independent Engineer approves the same in accordance
with the foregoing. Funds in the Major Maintenance Reserve Account will be used
to pay the costs of major maintenance activities for the Project.
AQUILA PPA RESERVE ACCOUNT
The Aquila PPA Reserve Requirement will be equal to the amount of credit
support that the Aquila PPA requires the Partnership to provide to
Aquila/UtiliCorp. The Partnership can provide an Aquila Reserve L/C in lieu of
depositing funds in the Aquila PPA Reserve Account, or can provide an Aquila
Reserve L/C in order to withdraw all or a portion of the funds on deposit in the
Aquila PPA Reserve Account, in each case as and to the extent provided under the
caption "--Letters of Credit." Funds in the Aquila PPA Reserve Account will be
used to make payments to Aquila as required under the Aquila PPA. If at the end
of any disbursement date, the Aquila PPA Reserve Requirement is less than the
funds on deposit in or credited to the Aquila PPA Reserve Account, all funds on
deposit in the Aquila PPA Reserve Account in excess of the Aquila PPA Reserve
Requirement will be transferred to the Revenue Account and/or the Partnership
may substitute a new Aquila Reserve L/C in a lesser amount.
LETTERS OF CREDIT
Instead of depositing cash to maintain the Debt Service Reserve Requirement
and/or the Aquila PPA Reserve Requirement, the Partnership may provide or cause
to be provided one or more irrevocable direct pay letters of credit (with
respect to the Debt Service Reserve Requirement, a "Debt Service Reserve L/C"
and with respect to the Aquila PPA Reserve Requirement, an "Aquila Reserve L/ C"
and, collectively with the Debt Service Reserve L/C, the "Reserve Account L/Cs")
issued by a bank or other financial institution rated at least A-by S&P and at
least A3 by Moody's and naming the Collateral Agent as beneficiary. In addition,
the Partnership may provide or cause to be provided a Debt Service Reserve L/C
or an Aquila Reserve L/C in substitution for all or a portion of amounts then on
deposit in the Debt Service Reserve Account or the Aquila PPA Reserve Account,
as applicable. Provided that neither the Partnership nor the Funding Corporation
has any reimbursement or other payment obligation in respect of any such Debt
Service Reserve L/C or Aquila Reserve L/C furnished in substitution for amounts
so on deposit, such amounts will be released from such accounts and distributed
to or at the direction of the Partnership without regard to any limitations on
distributions contained in the Financing Documents. Any Reserve Account L/C for
which the Partnership or the Funding Corporation has any reimbursement or other
obligation must be issued pursuant to a reimbursement agreement which contains
terms and conditions customary for facilities of this type. Neither the
Partnership nor the Funding Corporation can be liable for the reimbursement of
any draws under, or for any other costs in respect of, any Reserve Account L/C
unless (1) the Independent Engineer confirms that the minimum Senior Debt
Service Coverage Ratio for any fiscal year during the remaining term of the
Bonds is greater than or equal to 1. 45/1.00 and (2) the naming of
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the Partnership or the Funding Corporation, as applicable, as the account party
for such Debt Service Reserve L/C or Aquila Reserve L/C, as applicable, will not
result in a Ratings Downgrade.
Each drawing under a Debt Service Reserve L/C in respect of which the
Partnership or the Funding Corporation has responsibility for reimbursement or
the payment of other costs shall be converted into a Debt Service Reserve LOC
Loan. Each Debt Service Reserve Loan will mature not less than five years after
the drawing giving rise to such Debt Service Reserve LOC Loan.
Under certain circumstances, the issuer of the Debt Service Reserve L/C will
be permitted to convert its Debt Service Reserve LOC Loans into a substitute
loan (a "Debt Service Reserve LOC Bond") which will amortize, will mature on the
maturity date of the last series of Bonds to mature, and will bear interest at a
rate to be negotiated with the issuer of the Debt Service Reserve L/C. The
Partnership will pay principal of and interest on the Debt Service Reserve LOC
Bonds on each Scheduled Payment Date for the Bonds pursuant to priority FOURTH
under the caption "--Deposit and Disbursement of Funds."
DISTRIBUTION SUSPENSE ACCOUNT
The Distribution Suspense Account will be funded with amounts remaining in
the Revenue Account after all required disbursements have been made as described
above under "--Deposit and Disbursement of Funds." On any date which is the 15th
day of the month (or, if such day is not a business day, on the next succeeding
business day) and on which the Distribution Conditions are satisfied, the
following amount will be transferred to the "Distribution Account" for
distribution to or as directed by the Partnership:
(1) the sum of (a) the funds in the Distribution Suspense Account and
(b) the aggregate of all funds in the Debt Service Reserve Account and the
Debt Service Payment Account; less
(2) the sum of (a) the Debt Service Reserve Requirement as of the next
Scheduled Payment Date for the Bonds (or, if such distribution date is a
Scheduled Payment Date for the Bonds, the Debt Service Reserve Requirement
as of such date), (b) the Senior Indebtedness due and payable on the next
Scheduled Payment Date for the Bonds and (c) the Senior Indebtedness due and
payable from and after the date of determination and prior to the next
Scheduled Payment Date for the Bonds.
PERMITTED INVESTMENTS
Funds in the Accounts will be invested and reinvested in Permitted
Investments at the written direction (which may be in the form of a standing
instruction) of the Partnership. However, if an Event of Default exists or the
Partnership has not timely furnished such a written direction or confirmed a
standing instruction to the Administrative Agent, the Administrative Agent will
invest such amounts only in certain Permitted Investments with a maturity of (1)
180 days or less prior to the Completion Date or (2) one year or less after the
Completion Date. Any written direction of the Partnership with respect to the
investment or reinvestment of amounts held in any Account must direct investment
or reinvestment only in Permitted Investments that mature in such amounts and
have maturity dates or are subject to redemption at the option of the holder
thereof on or prior to maturity as needed for the purposes of such Accounts. No
Permitted Investments will mature more than (1) prior to the Completion Date,
180 days after the date acquired or (2) after the Completion Date, one year
after the date acquired. Any income or gain realized from such investments will
be deposited into the Account (or the sub-fund or sub account) from which such
amounts came.
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COLLATERAL AGENCY AGREEMENT
The Issuers entered into the Collateral Agency Agreement with the Trustee,
the Collateral Agent, the Intercreditor Agent, the Administrative Agent, the
Trustee and the Virginia Power L/C Agent on the Closing Date. In addition, the
Partnership may cause each Additional Indebtedness Agent (on behalf of each
Additional Indebtedness Holder) to become a party to the Collateral Agency
Agreement. Pursuant to the Collateral Agency Agreement, the Senior Secured
Parties (or their representatives party thereto) will appoint the Collateral
Agent to hold and administer the Collateral and to enter into and exercise
remedies under the Security Documents on behalf of the Senior Secured Parties.
The Collateral Agent will apply the proceeds of any collection, sale or
other realization of all or any part of the Collateral pursuant to the Security
Documents as follows:
- FIRST, to the payment of all reasonable costs and expenses relating to the
sale of the Collateral and the collection of amounts owing under the
Collateral Agency Agreement or relating to the protection of the Liens of
the Security Documents, and all liability payments covered by the
indemnity provisions of the Financing Documents;
- SECOND, to the payment of accrued and unpaid interest on interest that
became overdue on the Senior Secured Obligations, ratably, in an amount
necessary to make the Senior Secured Parties current on interest on
overdue interest to the same proportionate extent as the other Senior
Secured Parties are then current on interest on overdue interest due;
- THIRD, to the payment of accrued and unpaid interest on principal of the
Senior Secured Obligations that became overdue, ratably, in an amount
necessary to make the Senior Secured Parties current on interest on
overdue principal due to the same proportionate extent as the other Senior
Secured Parties are then current on interest on overdue principal due;
- FOURTH, to the payment of any accrued but unpaid commitment fees or other
fees for working capital facilities and letters of credit;
- FIFTH, to the payment of the remaining Senior Secured Obligations
outstanding; and
- FINALLY, to the payment to the Partnership, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
INTERCREDITOR AGREEMENT
Each of the Senior Secured Parties (or a representative therefor) entered
into the Intercreditor Agreement on the Closing Date or upon the incurrence of
the Indebtedness held by such Senior Secured Party. Pursuant to the
Intercreditor Agreement:
- the affirmative vote of persons holding at least 33 1/3% of the Senior
Secured Obligations will be required to exercise remedies upon the
occurrence of an Event of Default (or event of default under another
facility which is a Senior Secured Obligation) relating to payment;
- the affirmative vote of persons holding greater than 50% of the Senior
Secured Obligations will be required to exercise remedies upon the
occurrence of any other Event of Default (or event of default under
another facility which is a Senior Secured Obligation);
- the affirmative vote of persons holding greater than 50% of the Senior
Secured Obligations will be required to amend Financing Documents and
grant consents and approvals thereunder (other than with respect to
certain fundamental decisions and with respect to Financing Documents
(such as the Indenture) specific to a particular facility constituting
Senior Secured Obligations); and
133
<PAGE>
- the affirmative vote of persons holding 100% of the Senior Secured
Obligations will be required to amend Financing Documents and grant
consents and approvals with respect to certain fundamental decisions
thereunder, including, without limitation, amendments, consents and
approvals resulting in the release of Collateral.
EQUITY ARRANGEMENTS
EQUITY COMMITMENT OBLIGATION
Pursuant to the Equity Contribution Agreement executed by Holding on the
Closing Date in favor of the Partnership and the Collateral Agent for the
benefit of the Bondholders and the other Senior Secured Parties, Holding is
required to make cash equity contributions to the Partnership in an aggregate
amount of $54,000,000 (the "Total Equity Amount") from time to time after
depletion of the proceeds of the Bonds as requested by the Partnership to pay
Project Costs.
Holding is also required to make a cash equity contribution in an amount
equal to the Total Equity Amount less all previous equity contributions upon the
earliest to occur of the following events:
- an Event of Default;
- the bankruptcy or insolvency of Holding;
- the withdrawal of all proceeds of the Bonds from the Construction Account
and the failure of the Partnership to request an equity contribution
within 45 days after such withdrawal;
- the Completion Date;
- the Date Certain;
- a downgrade of the ratings of the bank providing the Equity Letter of
Credit below "A" by S&P and "A2" by Moody's and a failure by Holding to
replace the Equity Letter of Credit within 30 days of such downgrade; and
- the termination or expiration of the Equity Letter of Credit and the
failure by Holding to replace the Equity Letter of Credit within 30 days
prior to such termination or expiration.
Any such default equity contribution will be applied to pay Project Costs
and/or to redeem the Bonds and prepay other outstanding Senior Secured
Obligations as determined by the Senior Secured Parties pursuant to the
Intercreditor Agreement.
EQUITY LETTER OF CREDIT
The Equity Contribution Agreement requires Holding to deliver on the Closing
Date a letter of credit to support its obligation to contribute equity to the
Partnership. The Equity Letter of Credit delivered on the Closing Date names
Cogentrix as the account party and the Collateral Agent as the beneficiary, and
is issued by ANZ Investment Bank, a subsidiary of Australia and New Zealand
Banking Group Limited. The Collateral Agent is permitted to draw on the Equity
Letter of Credit upon any failure by Holding to make a required equity
contribution to the Partnership under the Equity Contribution Agreement.
134
<PAGE>
SOME FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material federal income tax
considerations relevant to the exchange of unregistered bonds for registered
bonds. The discussion is based upon the Internal Revenue Code of 1986, as
amended, Treasury regulations, Internal Revenue Service rulings and
pronouncements, and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect a holder of the registered bonds. The description does not consider the
effect of any applicable foreign, state, local or other tax laws or estate or
gift tax considerations.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING UNREGISTERED BONDS FOR REGISTERED BONDS,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF PRIVATE BONDS FOR EXCHANGE BONDS
The exchange of Private Bonds for Exchange Bonds pursuant to the Exchange
Offer should not constitute a sale or an exchange for federal income tax
purposes. The holder will have a basis for the Exchange Bonds equal to the basis
of the Private Bonds and the holder's holding period for the Exchange Bonds will
include the period during which the Private Bonds were held. Accordingly, such
exchange should have no federal income tax consequences to holders of Private
Bonds.
135
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Bonds for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with the resales of Exchange Bonds received in exchange for Private
Bonds where such Private Bonds were acquired as a result of market making
activities or other trading activities.
We will not receive any proceeds from any sale of Exchange Bonds by
broker-dealers or any other persons. Exchange Bonds received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Bonds or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Bonds. Any broker-dealer that resells Exchange Bonds that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Bonds may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Bonds and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the Registration Rights Agreement and will indemnify the
holders of Private Bonds (including any broker-dealers), and certain parties
related to such holders, against certain liabilities, including liabilities
under the Securities Act.
136
<PAGE>
VALIDITY OF THE EXCHANGE BONDS
The validity of the Exchange Bonds offered hereby will be passed upon by
Latham & Watkins, our counsel and the Funding Corporation's counsel.
EXPERTS
The financial statements of LSP Batesville Funding Corporation as of
December 31, 1998, and of LSP Energy Limited Partnership (a Delaware limited
partnership in the development stage) as of December 31, 1998 and 1997, and for
the years ended December 31, 1998 and 1997, the period from inception (February
7, 1996) to December 31, 1996 and for the period from inception (February 7,
1996) to December 31, 1998, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of KPMG LLP as
experts in accounting and auditing.
INDEPENDENT ENGINEER
R.W. Beck, Inc. prepared the independent engineer's report included as Annex
B to this prospectus. We include that report in this prospectus in reliance upon
R.W. Beck's conclusions and their experience in the review of the design,
development, construction and operation of cogeneration facilities. You should
read the R.W. Beck report in its entirety for information with respect to the
Facility and the related subjects discussed therein.
INDEPENDENT ELECTRICITY MARKET AND FUEL CONSULTANT
C.C. Pace Consulting, L.L.C. prepared the independent electricity market and
fuel consultant's report included as Annex C to this prospectus. We include that
report in this prospectus in reliance upon C.C. Pace's conclusions and their
experience in analyzing power markets and fuel supply and transportation
arrangements for independent power projects. You should read the C.C. Pace
report in its entirety for information with respect to the southeastern power
market and the availability of fuel supply and transportation arrangements to
serve the Facility.
AVAILABLE INFORMATION
We have filed with the Commission a Registration Statement on Form S-4 under
the Securities Act with respect to the Exchange Bonds offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain information, exhibits and undertakings contained in the Registration
Statement. For further information with respect to the Issuers and the Exchange
Bonds offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedules filed as
a part thereof. As a result of the Exchange Offer, we will become subject to the
informational requirements of the Exchange Act. The Registration Statement (and
the exhibits and schedules thereto), as well as the periodic reports and other
information filed by the Issuers with the Commission, may be inspected and
copied at the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Room 1400, 75 Park Place, New York, New
York 10007 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 6061-2511. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-800-SEC-0330.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and its public reference facilities in New York, New York and
Chicago, Illinois at the prescribed rates. The Commission maintains a web site
(http://www.sec.gov), that contains periodic reports, proxy and information
statements and other information regarding registrants that file documents
electronically with the Commission. Statements contained in this Prospectus as
to the
137
<PAGE>
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
Pursuant to the Indenture, we have agreed to furnish to the Trustee and to
registered holders of the Exchange Bonds, without cost to the Trustee or such
registered holders, copies of all reports and other information that would be
required to be filed by the Issuers with the Commission under the Exchange Act
(and, with respect to the annual information only, a report thereon by the
Issuers' certified independent accountants), whether or not the Issuers are then
required to file reports with the Commission. As a result of this Exchange
Offer, we will become subject to the periodic reporting and other informational
requirements of the Exchange Act. In the event that we cease to be subject to
the informational requirements of the Exchange Act, we have agreed that, so long
as any Bonds remain outstanding, we will file with the Commission (but only if
the Commission at such time is accepting such voluntary filings) and distribute
to holders of the Private Bonds or the Exchange Bonds, as applicable, copies of
the financial information that would have been contained in such annual reports
and quarterly reports that would have been required to be filed with the
Commission pursuant to the Exchange Act. We will also furnish such other reports
as we may determine or as may be required by law.
138
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS
Our audited financial statements, and those of the Funding Corporation, as
of December 31, 1998 and the related information listed below are set forth on
pages F-2 through F-19 of this prospectus and our unaudited financial
statements, and those of the Funding Corporation, as of March 31, 1999 and the
related information listed below are set forth on pages F-20 through F-36 of
this prospectus.
<TABLE>
<CAPTION>
TITLE PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
<S> <C>
LSP Batesville Funding Corporation:
Report of Independent Auditors........................................................................... F-2
Balance Sheet as of December 31, 1998.................................................................... F-3
Notes to Financial Statement............................................................................. F-4
LSP Energy Limited Partnership:
Report of Independent Auditors........................................................................... F-6
Balance Sheets as of December 31, 1998 and 1997.......................................................... F-7
Statements of Operations for the years ended December 31, 1998 and 1997, for the period from inception
(February 7, 1996) to December 31, 1996 and for the period from inception (February 7, 1996) to
December 31, 1998...................................................................................... F-8
Statements of Changes in Partners' Capital (Deficit) for the years ended December 31, 1998 and 1997, for
the period from inception (February 7, 1996) to December 31, 1996 and for the period from inception
(February 7, 1996) to December 31, 1998................................................................ F-9
Statements of Cash Flows for the years ended December 31, 1998 and 1997, for the period from inception
(February 7, 1996) to December 31, 1996 and for the period from inception (February 7, 1996) to
December 31, 1998...................................................................................... F-10
Notes to Financial Statements............................................................................ F-11
LSP Batesville Funding Corporation:
Balance Sheets as of March 31, 1999 and December 31, 1998................................................ F-20
Notes to Financial Statement............................................................................. F-21
LSP Energy Limited Partnership:
Balance Sheets as of March 31, 1999 and December 31, 1998................................................ F-23
Statements of Operations for the three months ended March 31, 1999 and 1998 and for the period from
inception (February 7, 1996) to March 31, 1999......................................................... F-24
Statements of Changes in Partners' Capital (Deficit) for the three months ended March 31, 1999 and 1998
and for the period from inception (February 7, 1996) to March 31, 1999................................. F-25
Statements of Cash Flows for the three months ended March 31, 1999 and 1998 and for the period from
inception (February 7, 1996) to March 31, 1999......................................................... F-26
Notes to Financial Statements............................................................................ F-27
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LSP Batesville Funding Corporation:
We have audited the accompanying balance sheet of LSP Batesville Funding
Corporation as of December 31, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of LSP Batesville Funding Corporation
as of December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Billings, Montana
April 8, 1999
F-2
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current Asset--Cash................................................................. $ 1,000
---------
---------
STOCKHOLDER'S EQUITY
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and
outstanding....................................................................... $ 1
Additional paid-in-capital.......................................................... 999
---------
Total Stockholder's Equity........................................................ $ 1,000
---------
---------
</TABLE>
See accompanying notes to financial statement.
F-3
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
LSP Batesville Funding Corporation ("Funding") was established on August 3,
1998. Funding's business purpose is limited to maintaining its organization and
activities necessary to facilitate the acquisition of financing by LSP Energy
Limited Partnership ("the Partnership") from the institutional debt market and
to offering debt securities. Funding is wholly owned by LSP Batesville Holding,
LLC ("Holding"), a Delaware limited liability company.
Holding was established on July 29, 1998 for the purpose of owning and
managing the limited partnership interests of the Partnership, the common stock
of LSP Energy, Inc., the general partner of the Partnership, and the common
stock of Funding.
The Partnership is a Delaware limited partnership formed in February 1996 to
develop, finance, construct, own and operate a gas-fired electric generating
facility with a design capacity of approximately 837 megawatts to be located in
Batesville, Mississippi (the "Facility"). The Partnership has been in the
development stage since its inception and is not expected to generate any
operating revenues until the Facility achieves commercial operations. As with
business ventures of this size and nature, the ultimate construction and
operation of the Facility could be affected by many factors. Construction of the
Facility is expected to be completed in the year 2000.
2. FINANCING
Effective August 28, 1998, the Partnership, Holding and Funding
(collectively the "Borrowers") entered into agreements with a financial
institution (the "Bank"), that provided for financing in the amount of
$330,000,000. The financing was comprised of a $180,000,000 credit facility (the
"Tranche A Credit Facility") entered into between the Partnership and the Bank,
a 25 year bond facility in the amount of $100,000,000 (the "Tranche B Bond
Facility") entered into between the Partnership, Funding and the Bank and a 10
year bond facility in the amount of $50,000,000 (the "Tranche C Bond Facility")
entered into between Holding and the Bank. Borrowings from this financing were
used for the development and construction of the Facility. The terms and
conditions of the Tranche B Bond Facility and Tranche C Bond Facility were set
forth in a letter agreement (the "Letter Agreement") entered into between the
Borrowers and the Bank.
Pursuant to the Letter Agreement the Borrowers and the Bank, as underwriter,
also agreed to pursue a capital markets offering during the last quarter of
1998. However, due to unfavorable capital markets conditions the capital markets
offering was not completed. Alternatively, on December 15, 1998 the Partnership
amended and restated the financing agreements entered into on August 28, 1998.
The amended and restated agreements provide for financing in the amount of
$305,000,000. The new financing consists of a $305,000,000 three-year loan
facility (the "Bank Credit Facility") entered into among the Partnership and a
consortium of banks. Pursuant to the original objectives contained in the Letter
Agreement, the Partnership intends to refinance the Bank Credit Facility
commitment with a capital markets offering prior to the maturity date of the
Bank Credit Facility. The Bank will still be afforded the opportunity to
underwrite any capital markets offering.
A common agreement (the "Common Agreement") ties all of the financing
agreements together and sets forth, among other things; (a) certain terms and
conditions upon which loans and disbursements shall be made under the Bank
Credit Facility; (b) the mechanism for which loan proceeds, operating revenues,
equity contributions and other amounts received by the Partnership are disbursed
to pay construction costs, operations and maintenance costs, debt service and
other amounts due from the Partnership; (c) the conditions which must be
satisfied prior to making distributions from
F-4
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FINANCING (CONTINUED)
the Partnership; and (d) the covenants and reporting requirements the
Partnership is required to be in compliance with during the term of the Common
Agreement.
The aggregate principal amount of all loans under the Bank Credit Facility
shall not exceed $305,000,000. The maturity date of loans outstanding under the
Bank Credit Facility is the earlier of (a) December 15, 2001 and (b) the
commitment termination date, as defined. At December 31, 1998, the Partnership
had $78,000,000 of LIBOR loans outstanding under the Bank Credit Facility.
Interest rates on the outstanding loans at December 31, 1998 ranged from 6.355%
to 6.505%.
Loans made under the Bank Credit Facility, when issued will be secured by
all of the assets and contract rights of the Partnership. In addition, each of
the partners of the Partnership has pledged its respective partnership interest
in the Partnership.
The Common Agreement requires compliance with certain covenants, including,
among other things, compliance with certain reporting requirements, limitations
or restrictions relating to the use of the proceeds under the Bank Credit
Facility, additional indebtedness, and disposition of assets. The Common
Agreement also describes events of default which include, among others, failure
to make payments in accordance with the terms of the Bank Credit Facility and
failure to comply with agreements entered into by the Partnership.
F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
LSP Energy Limited Partnership:
We have audited the accompanying balance sheets of LSP Energy Limited
Partnership (a Delaware limited partnership in the development stage) as of
December 31, 1998 and 1997, and the related statements of operations, changes in
partners' capital (deficit) and cash flows for the years ended December 31, 1998
and 1997, for the period from inception (February 7, 1996) to December 31, 1996
and for the period from inception (February 7, 1996) to December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LSP Energy Limited
Partnership (a Delaware limited partnership in the development stage) as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997, for the period from inception
(February 7, 1996) to December 31, 1996 and for the period from inception
(February 7, 1996) to December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Billings, Montana
April 8, 1999
F-6
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:.................................................................... $ --
Cash............................................................................. $ 83,866 --
Prepaid Insurance................................................................ 57,067
------------- -------------
Total Current Assets........................................................... 140,933 --
Property and construction in progress.............................................. 83,429,694 --
Debt issuance and financing costs, net of accumulated amortization of $233,505..... 10,531,773 --
------------- -------------
Total Assets....................................................................... $ 94,102,400 $ --
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable................................................................. $ 13,507,883 $ --
Accrued interest payable......................................................... 154,898 --
------------- -------------
Total Current Liabilities...................................................... 13,662,781 --
Contract retainage................................................................. 2,882,344 --
Loans payable...................................................................... 78,000,000 --
------------- -------------
Total Liabilities.............................................................. 94,545,125 --
Commitments and contingencies
Partners' Capital (Deficit)........................................................ (442,725)
------------- -------------
Total Liabilities and Partners' Capital (Deficit).................................. $ 94,102,400 $ --
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION INCEPTION
(FEBRUARY 7, (FEBRUARY 7,
YEAR ENDED DECEMBER 31, 1996) 1996) TO
------------------------- TO DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998
----------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Revenues............................................. $ -- $ 5,224,084 $ 158,205 $ 5,382,289
Project development expenses......................... 443,725 4,205 3,744 451,674
----------- ------------ -------- ------------
Net income (loss)................................ $ (443,725) $ 5,219,879 $ 154,461 $ 4,930,615
----------- ------------ -------- ------------
----------- ------------ -------- ------------
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1998 AND 1997,
PERIOD FROM INCEPTION (FEBRUARY 7, 1996) TO DECEMBER 31, 1996
PERIOD FROM INCEPTION (FEBRUARY 7, 1996)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
LIMITED PARTNER
------------------------------
LSP GRANITE POWER GENERAL PARTNER
BATESVILLE PARTNERS II, LSP ENERGY,
HOLDING, LLC L.P. INC. TOTAL
------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Balance at Inception.............................. $ -- $ -- $ -- $ --
Net income........................................ -- 152,917 1,544 154,461
Distributions to partners......................... -- (108,900) (1,100) (110,000)
------------- --------------- --------------- -----------
Balance at December 31, 1996...................... -- 44,017 444 44,461
Net income........................................ -- 5,167,680 52,199 5,219,879
Distributions to partners......................... -- (5,211,697) (52,643) (5,264,340)
------------- --------------- --------------- -----------
Balance at December 31, 1997...................... $ -- $ -- $ -- $ --
Capital contributions............................. -- 990 10 1,000
Transfer of partnership interests................. 990 (990) -- --
Net loss.......................................... (439,288) -- (4,437) (443,725)
------------- --------------- --------------- -----------
Balance at December 31, 1998...................... $ (438,298) $ -- $ (4,427) $ (442,725)
------------- --------------- --------------- -----------
------------- --------------- --------------- -----------
Balance at inception.............................. $ -- $ -- $ -- $ --
Capital Contributions............................. -- 990 10 1,000
Transfer of partnership interests................. 990 (990) -- --
Net income (loss)................................. $ (439,288) 5,320,597 49,306 4,930,615
Distributions to partners......................... -- (5,320,597) (53,743) (5,374,340)
------------- --------------- --------------- -----------
Balance at December 31, 1998...................... $ (438,298) $ -- $ (4,427) $ (442,725)
------------- --------------- --------------- -----------
------------- --------------- --------------- -----------
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION INCEPTION
(FEBRUARY 7, (FEBRUARY 7,
YEAR ENDED 1996) 1996)
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
--------------------------- ----------------- -----------------
1998 1997 1996 1998
------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................. $ (443,725) $ 5,219,879 $ 154,461 $ 4,930,615
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Decrease (increase) in interest receivable
net of accretion of purchase discount on
escrow funds.............................. -- 44,461 (44,461) --
Increase in other current assets............ (57,067) -- -- (57,067)
Increase in accounts payable and contract
retainage................................. 13,507,883 -- -- 13,507,883
Increase in accrued interest payable........ 154,898 -- -- 154,898
------------- ------------ -------- -----------------
Cash provided by operating activities......... 13,161,989 5,264,340 110,000 18,536,329
------------- ------------ -------- -----------------
Cash Flows from Investing Activities:
Payments on property and construction in
progress.................................... (80,313,845) -- -- (80,313,845)
------------- ------------ -------- -----------------
Cash used in investing activities............. (80,313,845) -- -- (80,313,845)
------------- ------------ -------- -----------------
Cash Flows from Financing Activities:
Debt issuance and financing costs........... (10,765,278) -- -- (10,765,278)
Proceeds from issuance of loans............. 78,000,000 -- -- 78,000,000
Capital Contributions....................... 1,000 -- -- 1,000
Distributions to partners................... -- (5,264,340) (110,000) (5,374,340)
------------- ------------ -------- -----------------
Cash provided by (used in) financing
activities.................................. 67,235,722 (5,264,340) (110,000) 61,861,382
------------- ------------ -------- -----------------
Increase in cash.............................. 83,866 -- -- 83,866
Cash, beginning of period..................... -- -- -- --
------------- ------------ -------- -----------------
Cash, end of period........................... $ 83,866 $ -- $ -- $ 83,866
------------- ------------ -------- -----------------
------------- ------------ -------- -----------------
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
LSP Energy Limited Partnership (the "Partnership") is a Delaware limited
partnership formed in February 1996 to develop, construct, own and operate a
gas-fired electric generating facility with a design capacity of approximately
837 megawatts to be located in Batesville, Mississippi (the "Facility"). The 1%
general partner of the Partnership is LSP Energy, Inc. ("Energy"). Granite Power
Partners II, L.P. ("Granite") was the original 99% limited partner of the
Partnership. The current 99% limited partner of the Partnership is LSP
Batesville Holding, LLC ("Holding"), a Delaware limited liability company
established on July 29, 1998. Granite is a Delaware limited partnership formed
to develop independent power projects throughout the United States. The general
partner of Granite is LS Power, LLC ("LS Power") a Delaware limited liability
company.
Granite and Cogentrix/Batesville, LLC ("Cogentrix"), a Delaware limited
liability company, entered into an operating agreement dated as of August 28,
1998 and amended on December 15, 1998 (as amended, the "Operating Agreement").
Pursuant to the Operating Agreement, Granite contributed to Holding its 99%
limited partnership interest in the Partnership and all of the common stock of
Energy and Cogentrix agreed to contribute to Holding $54,000,000 of equity.
Granite received an initial 47.85% membership interest in Holding and Cogentrix
received an initial 52.15% membership interest in Holding. These membership
interest percentages are dependent upon a number of factors and are subject to
adjustment as set forth in the Operating Agreement.
Cogentrix's equity contribution to Holding will be contributed to the
Partnership and used for the development and construction of the Facility.
Cogentrix's equity contribution commitment is supported by an irrevocable letter
of credit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Partnership has been in the development stage since its inception and is
not expected to generate any operating revenues until the Facility achieves
commercial operations. Revenues in 1997 primarily represent a $5,000,000 option
payment received by the Partnership under an option purchase agreement (the
"Option Purchase Agreement") entered into in 1996 with a third party. The
Partnership has no continuing financial commitments under the Option Purchase
Agreement and all funds earned under the Option Purchase Agreement were
distributed to the partners of the partnership prior to December 31, 1997 (See
Note 3). As with any new business venture of this size and nature, the ultimate
operation of the Facility could be affected by many factors. Construction of the
Facility is expected to be completed in 2000.
PROJECT DEVELOPMENT COSTS
On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP
98-5"). SOP 98-5 requires that costs incurred during start-up activities,
including organization costs, be expensed as incurred. Generally, all start-up
costs incurred that are not directly related to the acquisition or construction
of long-lived tangible assets will be expensed.
F-11
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Although not yet required, the Partnership adopted SOP 98-5 during 1998 and
accordingly has retroactively expensed all start-up costs aggregating
approximately $444,000 in the accompanying 1998 statement of operations.
CONSTRUCTION IN PROGRESS
All costs directly related to the acquisition and construction of long-lived
assets are capitalized. Interest costs (including amortization of debt issuance
and financing costs), net of interest income on excess proceeds from loans is
capitalized during construction. As of December 31, 1998, capitalized interest
including amortization of debt issuance and financing costs was approximately
$1,815,000 ($1,581,000 before amortization). Cash paid for interest was
approximately $1,426,000 for the year ended December 31, 1998 and for the period
February 7, 1996 (inception) to December 31, 1998.
DEBT ISSUANCE AND FINANCING COSTS
The Partnership amortizes deferred debt issuance and financing costs over
the term of the related debt using the effective interest method. Amortization
of deferred financing costs is capitalized as part of construction in progress
in the accompanying financial statements.
ACCOUNTS PAYABLE
As of December 31, 1998, substantially all accounts payable were considered
project costs and were eligible for payment from unadvanced loan proceeds.
USE OF ESTIMATES
Management makes a number of estimates and assumptions relating to the
reporting of assets and liabilities and revenues and expenses and the disclosure
of contingent assets and liabilities to prepare financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
INCOME TAXES
Since the Partnership is not an income tax paying entity, the accompanying
financial statements do not reflect any income tax effects.
3. INVESTMENTS HELD IN ESCROW
During 1996, the Partnership entered into the Option Purchase Agreement with
a third party. Under the terms of the Option Purchase Agreement, the third party
had the option to purchase 750 megawatts of capacity and dispatchable energy for
a defined term from the Partnership.
As consideration for this option, the third party made an initial option
payment to the Partnership of $3.5 million in March 1996, and an additional
option payment of $1.5 million in February 1997. Both option payments were
placed in escrow to secure the performance obligations of the Partnership under
the Option Purchase Agreement. Under the terms of the escrow agreement, the
Partnership was allowed to withdraw investment earnings on the funds placed in
escrow but could not withdraw the
F-12
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS HELD IN ESCROW (CONTINUED)
principal amount placed in escrow until the funds were released pursuant to the
Option Purchase Agreement. Interest income totaled $224,084, $158,205 and
$382,289 in 1997, 1996 and for the period from inception (February 7, 1996) to
December 31, 1998. Option payments received in 1996, and 1997 were recorded as
deferred revenue.
Effective November 1, 1997, the Option Purchase Agreement expired
unexercised and the escrow fund of approximately $5,100,000 was released to the
Partnership.
4. PROPERTY AND CONSTRUCTION IN PROGRESS
Property and construction in progress consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1998 1997
------------- -----
Land and easements...................................................... $ 1,398,071 $ --
Construction in progress................................................ 82,031,623 --
------------- ---
$ 83,429,694 $ --
------------- ---
------------- ---
</TABLE>
5. FACILITY CONTRACTS
On May 18, 1998, the Partnership entered into a Power Purchase Agreement
("VEPCO PPA") with Virginia Electric and Power Company ("VEPCO"). Under the
terms of the VEPCO PPA, the Partnership is obligated to sell and VEPCO is
obligated to purchase approximately 558 megawatts of electrical capacity and
dispatchable energy to be generated from two of the three Combined Cycle Units
("Unit" or "Units") at the Facility at prices set forth in the VEPCO PPA. The
initial term of the VEPCO PPA is thirteen years, beginning on the earlier of
commencement of commercial operations or June 1, 2000, which date may be
extended by a force majeure event or a delivery excuse. VEPCO has the option of
extending the term of the VEPCO PPA for an additional twelve years by providing
the Partnership written notice at least two years prior to the expiration of the
initial term. The extended term may be terminated at any time by VEPCO with 18
months prior notice to the Partnership.
The VEPCO PPA is subject to specified construction and energy delivery
milestone deadlines, including achieving commercial operations of the VEPCO
Units by June 1, 2000, which date may be extended by a force majeure event or a
delivery excuse. In the event the commercial operation date of the VEPCO Units
is delayed beyond June 1, 2000, the Partnership may be responsible for
replacement power during the period of delay, subject to a maximum of $20 per
kilowatt of committed capacity from each VEPCO Unit. VEPCO may terminate the
VEPCO PPA if the commercial operation date is not achieved by June 1, 2001,
which date may be extended by a force majeure event or a delivery excuse.
The VEPCO PPA is a tolling arrangement, whereby VEPCO is obligated to supply
natural gas to each VEPCO Unit. VEPCO is obligated to arrange, procure,
nominate, balance, transport and deliver to the Facility's lateral pipeline, the
amount of fuel necessary for each VEPCO Unit to generate its net electrical
output.
F-13
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FACILITY CONTRACTS (CONTINUED)
On May 21, 1998, the Partnership entered into a Power Purchase Agreement
("Aquila PPA") with Aquila Power Corporation ("Aquila") and UtiliCorp United,
Inc. ("Utilicorp"). Under the terms of the Aquila PPA, the Partnership is
obligated to sell and Aquila is obligated to purchase approximately 279
megawatts of electrical capacity and dispatchable energy to be generated from
one of the three Units at the Facility at prices set forth in the Aquila PPA.
UtiliCorp has appointed Aquila as its agent under the Aquila PPA. The initial
term of the Aquila PPA is fifteen years and seven months, beginning on June 1,
2000, which date may be extended by a force majeure event or a delivery excuse.
Aquila has the option of extending the term of the Aquila PPA for an additional
five years by providing the Partnership written notice by the later of July 2013
or twenty-nine months prior to the expiration of the initial term.
The Aquila PPA is subject to an energy delivery milestone deadline of June
1, 2000, which deadline may be extended by a force majeure event or a delivery
excuse. In the event that commercial operations of the Aquila Unit is not
achieved by such deadline, the Partnership may elect to incur an adjustment to
the capacity payment to be received under the Aquila PPA or to be responsible
for replacement power during the period of delay. Aquila may terminate the
Aquila PPA if commercial operations of the Aquila Unit is not achieved by the
first anniversary of the energy delivery milestone deadline, which deadline may
be extended for up to one year by a force majeure event or delivery excuse.
The Aquila PPA is a tolling arrangement, whereby Aquila is obligated to
supply natural gas to the Aquila Unit. Aquila is obligated to arrange, procure,
nominate, balance, transport and deliver to the Facility's lateral pipeline, the
amount of fuel necessary for the Aquila Unit to generate its net electrical
output. The Partnership is obligated to administer gas imbalances on the
Facility's lateral pipeline among all parties using the Facility's lateral
pipeline.
On July 22, 1998, the Partnership entered into a $240 million fixed price
Turnkey Engineering, Procurement and Construction Agreement ("Construction
Agreement") with BVZ Power Partners-Batesville ("BVZ"), a joint venture formed
by H.B. Zachary Company and a subsidiary of Black & Veatch, LLP. The obligations
of BVZ are guaranteed by Black & Veatch, LLP and the entire Construction
Agreement is backed by a performance bond. Under the terms of the Construction
Agreement, BVZ has committed to develop and construct the Facility subject to
the terms, deadlines and conditions set forth in the Construction Agreement. In
the event the construction and start-up to specified performance levels of the
two VEPCO Units and the Aquila Unit has not occurred on or prior to July 9,
2000, July 19, 2000 and July 24, 2000, as adjusted under the terms of the
Construction Agreement ("Guaranteed Completion Dates"), respectively, then BVZ
will be required under the contract to pay certain liquidated damages, subject
to certain limits. In the event the construction and start-up of the entire
Facility to specified performance levels occurs prior to the last Guaranteed
Completion Date, then BVZ will be entitled to receive a bonus for early
completion.
At various times during the period between January 8, 1999 and January 15,
1999, BVZ's access to the construction site was limited as a result of the
failure of the temporary access road. Due to delays in construction progress
experienced by BVZ during this period, the Partnership and BVZ have agreed to
enter into a change order to the Construction Agreement to extend the Guaranteed
Completion Dates by 7 days.
F-14
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FACILITY CONTRACTS (CONTINUED)
While the current construction schedule provided to the Partnership by BVZ
anticipates that construction and start-up of each Unit will occur prior to the
energy delivery milestone deadline of June 1, 2000 under both the VEPCO PPA and
Aquila PPA, a gap of 46 to 61 days exists between the Guaranteed Completion
Dates and June 1, 2000. This gap and any further delay in construction and
start-up of the Facility beyond June 1, 2000, may obligate the Partnership to:
(i) provide replacement power to VEPCO or reimburse VEPCO for any incremental
replacement power cost during the period of delay up to a maximum of $11,320,000
and (ii) elect to, at the option of the Partnership, provide replacement power
to Aquila, reimburse Aquila for any incremental replacement power cost during
the period of delay, or elect to incur an adjustment to the capacity payment to
be received under the Aquila PPA. While BVZ will be obligated to pay liquidated
damages for any failure to complete the construction and start-up of the
Facility on or prior to one day after the Guaranteed Completion Dates, no delay
damages will be due from BVZ with respect to any Unit during the respective gap
periods. Because the delay liquidated damages are subject to certain limits,
there can be no assurance that such liquidated damages will fully compensate the
Partnership for replacement power costs or other costs associated with delays
for which BVZ is responsible. The ultimate liability that would result from this
delay, if any, can not presently be determined.
In accordance with the terms of the Construction Agreement, Granite made
payments aggregating $1,742,500 during the months of July 1998 and August 1998,
on behalf of the Partnership. Granite was reimbursed for these payments by the
Partnership on August 28, 1998. As of December 31, 1998, engineering,
procurement and construction was estimated to be approximately 26% complete and
total costs incurred to date under the construction contract were approximately
$61,754,000 including retainage. At December 31, 1998, the Partnership has
retained construction contract payments totaling approximately $2,882,000.
The Partnership has entered into electrical interconnection agreements with
Tennessee Valley Authority (the "TVA Interconnection Agreement") and with
Entergy Mississippi, Inc. (the "Entergy Interconnection Agreement" and, together
with the TVA Interconnection Agreement, the "Interconnection Agreements"). The
TVA Interconnection Agreement has a term of thirty-five years, subject to
certain amendments for regulatory conformance on a non-discriminatory basis
which amendments could be proposed by the Tennessee Valley Authority at any time
after five years from commencement of commercial operations. The Entergy
Interconnection Agreement has a term of thirty-five years from the date when the
interconnection facilities have been completed, automatically extending for
subsequent five-year periods.
The Interconnection Agreements provide for the cost of the interconnection
facilities and system upgrades to be paid by the Partnership. The Partnership is
entitled to receive system upgrade credits in the amount of incremental revenue
received by Tennessee Valley Authority and Entergy Mississippi, Inc. for future
transmission services procured for the delivery of energy from the Facility. The
amount of such credits, if any, may not exceed the total cost of the system
upgrades paid for by the Partnership.
The Partnership has entered into various contracts aggregating approximately
$9,000,000 for the design and construction of an electrical substation and
transmission line system (the "Partnership's Interconnection Facilities"). The
Partnership's Interconnection Facilities are required to enable the Partnership
to deliver the output of the Facility to the Tennessee Valley Authority and
Entergy
F-15
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FACILITY CONTRACTS (CONTINUED)
Mississippi, Inc. interconnection facilities. The Partnership will design,
construct, own and operate the Partnership's Interconnection Facilities at its
own expense.
The Partnership entered into various contracts aggregating approximately
$17,600,000 for the construction of the Facility's gas lateral pipeline and the
pipelines through which the Facility will receive water and dispose of waste
water (collectively the "Infrastructure"). It is anticipated that the contracts
will be transferred to Panola County, Mississippi ("Panola County") with respect
to the work to be performed on and after the date of formal acceptance by Panola
County. If the contracts are taken over by Panola County, the Partnership will
lease the Infrastructure under terms which provide the Partnership with the
operational control and responsibility for the Infrastructure, and with the use
of the Infrastructure for the full projected requirements of the Facility. If
Panola County does not take over the contracts, the Partnership will complete
the construction and own the Infrastructure.
If Panola County takes over the contracts, the cost of the Infrastructure on
and after the date of formal acceptance by Panola County is expected to be paid
for by a grant to be financed through an offering of general obligation bonds
(the "Municipal Bonds") by the State of Mississippi. In the event that the
Infrastructure is not financed with an offering of Municipal Bonds, the proceeds
from the $305,000,000 credit facility (see Note 5), together with the
$54,000,000 of equity to be contributed by Holding to the Partnership, is
expected to be sufficient to pay the costs, including the cost of the
Infrastructure, to develop and complete the construction of the Facility.
As with any major construction effort, construction of the facility involves
many risks, including shortages of labor, work stoppages, labor disputes,
weather interferences, engineering, environmental permitting or geological
problems and unanticipated cost increases for reasons beyond the control of BVZ,
the occurrence of which could give rise to delays, cost overruns or performance
deficiencies, or otherwise adversely affect the design or operation of the
Facility.
These and other contracts and activities incident to the construction and
ultimate operation of the Facility require various other commitments and
obligations by the Partnership. Additionally, the contracts contain various
restrictive covenants, which allow the contracted party to terminate the
contract upon the occurrence of specified events or, in certain cases, default
under other contractual commitments.
6. FINANCING
Effective August 28, 1998, the Partnership, Holding and LSP Batesville
Funding Corporation ("Funding") (collectively the "Borrowers") entered into
agreements with a financial institution (the "Bank"), that provided for
financing in the amount of $330,000,000. The financing was comprised of a
$180,000,000 credit facility (the "Tranche A Credit Facility") entered into
between the Partnership and the Bank, a 25 year bond facility in the amount of
$100,000,000 (the "Tranche B Bond Facility") entered into between the
Partnership, Funding and the Bank and a 10 year bond facility in the amount of
$50,000,000 (the "Tranche C Bond Facility") entered into between Holding and the
Bank. Borrowings from this financing were used for the development and
construction of the Facility. The terms and conditions of the Tranche B Bond
Facility and Tranche C Bond Facility were set forth in a letter agreement (the
"Letter Agreement") entered into between the Borrowers and the Bank.
F-16
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FINANCING (CONTINUED)
Pursuant to the Letter Agreement the Borrowers and the Bank, as underwriter,
also agreed to pursue a capital markets offering during the last quarter of
1998. However, due to unfavorable capital markets conditions the capital markets
offering was not completed. Alternatively, on December 15, 1998 the Partnership
amended and restated the financing agreements entered into on August 28, 1998.
The amended and restated agreements provide for financing in the amount of
$305,000,000. The new financing consists of a $305,000,000 three-year loan
facility (the "Bank Credit Facility") entered into among the Partnership and a
consortium of banks. Pursuant to the original objectives contained in the Letter
Agreement, the Partnership intends to refinance the Bank Credit Facility
commitment with a capital markets offering prior to the maturity date of the
Bank Credit Facility. The Bank will still be afforded the opportunity to
underwrite any capital markets offering.
A common agreement (the "Common Agreement") ties all of the financing
agreements together and sets forth, among other things; (a) certain terms and
conditions upon which loans and disbursements shall be made under the Bank
Credit Facility; (b) the mechanism for which loan proceeds, operating revenues,
equity contributions and other amounts received by the Partnership are disbursed
to pay construction costs, operations and maintenance costs, debt service and
other amounts due from the Partnership; (c) the conditions which must be
satisfied prior to making distributions from the Partnership; and (d) the
covenants and reporting requirements the Partnership is required to be in
compliance with during the term of the Common Agreement.
The aggregate principal amount of all loans under the Bank Credit Facility
shall not exceed $305,000,000. The maturity date of loans outstanding under the
Bank Credit Facility is the earlier of (a) December 15, 2001 and (b) the
commitment termination date, as defined.
During the period from December 15, 1998 through the completion of
construction of the Facilities, amounts outstanding, based on loan amounts
designated by the Partnership, bear interest at (i) .125% above the higher of
the Prime Rate or .50% above the Federal Funds Rate (collectively the "Base
Rate") or (ii) 1.125% above the selected London Interbank Offered Rate ("LIBOR")
term, not to exceed one year. The interest rate spreads subsequent to completion
of construction of the Facility will be as follows:
<TABLE>
<CAPTION>
BASE RATE LOANS LIBOR LOANS
- ------------------- ---------------
<S> <C>
.300% 1.300%
</TABLE>
Interest payments on Base Rate loans are payable quarterly. Interest
payments on LIBOR loans are payable on the last day of the LIBOR loan term, or
if the LIBOR loan term maturity is longer than three months, every three months
after the date of such LIBOR loan. At December 31, 1998, the Partnership had
$78,000,000 of LIBOR loans outstanding under the Bank Credit Facility. Interest
rates on the outstanding loans at December 31, 1998 ranged from 6.355% to
6.505%.
The estimated fair value of the loans made under the Bank Credit Facility
approximate their carrying value since the interest rates are variable.
A quarterly commitment fee of .375% is incurred on the daily average
unadvanced and available commitment under the Bank Credit Facility.
F-17
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FINANCING (CONTINUED)
The Partnership has entered into a Letter of Credit and Reimbursement
Agreement (the "LOC Agreement") with the Bank that provides for letter of credit
commitments aggregating $16,980,000. The LOC Agreement provides for the
Partnership to issue three separate letters of credit ("Letter of Credit A",
"Letter of Credit B" and "Letter of Credit C"). The letters of credit will be
used to provide security in favor of VEPCO to support the Partnership's
obligations under the VEPCO PPA. The LOC Agreement requires commitment fees
payable quarterly in arrears, at varying rates on each letter of credit
commitment until the expiration of each letter of credit commitment.
On August 28, 1998, the Partnership issued Letter of Credit A in the amount
of $5,660,000 as security for the Partnership's replacement power obligation
under the VEPCO PPA until the earlier of June 1, 2001 and the commercial
operations date.
On December 15, 1998, the Partnership and the Bank amended the LOC Agreement
to conform its terms and conditions to the amended and restated Bank Credit
Facility and Common Agreement.
Loans made under the Bank Credit Facility, when issued will be secured by
all of the assets and contract rights of the Partnership. In addition, each of
the partners has pledged its respective partnership interest in the Partnership.
The Common Agreement, the Bank Credit Facility and the LOC Agreement,
require compliance with certain covenants, including, among other things,
compliance with certain reporting requirements, limitations or restrictions
relating to the use of the proceeds under the Bank Credit Facility, additional
indebtedness, and disposition of assets. The Common Agreement also describes
events of default which include, among others, failure to make payments in
accordance with the terms of the Bank Credit Facility and the LOC Agreement and
failure to comply with agreements entered into by the Partnership.
7. PARTNERS' CAPITAL
Profits, losses and distributions are allocated based on the respective
partnership interests and in accordance with the Partnership Agreement and the
Common Agreement.
8. RELATED PARTY TRANSACTIONS
All costs incurred through August 28, 1998 to develop the Facility,
consisting principally of site development costs, engineering fees, legal and
consulting fees, permitting costs, and LS Power employee and office costs have
been expended by Granite. These costs were reimbursed and a development fee was
paid to Granite on completion of construction financing on August 28, 1998 (see
Note 5). The aggregate payment to Granite was approximately $13,500,000.
LS Power Management, LLC ("LSP Management"), a wholly owned subsidiary of LS
Power, will provide certain management services to the Partnership pursuant to a
management services agreement. Under this management services agreement, LSP
Management will manage the business affairs of the Partnership during
construction and operation of the Facility. LSP Management will be reimbursed
for its reasonable and necessary expenses incurred in performing its services,
including salaries of its personnel to the extent related to services provided
under the management services agreement. LSP Management will also receive a
monthly management fee of approximately $33,000 during operation of
F-18
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
the Facility. This management fee will be adjusted annually based on certain
published indices. Management fee payments are anticipated to begin during the
third quarter of 1999. For the year ended December 31, 1998, LSP Management
billed the Partnership approximately $362,000 under the management services
agreement.
The Facility will be operated and maintained under a long-term operations
and maintenance agreement with Cogentrix. The term of the operations and
maintenance agreement extends for an initial term of twenty-seven years. The
Partnership has the option of extending the term of the agreement for successive
two-year terms with one hundred and eighty days notice. Under the terms of the
agreement the Partnership is required to pay Cogentrix a fixed fee of $390,000,
payable in ten monthly installments, for services provided during construction
of the Facility and a fixed monthly fee of approximately $42,000 during
operation of the Facility. The Partnership is also required to reimburse
Cogentrix for all labor costs, including payroll and taxes, subcontractor costs
and other costs deemed reimbursable by the Partnership. The management fee will
be adjusted annually based on certain published indices. Services to be provided
during construction of the Facility are anticipated to begin in the third
quarter of 1999.
9. DEPENDENCE ON THIRD PARTIES
The Partnership is highly dependent on BVZ for the construction of the
Facility, certain contractors for the construction of the Partnership's
Interconnection Facilities and Infrastructure and Cogentrix for the operation
and maintenance of the Facility. During the terms of the VEPCO PPA and Aquila
PPA, the Partnership is highly dependent on two utilities for the purchase of
electric generating capacity and dispatchable energy from their respective Units
at the Facility. Any material breach by any one of these parties of their
respective obligations to the Partnership could affect the ability of the
Partnership to make payments under the various financing agreements. In
addition, bankruptcy or insolvency of certain other parties or default by such
parties relative to their contractual or regulatory obligations could adversely
affect the ability of the Partnership to make payments under the various
financing agreements. If an agreement were to be terminated due to a breach of
such agreement, the Partnership's ability to enter into a substitute agreement
having substantially equivalent terms and conditions, or with an equally
creditworthy third party, is uncertain and there can be no assurance that the
Partnership will be able to make payments under the various financing
agreements.
F-19
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Asset--Cash............................................................................ $ 1,000 $ 1,000
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<S> <C> <C>
STOCKHOLDER'S EQUITY
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and
outstanding............................................................... $ 1 $ 1
Additional paid-in-capital.................................................. 999 999
--------- ---------
Total Stockholder's Equity.......................................... $ 1,000 $ 1,000
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to financial statement.
F-20
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
1. ORGANIZATION
LSP Batesville Funding Corporation ("Funding") was established on August 3,
1998. Funding's business purpose is limited to maintaining its organization and
activities necessary to facilitate the acquisition of financing by LSP Energy
Limited Partnership ("the Partnership") from the institutional debt market and
to offering debt securities. Funding is wholly owned by LSP Batesville Holding,
LLC ("Holding"), a Delaware limited liability company.
Holding was established on July 29, 1998 for the purpose of owning and
managing the limited partnership interests of the Partnership, the common stock
of LSP Energy, Inc., the general partner of the Partnership, and the common
stock of Funding.
The Partnership is a Delaware limited partnership formed in February 1996 to
develop, finance, construct, own and operate a gas-fired electric generating
facility with a design capacity of approximately 837 megawatts to be located in
Batesville, Mississippi (the "Facility"). The Partnership has been in the
development stage since its inception and is not expected to generate any
operating revenues until the Facility achieves commercial operations. As with
business ventures of this size and nature, the ultimate construction and
operation of the Facility could be affected by many factors. Construction of the
Facility is expected to be completed in the year 2000.
2. FINANCING
Effective August 28, 1998, the Partnership, Holding and Funding
(collectively the "Borrowers") entered into agreements with a financial
institution (the "Bank"), that provided for financing in the amount of
$330,000,000. The financing was comprised of a $180,000,000 credit facility (the
"Tranche A Credit Facility") entered into between the Partnership and the Bank,
a 25 year bond facility in the amount of $100,000,000 (the "Tranche B Bond
Facility") entered into between the Partnership, Funding and the Bank and a 10
year bond facility in the amount of $50,000,000 (the "Tranche C Bond Facility")
entered into between Holding and the Bank. Borrowings from this financing were
used for the development and construction of the Facility. The terms and
conditions of the Tranche B Bond Facility and Tranche C Bond Facility were set
forth in a letter agreement (the "Letter Agreement") entered into between the
Borrowers and the Bank.
Pursuant to the Letter Agreement the Borrowers and the Bank, as underwriter,
also agreed to pursue a capital markets offering during the last quarter of
1998. However, due to unfavorable capital markets conditions the capital markets
offering was not completed. Alternatively, on December 15, 1998 the Partnership
amended and restated the financing agreements entered into on August 28, 1998.
The amended and restated agreements provide for financing in the amount of
$305,000,000. The new financing consists of a $305,000,000 three-year loan
facility (the "Bank Credit Facility") entered into among the Partnership and a
consortium of banks. Pursuant to the original objectives, contained in the
Letter Agreement, the Partnership refinanced the Bank Credit Facility commitment
with a capital markets offering. (See Note 3).
A common agreement (the "Common Agreement") ties all of the financing
agreements together and sets forth, among other things; (a) certain terms and
conditions upon which loans and disbursements shall be made under the Bank
Credit Facility; (b) the mechanism for which loan proceeds, operating revenues,
equity contributions and other amounts received by the Partnership are disbursed
to pay construction costs, operations and maintenance costs, debt service and
other amounts
F-21
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENT (CONCLUDED)
(UNAUDITED)
2. FINANCING (CONTINUED)
due from the Partnership; (c) the conditions which must be satisfied prior to
making distributions from the Partnership; and (d) the covenants and reporting
requirements the Partnership is required to be in compliance with during the
term of the Common Agreement.
The aggregate principal amount of all loans under the Bank Credit Facility
shall not exceed $305,000,000. The maturity date of loans outstanding under the
Bank Credit Facility is the earlier of (a) December 15, 2001 and (b) the
commitment termination date, as defined. At March 31, 1999 and December 31,
1998, the Partnership had $120,900,000 and $78,000,000, respectively, of LIBOR
loans outstanding under the Bank Credit Facility. Interest rates on the
outstanding loans at March 31, 1999 were 6.065% and at December 31, 1998 ranged
from 6.355% to 6.505%.
Loans made under the Bank Credit Facility, when issued will be secured by
all of the assets and contract rights of the Partnership. In addition, each of
the partners of the Partnership has pledged its respective partnership interest
in the Partnership.
The Common Agreement requires compliance with certain covenants, including,
among other things, compliance with certain reporting requirements, limitations
or restrictions relating to the use of the proceeds under the Bank Credit
Facility, additional indebtedness, and disposition of assets. The Common
Agreement also describes events of default which include, among others, failure
to make payments in accordance with the terms of the Bank Credit Facility and
failure to comply with agreements entered into by the Partnership.
3. SUBSEQUENT EVENT
On May 21, 1999, the Partnership and Funding issued two series of Senior
Secured Bonds (the "Bonds") in the following total principal amounts:
$150,000,000 7.164% Series A Senior Secured Bonds due 2014 and $176,000,000
8.160% Series B Senior Secured Bonds due 2025. Interest is payable semiannually
on each January 15 and July 15, commencing January 15, 2000. A portion of the
proceeds from the issuance of the Bonds was used to repay the $136,600,000 of
outstanding loans under the Bank Credit Facility. The remaining proceeds from
the issuance of the Bonds will be used to pay a portion of the costs of
completing the Facility.
F-22
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................ $ 794,410 $ 83,866
Other current assets............................................................ 57,067 57,067
-------------- -------------
Total Current Assets.......................................................... 851,477 140,933
Property and construction in progress............................................. 128,901,277 83,429,694
Debt issuance and financing costs, net of accumulated
amortization of $1,014,762...................................................... 9,765,593 10,531,773
-------------- -------------
Total Assets...................................................................... $ 139,518,347 $ 94,102,400
-------------- -------------
-------------- -------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable................................................................ $ 13,811,482 $ 13,507,883
Accrued interest payable........................................................ 213,454 154,898
-------------- -------------
Total Current Liabilities..................................................... 14,024,936 13,662,781
Contract retainage................................................................ 5,119,021 2,882,344
Loans payable..................................................................... 120,900,000 78,000,000
-------------- -------------
Total Liabilities............................................................. 140,043,957 94,545,125
Commitments and contingencies
PARTNERS' CAPITAL (DEFICIT)....................................................... (525,610) (442,725)
-------------- -------------
Total Liabilities and Partners' Capital (Deficit)............................... $ 139,518,347 $ 94,102,400
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes to financial statement.
F-23
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION
THREE MONTHS ENDED (FEBRUARY 7,
MARCH 31, 1996)
---------------------- TO
1999 1998 MARCH 31, 1999
---------- ---------- -----------------
<S> <C> <C> <C>
Revenues............................................................... $ -- $ -- $ 5,382,289
Project development expenses........................................... 82,885 -- 534,559
---------- ---------- -----------------
Net income (loss)...................................................... $ (82,885) $ -- $ 4,847,730
---------- ---------- -----------------
---------- ---------- -----------------
</TABLE>
See accompanying notes to financial statement.
F-24
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 AND
FOR THE PERIOD FROM INCEPTION (FEBRUARY 7, 1996)
TO MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GENERAL PARTNER
--------------------------------
LIMITED PARTNER GRANITE POWER
LSP BATESVILLE PARTNERS II, LSP ENERGY,
HOLDING, LLC L.P. INC. TOTAL
--------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998..................... $ (438,298) $ -- $ (4,427) $ (442,725)
Net loss......................................... (82,056) -- (829) (82,885)
--------------- --------------- ------- -----------
Balance at March 31, 1999........................ $ (520,354) $ -- $ (5,256) $ (525,610)
--------------- --------------- ------- -----------
--------------- --------------- ------- -----------
Balance at December 31, 1997..................... $ -- $ -- $ -- $ --
Capital contributions............................ -- -- -- --
--------------- --------------- ------- -----------
Balance at March 31, 1998........................ $ -- $ -- $ -- $ --
--------------- --------------- ------- -----------
--------------- --------------- ------- -----------
Balance at inception............................. $ -- $ -- $ -- $ --
Capital Contributions............................ -- 990 10 1,000
Transfer of partnership interests................ 990 (990) -- --
Net income (loss)................................ $ (521,344) 5,320,597 48,477 4,847,730
Distributions to partners........................ -- (5,320,597) (53,743) (5,374,340)
--------------- --------------- ------- -----------
Balance at March 31, 1999........................ $ (520,354) $ -- $ (5,256) $ (525,610)
--------------- --------------- ------- -----------
--------------- --------------- ------- -----------
</TABLE>
See accompanying notes to financial statement.
F-25
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION
THREE MONTHS ENDED MARCH (FEBRUARY 7,
31, 1996)
------------------------ TO DECEMBER 31,
1999 1998 1999
------------- --------- -----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)....................................................... $ (82,885) $ -- $ 4,847,730
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Increase in other current assets...................................... -- -- (57,067)
Increase in accounts payable and contract retainage................... 303,599 -- 13,811,482
Increase in accrued interest payable.................................. 58,556 -- 213,454
------------- --------- -----------------
Cash provided by operating activities................................... 279,270 -- 18,815,599
------------- --------- -----------------
Cash Flows from Investing Activities:
Payments on property and construction in progress..................... (42,453,649) -- (122,767,494)
------------- --------- -----------------
Cash used in investing activities....................................... (42,453,649) -- (122,767,494)
------------- --------- -----------------
Cash Flows from Financing Activities:
Debt issuance and financing costs..................................... (15,077) -- (10,780,355)
Proceeds from issuance of loans....................................... 42,900,000 -- 120,900,000
Capital Contributions................................................. -- -- 1,000
Distributions to partners............................................. -- -- (5,374,340)
------------- --------- -----------------
Cash provided by (used in) financing activities......................... 42,884,923 -- 104,746,305
------------- --------- -----------------
Increase in cash........................................................ 710,544 -- 794,410
Cash, beginning of period............................................... 83,866 -- --
------------- --------- -----------------
Cash, end of period..................................................... $ 794,410 $ -- $ 794,410
------------- --------- -----------------
------------- --------- -----------------
</TABLE>
See accompanying notes to financial statement.
F-26
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(a Delaware Limited Partnership in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BUSINESS
LSP Energy Limited Partnership (the "Partnership") is a Delaware limited
partnership formed in February 1996 to develop, construct, own and operate a
gas-fired electric generating facility with a design capacity of approximately
837 megawatts to be located in Batesville, Mississippi (the "Facility"). The 1%
general partner of the Partnership is LSP Energy, Inc. ("Energy"). Granite Power
Partners II, L.P. ("Granite") was the original 99% limited partner of the
Partnership. The current 99% limited partner of the Partnership is LSP
Batesville Holding, LLC ("Holding"), a Delaware limited liability company
established on July 29, 1998. Granite is a Delaware limited partnership formed
to develop independent power projects throughout the United States. The general
partner of Granite is LS Power, LLC ("LS Power") a Delaware limited liability
company.
Granite and Cogentrix/Batesville, LLC ("Cogentrix"), a Delaware limited
liability company, entered into an operating agreement dated as of August 28,
1998 and amended on December 15, 1998 (as amended, the "Operating Agreement").
Pursuant to the Operating Agreement, Granite contributed to Holding its 99%
limited partnership interest in the Partnership and all of the common stock of
Energy and Cogentrix agreed to contribute to Holding $54,000,000 of equity.
Granite received an initial 47.85% membership interest in Holding and Cogentrix
received an initial 52.15% membership interest in Holding. These membership
interest percentages are dependent upon a number of factors and are subject to
adjustment as set forth in the Operating Agreement.
Cogentrix's equity contribution to Holding will be contributed to the
Partnership and used for the development and construction of the Facility.
Cogentrix's equity contribution commitment is supported by an irrevocable letter
of credit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Partnership has been in the development stage since its inception and is
not expected to generate any operating revenues until the Facility achieves
commercial operations. Revenues in 1997 primarily represent a $5,000,000 option
payment received by the Partnership under an option purchase agreement (the
"Option Purchase Agreement") entered into in 1996 with a third party. Under the
terms of the Option Purchase Agreement, the third party had the option to
purchase 750 megawatts of capacity and dispatchable energy for a defined term
from the Partnership. Effective November 1, 1997, the Option Purchase Agreement
expired unexercised. The Partnership has no continuing financial commitments
under the Option Purchase Agreement and all funds earned under the Option
Purchase Agreement were distributed to the partners of the Partnership prior to
December 31, 1997. As with any new business venture of this size and nature, the
ultimate operation of the Facility could be affected by many factors.
Construction of the Facility is expected to be completed in 2000.
PROJECT DEVELOPMENT COSTS
On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP
98-5"). SOP 98-5 requires that costs incurred during start-up activities,
including organization costs, be expensed as incurred. Generally, all
F-27
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
start-up costs incurred that are not directly related to the acquisition or
construction of long-lived tangible assets will be expensed.
The Partnership adopted SOP 98-5 during 1998 and accordingly has expensed
all start-up costs in the accompanying [1999] statement of operations.
CONSTRUCTION IN PROGRESS
All costs directly related to the acquisition and construction of long-lived
assets are capitalized. Interest costs (including amortization of debt issuance
and financing costs), net of interest income on excess proceeds from loans is
capitalized during construction. As of March 31, 1999 and December 31, 1998,
capitalized interest including amortization of debt issuance and financing costs
was approximately $4,318,000 and $1,815,000, respectively, ($3,269,000 and
$1,581,000, respectively, before amortization). Cash paid for interest was
approximately $1,630,000 for the three months ended March 31, 1999,
approximately $1,426,000 for the year ended December 31, 1998 and approximately
$3,056,000 for the period February 7, 1996 (inception) to March 31, 1999.
DEBT ISSUANCE AND FINANCING COSTS
The Partnership amortizes deferred debt issuance and financing costs over
the term of the related debt using the effective interest method. Amortization
of deferred financing costs is capitalized as part of construction in progress
in the accompanying financial statements.
ACCOUNTS PAYABLE
As of March 31, 1999 and December 31, 1998, substantially all accounts
payable were considered project costs and were eligible for payment from
unadvanced loan proceeds.
USE OF ESTIMATES
Management makes a number of estimates and assumptions relating to the
reporting of assets and liabilities and revenues and expenses and the disclosure
of contingent assets and liabilities to prepare financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
INCOME TAXES
Since the Partnership is not an income tax paying entity, the accompanying
financial statements do not reflect any income tax effects.
F-28
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. PROPERTY AND CONSTRUCTION IN PROGRESS
Property and construction in progress consist of the following at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
Land and easements................................................................ $ 1,398,071 $ 1,398,071
Construction in progress.......................................................... 127,503,206 82,031,623
-------------- -------------
$ 128,901,277 $ 83,429,694
-------------- -------------
-------------- -------------
</TABLE>
4. FACILITY CONTRACTS
On May 18, 1998, the Partnership entered into a Power Purchase Agreement
("VEPCO PPA") with Virginia Electric and Power Company ("VEPCO"). Under the
terms of the VEPCO PPA, the Partnership is obligated to sell and VEPCO is
obligated to purchase approximately 558 megawatts of electrical capacity and
dispatchable energy to be generated from two of the three Combined Cycle Units
("Unit" or "Units") at the Facility at prices set forth in the VEPCO PPA. The
initial term of the VEPCO PPA is thirteen years, beginning on the earlier of
commencement of commercial operations or June 1, 2000, which date may be
extended by a force majeure event or a delivery excuse. VEPCO has the option of
extending the term of the VEPCO PPA for an additional twelve years by providing
the Partnership written notice at least two years prior to the expiration of the
initial term. The extended term may be terminated at any time by VEPCO with 18
months prior notice to the Partnership.
The VEPCO PPA is subject to specified construction and energy delivery
milestone deadlines, including achieving commercial operations of the VEPCO
Units by June 1, 2000, which date may be extended by a force majeure event or a
delivery excuse.
In the event the commercial operation date of the VEPCO units is delayed
beyond June 1, 2000, the Partnership may be responsible for replacement power
during the period of delay, subject to a maximum of $20 per kilowatt of
committed capacity from each VEPCO Unit. VEPCO may terminate the VEPCO PPA if
the commercial operation date is not achieved by June 1, 2001, which date may be
extended by a force majeure event or a delivery excuse.
The VEPCO PPA is a tolling arrangement, whereby VEPCO is obligated to supply
natural gas to each VEPCO Unit. VEPCO is obligated to arrange, procure,
nominate, balance, transport and deliver to the Facility's lateral pipeline, the
amount of fuel necessary for each VEPCO Unit to generate its net electrical
output.
On May 21, 1998, the Partnership entered into a Power Purchase Agreement
("Aquila PPA") with Aquila Power Corporation ("Aquila") and UtiliCorp United,
Inc. ("Utilicorp"). Under the terms of the Aquila PPA, the Partnership is
obligated to sell and Aquila is obligated to purchase approximately 279
megawatts of electrical capacity and dispatchable energy to be generated from
one of the three Units at the Facility at prices set forth in the Aquila PPA.
UtiliCorp has appointed Aquila as its agent under the Aquila PPA. The initial
term of the Aquila PPA is fifteen years and seven months, beginning on June 1,
2000, which date may be extended by a force majeure event or a delivery excuse.
Aquila has the option of extending the term of the Aquila PPA for an additional
five years by providing the Partnership
F-29
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. FACILITY CONTRACTS (CONTINUED)
written notice by the later of July 2013 or twenty-nine months prior to the
expiration of the initial term.
The Aquila PPA is subject to an energy delivery milestone deadline of June
1, 2000, which deadline may be extended by a force majeure event or a delivery
excuse. In the event that commercial operations of the Aquila Unit is not
achieved by such deadline, the Partnership may elect to incur an adjustment to
the capacity payment to be received under the Aquila PPA or to be responsible
for replacement power during the period of delay. Aquila may terminate the
Aquila PPA if commercial operations of the Aquila Unit is not achieved by the
first anniversary of the energy delivery milestone deadline, which deadline may
be extended for up to one year by a force majeure event or delivery excuse.
The Aquila PPA is a tolling arrangement, whereby Aquila is obligated to
supply natural gas to the Aquila Unit. Aquila is obligated to arrange, procure,
nominate, balance, transport and deliver to the Facility's lateral pipeline, the
amount of fuel necessary for the Aquila Unit to generate its net electrical
output. The Partnership is obligated to administer gas imbalances on the
Facility's lateral pipeline among all parties using the Facility's lateral
pipeline.
On July 22, 1998, the Partnership entered into a $240 million fixed price
Turnkey Engineering, Procurement and Construction Agreement ("Construction
Agreement") with BVZ Power Partners & Batesville ("BVZ"), a joint venture formed
by H.B. Zachary Company and a subsidiary of Black & Veatch, LLP. The obligations
of BVZ are guaranteed by Black & Veatch, LLP and the entire Construction
Agreement is backed by a performance bond. Under the terms of the Construction
Agreement, BVZ has committed to develop and construct the Facility subject to
the terms, deadlines and conditions set forth in the Construction Agreement. In
the event the construction and start-up to specified performance levels of the
two VEPCO Units and the Aquila Unit has not occurred on or prior to July 9,
2000, July 19, 2000 and July 24, 2000, as adjusted under the terms of the
Construction Agreement ("Guaranteed Completion Dates"), respectively, then BVZ
will be required under the contract to pay certain liquidated damages, subject
to certain limits. In the event the construction and start-up of the entire
Facility to specified performance levels occurs prior to the last Guaranteed
Completion Date, then BVZ will be entitled to receive a bonus for early
completion.
At various times during the period between January 8, 1999 and January 15,
1999, BVZ's access to the construction site was limited as a result of the
failure of the temporary access road. Due to delays in construction progress
experienced by BVZ during this period, the Partnership and BVZ entered into a
change order to the Construction Agreement to extend the Guaranteed Completion
Dates by 7 days.
While the current construction schedule provided to the Partnership by BVZ
anticipates that construction and start-up of each Unit will occur prior to the
energy delivery milestone deadline of June 1, 2000 under both the VEPCO PPA and
Aquila PPA, a gap of 46 to 61 days exists between the Guaranteed Completion
Dates and June 1, 2000. This gap and any further delay in construction and
start-up of the Facility beyond June 1, 2000, may obligate the Partnership to:
(i) provide replacement power to VEPCO or reimburse VEPCO for any incremental
replacement power cost during the period of delay up to a maximum of $11,320,000
and (ii) elect to, at the option of the Partnership, provide replacement power
to Aquila, reimburse Aquila for any incremental replacement power cost during
the
F-30
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. FACILITY CONTRACTS (CONTINUED)
period of delay, or elect to incur an adjustment to the capacity payment to be
received under the Aquila PPA. While BVZ will be obligated to pay liquidated
damages for any failure to complete the construction and start-up of the
Facility on or prior to one day after the Guaranteed Completion Dates, no delay
damages will be due from BVZ with respect to any Unit during the respective gap
periods. Because the delay liquidated damages are subject to certain limits,
there can be no assurance that such liquidated damages will fully compensate the
Partnership for replacement power costs or other costs associated with delays
for which BVZ is responsible. The ultimate liability that would result from this
delay, if any, can not presently be determined.
In accordance with the terms of the Construction Agreement, Granite made
payments aggregating $1,742,500 during the months of July 1998 and August 1998,
on behalf of the Partnership. Granite was reimbursed for these payments by the
Partnership on August 28, 1998. As of March 31, 1999 and December 31, 1998,
engineering, procurement and construction was estimated to be approximately 42%
and 26%, respectively, complete and total costs incurred to date under the
Construction Agreement were approximately $101,375,000 and $61,754,000,
respectively, including retainage. At March 31, 1999 and December 31, 1998, the
Partnership has retained construction contract payments under the Construction
Agreement totaling approximately $4,851,000 and $2,882,000, respectively.
The Partnership has entered into electrical interconnection agreements with
Tennessee Valley Authority (the "TVA Interconnection Agreement") and with
Entergy Mississippi, Inc. (the "Entergy Interconnection Agreement" and, together
with the TVA Interconnection Agreement, the "Interconnection Agreements"). The
TVA Interconnection Agreement has a term of thirty-five years, subject to
certain amendments for regulatory conformance on a non-discriminatory basis
which amendments could be proposed by the Tennessee Valley Authority at any time
after five years from commencement of commercial operations. The Entergy
Interconnection Agreement has a term of thirty-five years from the date when the
interconnection facilities have been completed, automatically extending for
subsequent five-year periods.
The Interconnection Agreements provide for the cost of the interconnection
facilities and system upgrades to be paid by the Partnership. The Partnership is
entitled to receive system upgrade credits in the amount of incremental revenue
received by Tennessee Valley Authority and Entergy Mississippi, Inc. for future
transmission services procured for the delivery of energy from the Facility. The
amount of such credits, if any, may not exceed the total cost of the system
upgrades paid for by the Partnership.
The Partnership has entered into various contracts aggregating approximately
$9,000,000 for the design and construction of an electrical substation and
transmission line system (the "Partnership's Interconnection Facilities"). The
Partnership's Interconnection Facilities are required to enable the Partnership
to deliver the output of the Facility to the Tennessee Valley Authority and
Entergy Mississippi, Inc. interconnection facilities. The Partnership will
design, construct, own and operate the Partnership's Interconnection Facilities
at its own expense.
The Partnership has entered into various contracts aggregating approximately
$17,600,000 for the construction of the Facility's gas lateral pipeline and the
pipelines through which the Facility will receive water and dispose of waste
water (collectively the "Infrastructure"). It is anticipated that the
F-31
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. FACILITY CONTRACTS (CONTINUED)
contracts will be transferred to Panola County, Mississippi ("Panola County")
with respect to the work to be performed on and after April 12, 1999. If the
contracts are taken over by Panola County, the Partnership will lease the
Infrastructure under terms which provide the Partnership with the operational
control and responsibility for the Infrastructure, and with the use of the
Infrastructure for the full projected requirements of the Facility. If Panola
County does not take over the contracts, the Partnership will complete the
construction and own the Infrastructure.
If Panola County takes over the contracts, the cost of the Infrastructure on
and after April 12, 1999 is expected to be paid for by a grant to be financed
through an offering of general obligation bonds (the "Municipal Bonds") by the
State of Mississippi. In the event that the Infrastructure is not financed with
an offering of Municipal Bonds, the proceeds from the $305,000,000 credit
facility (see Note 5), together with the $54,000,000 of equity to be contributed
by Holding to the Partnership, is expected to be sufficient to pay the costs,
including the cost of the Infrastructure, to develop and complete the
construction of the Facility.
As with any major construction effort, construction of the facility involves
many risks, including shortages of labor, work stoppages, labor disputes,
weather interferences, engineering, environmental permitting or geological
problems and unanticipated cost increases for reasons beyond the control of BVZ,
the occurrence of which could give rise to delays, cost overruns or performance
deficiencies, or otherwise adversely affect the design or operation of the
Facility.
These and other contracts and activities incident to the construction and
ultimate operation of the Facility require various other commitments and
obligations by the Partnership. Additionally, the contracts contain various
restrictive covenants, which allow the contracted party to terminate the
contract upon the occurrence of specified events or, in certain cases, default
under other contractual commitments.
5. FINANCING
Effective August 28, 1998, the Partnership, Holding and LSP Batesville
Funding Corporation ("Funding") (collectively the "Borrowers") entered into
agreements with a financial institution (the "Bank"), that provided for
financing in the amount of $330,000,000. The financing was comprised of a
$180,000,000 credit facility (the "Tranche A Credit Facility") entered into
between the Partnership and the Bank, a 25 year bond facility in the amount of
$100,000,000 (The "Tranche B Bond Facility") entered into between the
Partnership, Funding and the Bank and a 10 year bond facility in the amount of
$50,000,000 (the "Tranche C Bond Facility") entered into between Holding and the
Bank. Borrowings from this financing were used for the development and
construction of the Facility. The terms and conditions of the Tranche B Bond
Facility and Tranche C Bond Facility were set forth in a letter agreement (the
"Letter Agreement") entered into between the Borrowers and the Bank.
Pursuant to the Letter Agreement the Borrowers and the Bank, as underwriter,
also agreed to pursue a capital markets offering during the last quarter of
1998. However, due to unfavorable capital markets conditions the capital markets
offering was not completed. Alternatively, on December 15, 1998 the Partnership
amended and restated the financing agreements entered into on August 28, 1998.
The amended and restated agreements provide for financing in the amount of
$305,000,000. The new
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<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. FINANCING (CONTINUED)
financing consists of a $305,000,000 three-year loan facility (the "Bank Credit
Facility") entered into among the Partnership and a consortium of banks.
Pursuant to the original objectives contained in the Letter Agreement, the
Partnership refinanced the Bank Credit Facility commitment with a capital
markets offering. (See Note 9).
A common agreement (the "Common Agreement") ties all of the financing
agreements together and sets forth, among other things; (a) certain terms and
conditions upon which loans and disbursements shall be made under the Bank
Credit Facility; (b) the mechanism for which loan proceeds, operating revenues,
equity contributions and other amounts received by the Partnership are disbursed
to pay construction costs, operations and maintenance costs, debt service and
other amounts due from the Partnership; (c) the conditions which must be
satisfied prior to making distributions from the Partnership; and (d) the
covenants and reporting requirements the Partnership is required to be in
compliance with during the term of the Common Agreement.
The aggregate principal amount of all loans under the Bank Credit Facility
shall not exceed $305,000,000. The maturity date of loans outstanding under the
Bank Credit Facility is the earlier of (a) December 15, 2001 and (b) the
commitment termination date, as defined.
During the period from December 15, 1998 through the completion of
construction of the Facilities, amounts outstanding, based on loan amounts
designated by the Partnership, bear interest at (i) .125% above the higher of
the Prime Rate or .50% above the Federal Funds Rate (collectively the "Base
Rate") or (ii) 1.125% above the selected London Interbank Offered Rate ("LIBOR")
term, not to exceed one year. The interest rate spreads subsequent to completion
of construction of the Facility will be as follows:
<TABLE>
<CAPTION>
BASE RATE LOANS LIBOR LOANS
- -------------------------- --------------------------
<S> <C>
.300% 1.300%
</TABLE>
Interest payments on Base Rate loans are payable quarterly. Interest
payments on LIBOR loans are payable on the last day of the LIBOR loan term, or
if the LIBOR loan term maturity is longer than three months, every three months
after the date of such LIBOR loan. At March 31, 1999 and December 31, 1998, the
Partnership had $120,900,000 and $78,000,000, respectively, of LIBOR loans
outstanding under the Bank Credit Facility. Interest rates on the outstanding
loans at March 31, 1999 were 6.065% and at December 31, 1998 ranged from 6.355%
to 6.505%.
The estimated fair value of the loans made under the Bank Credit Facility
approximate their carrying value since the interest rates are variable.
A quarterly commitment fee of .375% is incurred on the daily average
unadvanced and available commitment under the Bank Credit Facility.
The Partnership has entered into a Letter of Credit and Reimbursement
Agreement (the "LOC Agreement") with the Bank that provides for letter of credit
commitments aggregating $16,980,000. The LOC Agreement provides for the
Partnership to issue three separate letters of credit ("Letter of Credit A",
"Letter of Credit B" and "Letter of Credit C"). The letters of credit will be
used to provide
F-33
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. FINANCING (CONTINUED)
security in favor of VEPCO to support the Partnership's obligations under the
VEPCO PPA. The LOC Agreement requires commitment fees payable quarterly in
arrears, at varying rates on each letter of credit commitment until the
expiration of each letter of credit commitment.
On August 28, 1998, the Partnership issued Letter of Credit A in the amount
of $5,660,000 as security for the Partnership's replacement power obligation
under the VEPCO PPA until the earlier of June 1, 2001 and the commercial
operations date.
On December 15, 1998, the Partnership and the Bank amended the LOC Agreement
to conform its terms and conditions to the amended and restated Bank Credit
Facility and Common Agreement.
Loans made under the Bank Credit Facility, when issued will be secured by
all of the assets and contract rights of the Partnership. In addition, each of
the partners has pledged its respective partnership interest in the Partnership.
The Common Agreement, the Bank Credit Facility and the LOC Agreement,
require compliance with certain covenants, including, among other things,
compliance with certain reporting requirements, limitations or restrictions
relating to the use of the proceeds under the Bank Credit Facility, additional
indebtedness, and disposition of assets. The Common Agreement also describes
events of default which include, among others, failure to make payments in
accordance with the terms of the Bank Credit Facility and the LOC Agreement and
failure to comply with agreements entered into by the Partnership.
6. PARTNERS' CAPITAL
Profits, losses and distributions are allocated based on the respective
partnership interests and in accordance with the Partnership Agreement and the
Common Agreement.
7. RELATED PARTY TRANSACTIONS
All costs incurred through August 28, 1998 to develop the Facility,
consisting principally of site development costs, engineering fees, legal and
consulting fees, permitting costs, and LS Power employee and office costs have
been expended by Granite. These costs were reimbursed and a development fee was
paid to Granite on completion of construction financing on August 28, 1998 (see
Note 5). The aggregate payment to Granite was approximately $13,500,000.
LS Power Management, LLC ("LSP Management"), a wholly owned subsidiary of LS
Power, will provide certain management services to the Partnership pursuant to a
management services agreement. Under this management services agreement, LSP
Management will manage the business affairs of the Partnership during
construction and operation of the Facility. LSP Management will be reimbursed
for its reasonable and necessary expenses incurred in performing its services,
including salaries of its personnel to the extent related to services provided
under the management services agreement. LSP Management will also receive a
monthly management fee of approximately $33,000 during operation of the
Facility. This management fee will be adjusted annually based on certain
published indices. Management fee payments are anticipated to begin during the
third quarter of 1999. For the three months ended March 31, 1999 and for the
year ended December 31, 1998, LSP Management billed the
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<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Partnership approximately $200,000 and $362,000, respectively, under the
management services agreement.
The Facility will be operated and maintained under a long-term operations
and maintenance agreement with Cogentrix. The term of the operations and
maintenance agreement extends for an initial term of twenty-seven years. The
Partnership has the option of extending the term of the agreement for successive
two-year terms with one hundred and eighty days notice. Under the terms of the
agreement the Partnership is required to pay Cogentrix a fixed fee of $390,000,
payable in ten monthly installments, for services provided during construction
of the Facility and a fixed monthly fee of approximately $42,000 during
operation of the Facility. The Partnership is also required to reimburse
Cogentrix for all labor costs, including payroll and taxes, subcontractor costs
and other costs deemed reimbursable by the Partnership. The management fee will
be adjusted annually based on certain published indices. Services to be provided
during construction of the Facility are anticipated to begin in the third
quarter of 1999.
8. DEPENDENCE ON THIRD PARTIES
The Partnership is highly dependent on BVZ for the construction of the
Facility, certain contractors for the construction of the Partnership's
Interconnection Facilities and Infrastructure and Cogentrix for the operation
and maintenance of the Facility. During the terms of the VEPCO PPA and Aquila
PPA, the Partnership is highly dependent on two utilities for the purchase of
electric generating capacity and dispatchable energy from their respective Units
at the Facility. Any material breach by any one of these parties of their
respective obligations to the Partnership could affect the ability of the
Partnership to make payments under the various financing agreements. In
addition, bankruptcy or insolvency of certain other parties or default by such
parties relative to their contractual or regulatory obligations could adversely
affect the ability of the Partnership to make payments under the various
financing agreements. If an agreement were to be terminated due to a breach of
such agreement, the Partnership's ability to enter into a substitute agreement
having substantially equivalent terms and conditions, or with an equally
creditworthy third party, is uncertain and there can be no assurance that the
Partnership will be able to make payments under the various financing
agreements.
9. SUBSEQUENT EVENT
On May 21, 1999, the Partnership and Funding issued two series of Senior
Secured Bonds (the "Bonds") in the following total principal amounts:
$150,000,000 7.164% Series A Bonds due 2014 and $176,000,000 8.160% Series B
Bonds due 2025. Interest is payable semiannually on each January 15 and July 15,
commencing January 15, 2000. A portion of the proceeds from the issuance of the
Bonds was used to repay the $136,600,000 of outstanding loans under the Bank
Credit Facility. The remaining proceeds from the issuance of the Bonds will be
used to pay a portion of the costs of completing the Facility.
Under the terms of the Operating Agreement, the issuance of the Bonds
resulted in a recalculation of the Granite and Cogentrix membership interests in
Holding. Effective May 21, 1999 the revised Granite and Cogentrix membership
interests are 48.63% and 51.37% respectively.
F-35
<PAGE>
ANNEX A
DEFINITIONS
"Acceptable PPA" means any of the Virginia Power PPA, the Aquila PPA or a
Replacement PPA.
"Acceptable Replacement Power Arrangement" means an agreement for the
purchase of Replacement Power entered into or arranged for by the Partnership:
(1) that would not reasonably be expected to result in a Material Adverse Effect
or a material adverse effect on the operation of the Project (as certified by
the Partnership); (2) (a) the counterparty of which or the credit support
provider for such counterparty (including any parent of such counterparty which
guarantees such counterparty's obligations) is rated at least "BBB-" by S&P or
at least "Baa3" by Moody's, provided that such counterparty or such credit
support provider, as applicable, will not be required to satisfy such rating
standard if such counterparty has dedicated existing generating assets and
capacity for the provision of such Replacement Power and such generating assets
have a proven track record for satisfying the obligation to provide all of such
Replacement Power, and (b) that has a term not exceeding 45 days; or (3) (a) the
counterparty of which is reasonably experienced in the business of providing
power for similar sized obligations and has a proven track record for satisfying
the obligation to provide all of such Replacement Power and (b) that has a term
not exceeding 48 hours.
"Account Balance Amount" means the sum of (1) the funds in the Distribution
Suspense Account and (2) the aggregate of all funds in the Debt Service Reserve
Account and the Debt Service Payment Account.
"Account Reserve Requirement" means, as of any date of determination, the
sum of (1) the Debt Service Reserve Requirement as of the next Scheduled Payment
Date for the Bonds (or, if the date of determination is a Scheduled Payment Date
for the Bonds, the Debt Service Reserve Requirement as of such date), (2) the
Senior Indebtedness due and payable on the next Scheduled Payment Date for the
Bonds and (3) the Senior Indebtedness due and payable from and after the date of
determination and prior to the next Scheduled Payment Date for the Bonds.
"Accounts" means collectively, the Construction Account, the Revenue
Account, the O&M Account, the Debt Service Payment Account, the DSRA LOC Payment
Account, the Debt Service Reserve Account, the Major Maintenance Reserve
Account, the Aquila PPA Reserve Account, the Distribution Suspense Account and
such other accounts as may be established pursuant to the Common Agreement.
"Additional Bonds" means any bonds issued pursuant to the Indenture, other
than the Bonds.
"Additional Indebtedness" means Indebtedness incurred in respect of Required
Modifications, Optional Modifications or Expansion Modifications.
"Additional Indebtedness Agent" means any agent, trustee or similar
representative for the Additional Indebtedness Holders under an Additional
Indebtedness Agreement.
"Additional Indebtedness Agreement" means an agreement among the
Partnership, an Additional Indebtedness Agent and Additional Indebtedness
Holders pursuant to which the Additional Indebtedness Holders agree to provide
Additional Indebtedness to the Partnership on the terms and conditions set forth
therein and in accordance with the Financing Documents.
"Additional Indebtedness Holders" means the financial institutions from time
to time party to an Additional Indebtedness Agreement.
"Additional Project Document" means any material contract or undertaking to
which the Partnership is a party relating to the development, construction,
operation, administration or maintenance of the Project entered into after the
Closing Date, but excluding any Financing Document.
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<PAGE>
"Administrative Agent" means, initially, The Bank of New York, and any
person appointed as a substitute or replacement Administrative Agent under the
Common Agreement.
"Aquila PPA" means the Power Purchase Agreement, dated May 21, 1998, by and
among the Partnership, Aquila and UtiliCorp, as amended by (i) the Letter
Agreement, dated July 16, 1998, by and among the Partnership, Aquila and
UtiliCorp, and (ii) the Letter Agreement, dated August 28, 1998, by and among
the Partnership, Aquila and UtiliCorp.
"Aquila PPA Reserve Account" means the account having such name established
pursuant to the Common Agreement.
"Aquila Reserve L/C" means any letter of credit provided by or on behalf of
the Partnership to the Administrative Agent to satisfy the Aquila PPA Reserve
Requirement as described under the caption "Description of Principal Financing
Documents--Common Agreement--Reserve Accounts--Letters of Credit."
"Aquila Reserve L/C Agreement" means any agreement providing for the
issuance of an Aquila Reserve L/C.
"Bonds" means the Private Bonds and the Exchange Bonds.
"Bondholder" means a person in whose name a Private Bond or an Exchange Bond
is registered in the security register.
"Bonding Arrangements" means surety bonds, performance bonds or similar
arrangements with third-party sureties or indemnitors or similar persons.
"Btu" means British Thermal Unit, the amount of heat required to raise the
temperature of 1 pound of pure water 1 degree F from 59 degrees F to 60 degrees
F at a constant pressure of 14.73 pounds per square inch absolute.
"Cash Available for Debt Service" means, for any period, Operating Revenues
(excluding any receipts derived from the sale of any property pertaining to the
Project) for such period, minus (1) all O&M Costs for such period and (2) all
deposits, if any, into the Major Maintenance Reserve Account for such period.
"Casualty Event" means an event that causes all or a portion of the Project
to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Expropriation Event.
"Casualty Proceeds" means all insurance proceeds or other amounts actually
received on account of a Casualty Event, except proceeds of delayed opening or
business interruption insurance.
"Change of Control" means:
(1) LS Power, Cogentrix and/or any Qualified Transferee shall collectively cease
to own, directly or indirectly, at least 51% of the capital stock of the
general partner of the Partnership (unless any or all of them maintain
management control of the Partnership); or
(2) LS Power, Cogentrix and/or any Qualified Transferee shall collectively cease
to own, directly or indirectly, at least 10% of the ownership and economic
interests in the Partnership;
PROVIDED that none of the events described in clauses (1) or (2) above shall
be deemed a "Change of Control" if (x) such events will not result in a Rating
Downgrade or (y) such events are approved by Holders holding at least 66 2/3% in
aggregate principal amount of the outstanding Bonds.
"Closing Date" means May 21, 1999.
A-2
<PAGE>
"Collateral" means all assets, rights, interests and other property in or
upon which a security interest or Lien is or is purported to be granted to the
Collateral Agent for the benefit of the Senior Secured Parties pursuant to the
Security Documents.
"Commercial Operation Date" means the later to occur of the Commercial
Operation Date under the Virginia Power PPA and the Commercial Operation Date
under the Aquila PPA.
"Commercially Feasible Basis" means that, following a Casualty Event, an
Expropriation Event or a Title Event:
(1) the Casualty Proceeds, the Expropriation Proceeds or the Title
Proceeds, as the case may be, together with any other amounts that the
Partnership is or the partners of the Partnership are irrevocably committed
to contribute pursuant to support arrangements to Restore all or a portion,
as the case may be, of the Project, will be sufficient to permit such
Restoration of the Project;
(2) the sum of (a) the proceeds of the business interruption insurance,
(b) the monies available in the Construction Account and the O&M Account,
(c) any amounts that the Partnership is or the partners of the Partnership
are irrevocably committed to contribute pursuant to support arrangements
(without duplication of such amounts referred to in clause (1) above) and
(d) the anticipated Operating Revenues during the estimated period of
Restoration will be sufficient to pay all Senior Debt Service and O&M Costs
(taking into account the limitation on the use of such funds set forth in
the Common Agreement) during the estimated period of Restoration;
(3) the Project upon being Restored can be reasonably expected to
produce Operating Revenues adequate to maintain (x) a Projected Senior Debt
Service Coverage Ratio, for the period of four consecutive complete fiscal
quarters of the Partnership commencing with the fiscal quarter of the
Partnership beginning on or most recently after the projected date of
Restoration, equal to or greater than 1.3 to 1 during the 100% PPA Period
and the Two-Thirds PPA Period and 1.75 to 1.0 during the One-Third PPA
Period and the Merchant Period, and (y) a Projected Senior Debt Service
Coverage Ratio, for each complete Fiscal Year commencing with the Fiscal
Year beginning on or most recently after the projected date of Restoration,
equal to or greater than 1.4 to 1 during the 100% PPA Period and the
Two-Thirds PPA Period and 2.0 to 1.0 during the One-Third PPA Period and the
Merchant Period, in each case taking into account any change in projected
operating results due to the impairment of any portion of the Project and
any reduction in Senior Debt Service due to any partial redemption of the
Bonds pursuant to the Indenture or any partial prepayment of the amounts
outstanding under the Virginia Power L/C Agreement; and
(4) the Partnership shall reasonably believe that the Project can be
operated in accordance with the provisions of the Project Documents that are
then in effect or that are expected to be in effect after the completion of
the Restoration.
"Commission" means the United States Securities and Exchange Commission.
"Common Facilities Agreement" means an agreement between the Partnership and
an Expansion Party which provides for the sharing of transmission lines,
interconnections, utilities and other facilities among the first three Units of
the Project and any Expansion.
"Completion" means that: (1) Substantial Completion (as defined in the
Construction Contract) of the Facility (as defined the Construction Contract)
shall have occurred and been accepted under the Construction Contract, that all
work necessary to achieve Substantial Completion under the Construction Contract
shall have been performed in accordance with the Construction Contract and the
requirements of all applicable governmental approvals, and that all liquidated
damages then due and payable under the Construction Contract have been paid in
full (other than those that are subject to a Good Faith Contest); (2) commercial
operation under any Infrastructure Contracts shall have occurred
A-3
<PAGE>
and been accepted under such Infrastructure Contracts, that all work necessary
to achieve completion under such Infrastructure Contracts shall have been
performed in accordance with such Infrastructure Contracts and the requirements
of all applicable governmental approvals; (3) the Commercial Operation Date
shall have occurred; and (4) the Independent Engineer shall have confirmed each
of the events described in clauses (1) through (3) above.
"Completion Date" means the date on which the Project achieves Completion.
"Construction Account" means the account of such name established pursuant
to the Common Agreement.
"Construction Contract" means the Turnkey Engineering, Procurement and
Construction Agreement dated as of July 22, 1998 between the Partnership and the
Contractor.
"Distribution Suspense Account" means the account having such name
established pursuant to the Common Agreement.
"Date Certain" means June 1, 2001.
"Debt Service Payment Account" means the account having such name
established pursuant to the Common Agreement.
"Debt Service Reserve Account" means the account having such name
established pursuant to the Common Agreement.
"Debt Service Reserve L/C" means any letter of credit provided by or on
behalf of the Partnership to the Administrative Agent to satisfy the Debt
Service Reserve Requirement as described under the caption "Description of
Principal Financing Documents--Common Agreement--Reserve Accounts-- Letters of
Credit."
"Debt Service Reserve L/C Agreement" means any agreement providing for the
issuance of a Debt Service Reserve L/C.
"Debt Service Reserve LOC Loans" means any loans made to the Partnership or
the Funding Corporation under a Debt Service Reserve L/C Agreement.
"Default Equity Contribution" means an equity contribution made to the
Partnership when an Event of Default or a bankruptcy event has occurred.
"Distributable Amount" means the Account Balance Amount less the Account
Reserve Requirement.
"Default" means any occurrence, circumstance or event, or any combination
thereof, which, with the lapse of time and/or the giving of notice, would
constitute an Event of Default.
"DSRA LOC Payment Account" means the account having such name established
pursuant to the Common Agreement.
"Easements" means the easements appurtenant, easements in gross, license
agreements and other rights running in favor of the Partnership and/or
appurtenant to the Site, including those certain easements and licenses
described in the Title Policy.
"Eligible Facility" means an "eligible facility" as that term is defined in
15 U.S.C. Section 79z-5a(a-2).
"Equity Documents" means the Equity Contribution Agreement and the Equity
Letter of Credit.
"Event of Abandonment" means: (1) prior to the Completion Date, (a) the
cessation or deferral of all or substantially all construction or completion of
the Project for more than 120 consecutive days (as such period may be extended
on a day for day basis corresponding with the occurrence and continuance of any
event of force majeure (as defined in any of the Project Documents) so long as
the
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<PAGE>
Partnership is diligently proceeding to mitigate the consequences of such event)
other than by reason of a Casualty Event or an Expropriation Event or (b) the
announcement by the Partnership of a decision to permanently cease or
indefinitely defer the construction or completion of the Project; or (2) after
the Completion Date, (a) the suspension for more than 120 consecutive days (as
such period may be extended on a day for day basis corresponding with the
occurrence and continuance of any event of force majeure (as defined in any of
the Project Documents) so long as the Partnership is diligently proceeding to
mitigate the consequences of such event) of all or substantially all operation
of the Project (other than (1) by reason of the failure to be dispatched or (2)
by reason of the occurrence of a Casualty Event or an Expropriation Event) or
(b) the announcement by the Partnership of a decision to permanently cease
operation of the Project.
"EWG" or "Exempt Wholesale Generator" means an "exempt wholesale generator,"
as that term is defined in 15 U.S.C. Section79z-5a(a-1).
"Exchange Bonds" means the 7.164% Series C Senior Secured Bonds Due January
15, 2014 and the 8.160% Series D Senior Secured Bonds Due July 15, 2025.
"Expansion Modifications" means modifications or improvements to the Project
that are designed to materially increase the net generating capacity of the
Facility, including without limitation the addition of a fourth combined-cycle
generating unit at the Site. Expansion Modifications do not include
modifications that are either Required Modifications or Optional Modifications.
"Expansion" means the improvements resulting from an Expansion Modification.
"Expansion Party" means any third person owning and otherwise responsible
for the development, construction and operation of an Expansion.
"Expropriation Event" means any compulsory transfer or taking or transfer
under threat of compulsory transfer or taking of a material part of the
Collateral by any Governmental Authority unless such transfer or taking is the
subject of a Good Faith Contest.
"Expropriation Proceeds" means all insurance proceeds or other amounts
(including instruments) actually received on account of an Expropriation Event
unless such transfer or taking is the subject of a Good Faith Contest (after
deducting all reasonable expenses incurred in litigating, arbitrating,
compromising, settling or consenting to the settlement of any claims against the
appropriate Governmental Authority).
"Financing Documents" means, collectively, the Indenture, the supplemental
indentures for the initial two series of Bonds, the Bonds, the Virginia Power
L/C Agreement, any Working Capital Agreement (when entered into), any Debt
Service Reserve L/C Agreement (to the extent the Partnership or the Funding
Corporation is the account party to the Debt Service Reserve L/C issued
thereunder) (when entered into), any Aquila Reserve L/C Agreement (to the extent
the Partnership or the Funding Corporation is the account party to the Aquila
Reserve L/C issued thereunder) (when entered into), any Additional Indebtedness
Agreement (when entered into), the Security Documents and the Equity Documents.
"Fiscal Year" means the accounting year of the Partnership commencing each
year on January 1 and ending on December 31 or such other period adopted as such
by the Partnership.
"Good Faith Contest" means the contest of an item if (1) the item is
diligently being contested in good faith by appropriate proceedings timely
instituted, (2) adequate reserves are established in accordance with generally
accepted accounting principles with respect to the contested item and held in
cash or Permitted Investments, if the contested item individually or when taken
together with all other contested items for which reserves are not at the time
being held in cash or Permitted Investments could reasonably be expected to
result in liability of the Partnership and the Funding Corporation in excess of
$1,000,000, (3) during the period of such contest, the enforcement of any
contested item is
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<PAGE>
effectively stayed, unless such enforcement would not reasonably be expected to
result in a Material Adverse Effect, (4) any Lien filed in connection therewith
will have been removed from the record by Bonding Arrangements by a reputable
surety company, or title insurance or cash deposits are otherwise provided to
assure the discharge of the Funding Corporation's or the Partnership's
obligation in connection therewith, provided that such cash deposits, in the
aggregate, will not exceed $2,000,000, (5) such payment for any Tax, Lien or
claim will have been made as is necessary to prevent the recordation of a tax
deed or other similar instrument conveying the property of the Partnership or
any portion thereof, (6) the failure to pay or comply with the contested item
during the period of such Good Faith Contest would not reasonably be expected to
result in a Material Adverse Effect and (7) the Partnership or the Funding
Corporation has no knowledge of any actual or proposed deficiency or additional
assessment in connection therewith not otherwise satisfying the requirements of
clauses (1) through (6).
"Governmental Authority" means any government, governmental department,
ministry, commission, board, bureau, agency, regulatory authority,
instrumentality of any government (central or state), judicial, legislative or
administrative body, federal, state or local, having jurisdiction over the
matter or matters in question.
"Heat rate" means a measure of generating station thermal efficiency,
generally expressed in Btu per net kilowatt-hour. It is computed by dividing the
total Btu content of fuel burned for electric generation by the resulting net
kilowatt-hour generation.
"Heating value" means the amount of heat produced by the complete combustion
of a unit quantity of fuel. The gross or higher heating value (HHV) is that
which is obtained when all of the products of combustion are cooled to the
temperature existing before combustion, the water vapor formed during combustion
is condensed and all the necessary corrections have been made. The net or lower
heating value (LHV) is obtained by subtracting the latent heat of vaporization
of the water vapor, formed by the combustion of the hydrogen in the fuel, from
the gross or higher heating value.
"Indebtedness" of any person at any date means, without duplication, (1) all
obligations of such person for borrowed money, (2) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (3)
all obligations of such person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (4) all obligations of such person under leases which are or should
be, in accordance with generally accepted accounting principles, recorded as
capital leases for which such person is liable, (5) all obligations of such
person under interest rate or currency protection agreements or other hedging
instruments, (6) all obligations of such person to purchase securities (or other
property) which arise out of or in connection with the sale of the same or
substantially similar securities (or property), (7) all deferred obligations of
such person to reimburse any bank or other person for amounts paid or advanced
under a letter of credit or other instrument, (8) all Indebtedness of others
secured by a Lien on any asset of such person, whether or not such Indebtedness
is assumed by such person, and (9) all Indebtedness of others guaranteed
directly or indirectly by such person or as to which such person has an
obligation substantially the economic equivalent of a guarantee or other
arrangement to assure a creditor against loss.
"Independent Consultants" means the Independent Engineer and the Independent
Electricity Market and Fuel Consultant.
"Independent Electricity Market and Fuel Consultant" means C.C. Pace
Consulting L.L.C., or another nationally recognized electricity market
consultant selected by the Partnership.
"Independent Engineer" means R.W. Beck, or another nationally recognized
independent engineer selected by the Partnership.
"Inducement Agreement" means the Inducement Agreement to be entered into by
and among the Authority, the County, the IDA and the Partnership.
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<PAGE>
"Infrastructure Contracts" means the construction contracts between the
Partnership and each of Robinson Mechanical Contracts, Inc., Big Warrior
Corporation and Garney Companies, Inc., which are described under the caption
"Description of the Principal Project Documents--Other Construction and
Engineering Contracts."
"Infrastructure Financing Documents" means the Use Agreements and the
Inducement Agreement.
"Initial Purchasers" means Credit Suisse First Boston Corporation, Scotia
Capital Markets (USA) Inc., and TD Securities (USA) Inc.
"Institutional Accredited Investors" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also Qualified Institutional Buyers.
"Involuntary PPA Buy-Out" means any buy-out of a Power Purchase Agreement
that is not voluntarily sought by the Partnership, but into which the
Partnership is legally or practically required to enter by force or law or
regulation, or by any actual or threatened Expropriation Event, or by an actual
or threatened bankruptcy proceeding or other action adverse to the material
rights and benefits granted to the Partnership under such Power Purchase
Agreement on the part of, or an actual or threatened termination of such Power
Purchase Agreement by, the purchaser of electricity under such Power Purchase
Agreement.
"Kilowatt" or "kW" means 1,000 watts.
"Lien" means, with respect to any asset, any mortgage, deed of trust, lien,
pledge, charge, security interest, or easement or encumbrance of any kind in
respect of such asset, whether or not filed, recorded or otherwise perfected or
effective under applicable law, as well as the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loss Event" means a Casualty Event, an Expropriation Event or a Title
Event.
"Make-Whole Premium" means an amount equal to the Discounted Present Value
calculated for any Bond subject to redemption less the unpaid principal amount
of such Bond; provided that the Make-Whole Premium shall not be less than zero.
For purposes of this definition, the "Discounted Present Value" of any Bond
subject to redemption shall be equal to the discounted present value of all
principal and interest payments scheduled to become due in respect of such Bond
after the date of such redemption, calculated using a discount rate equal to the
sum of (1) the yield to maturity on the United States treasury security having
an average life equal to the remaining average life of such Bond and trading in
the secondary market at the price closest to par and (2) 30 basis points in the
case of the Series C Bonds and 50 basis points in the case of the Series D
Bonds; PROVIDED, HOWEVER, that if there is no United States treasury security
having an average life equal to the remaining average life of such Bond, such
discount rate shall be calculated using a yield to maturity interpolated or
extrapolated on a straight-line basis (rounding to the nearest month, if
necessary) from the yields to maturity for two United States treasury securities
having average lives most closely corresponding to the remaining average life of
such Bond and trading in the secondary market at the price closest to par.
"Material Adverse Effect" means:
(1) a material adverse change in the status of the business, operations,
property or financial condition of the Partnership or the Funding
Corporation; or
(2) any event or occurrence of whatever nature which materially
adversely affects (a) the Partnership's or the Funding Corporation's ability
to perform its obligations under any Transaction
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Document or (b) the perfection, validity or priority of the Senior Secured
Parties' security interests in the Collateral.
"Merchant Period" means any period during which less than 33% of the then
current capacity of the Facility is to be sold or otherwise disposed of under an
Acceptable PPA.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage Estate" means the mortgage on and security interest in all real
property interests of the Partnership (including leasehold interests and
easement interests) in the Site and all fixtures, equipment and improvements
thereon granted by the Partnership to a trustee for the benefit of the
Collateral Agent, acting on behalf of the Senior Secured Parties.
"O&M Account" means the account of such name established pursuant to the
Common Agreement.
"O&M Costs" means all actual cash maintenance and operation costs incurred
and paid for the Project in any particular calendar or fiscal year or period to
which said term is applicable (provided that if the Partnership elects to accrue
property taxes or any other annual cost on a monthly basis and such property
taxes and/or such other annual costs are shown as a separate line item in the
annual operating budget, such property taxes and /or such other annual costs
shall be factored into the calculation of Cash Available for Debt Service as
accrued instead of according to when such property taxes and/or such other
annual costs are actually paid), including payments for fuel and/or tracking
account payments made by the Partnership under the Power Purchase Agreements,
fuel costs incurred under Power Purchase Agreements other than the Virginia
Power PPA or the Aquila PPA or when no Power Purchase Agreements are in effect,
additives or chemicals and transportation costs related thereto, taxes (other
than those based upon the Partnership's income), insurance, consumables,
payments under any lease, payments pursuant to the O&M Agreement (other than the
Operator Fee), the Parts Agreement and the Management Services Agreement, legal
fees and expenses paid by the Partnership in connection with the management,
maintenance or operation of the Project, fees paid in connection with obtaining,
transferring, maintaining or amending any Governmental Approvals and reasonable
general and administrative expenses, but exclusive in all cases of non-cash
charges, including depreciation or obsolescence charges or reserves therefor,
amortization of intangibles or other bookkeeping entries of a similar nature,
and also exclusive of all interest charges and charges for the payment or
amortization of principal of indebtedness of the Partnership; provided that O&M
Costs shall not include (1) major maintenance expenditures to the extent paid
with funds on deposit in the Major Maintenance Reserve Account, (2)
distributions of any kind to the Partnership or its affiliates (other than
payments under the Management Services Agreement and the O&M Agreement (except
for the Operator Fee)), (3) depreciation, (4) capital expenditures, other than
those included in and approved as part of the annual operating budget or (5)
payments made for Restoration of the Project in accordance with the applicable
provisions of the Common Agreement.
"100% PPA Period" means any period during which 100% of the then current
capacity of the Facility is to be sold or otherwise disposed of under an
Acceptable PPA.
"One-Third PPA Period" means any period during which at least 33% but less
than 66 2/3% of the then current capacity of the Facility is to be sold or
otherwise disposed of under an Acceptable PPA.
"Operating Revenues" means all of the following, without duplication,
received by the Partnership:
(1) all payments received by the Partnership under the Power Purchase
Agreements (including with respect to fuel);
(2) proceeds of any business interruption insurance;
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(3) income derived from the sale or use of electric capacity or energy
produced, transmitted or distributed by the Project;
(4) all other revenues from the operation of the Project together with
any receipts derived from the sale of any property pertaining to the Project
or incidental to the operation of the Project, including, without
limitation, transmission system upgrade credits;
(5) the investment income on amounts in the Accounts (but solely to the
extent deposited from time to time in the Revenue Account); and
(6) all other deposits into the Revenue Account not included in clauses
(1) through (5) above, including transfers from the Debt Service Reserve
Account.
all as determined in conformity with cash accounting principles and excluding
any payments received in connection with any buy-out of a Power Purchase
Agreement.
"Operator Fee" means the "Management Fee" due and payable to the Operator
pursuant to the O&M Agreement.
"Optional Modifications" means discretionary modifications or improvements
to the Project other than Required Modifications or Expansion Modifications.
"Ordinary Equity Contributions" means, all equity contributions other than
Default Equity Contributions.
"NOx" means oxides of nitrogen.
"Panola Partnership Agreement" means the Agreement to be entered into by and
between Panola Partnership, Inc. and the Partnership.
"Performance Liquidated Damages" means the performance liquidated damages
payable by the Contractor pursuant to the Construction Contract, in an amount
and to the extent payable pursuant to the Construction Contract.
"Permitted Investments" means (1) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having a maturity not exceeding
(x) 180 days (prior to the Completion Date) or (y) 364 days (after the
Completion Date) from the date of issuance; (2) time deposits and certificates
of deposit having a maturity not exceeding (a) 180 days (prior to the Completion
Date) or (b) 364 days (after the Completion Date) of any domestic commercial
bank of recognized standing having capital and surplus in excess of
$100,000,000; (3) commercial paper issued by the parent corporation of any
domestic commercial bank of recognized standing having capital and surplus in
excess of $100,000,000 and commercial paper of any domestic corporation rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's and, in each case, having a maturity not exceeding (x) 180
days (prior to the Completion Date) or (y) 364 days (after the Completion Date)
from the date of acquisition; (4) fully secured repurchase obligations for
underlying securities of the types described in clause (1) above entered into
with any bank meeting the qualifications established in clause (2) above or any
financial institution having long term unsecured debt securities rated "A" or
better by S&P or "A2" or better by Moody's, in connection with which such
underlying securities are held in trust by a third party custodian; (5)
high-grade corporate bonds rated at least "A" or the equivalent thereof by S&P
or at least "Aa3" or the equivalent thereof by Moody's and having a maturity not
exceeding (x) 180 days (prior to the Completion Date) or (y) 364 days (after the
Completion Date) and (6) money market funds having a rating in the highest
investment category granted thereby by a Rating Agency at the time of
acquisition, including any fund for which the Trustee or an affiliate of the
Trustee serves as an investment advisor, administrator, shareholder, servicing
agent, custodian or subcustodian,
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notwithstanding that (a) the Trustee or an affiliate of the Trustee charges and
collects fees and expenses from such funds for services rendered (provided that
such charges, fees and expenses are on terms consistent with terms negotiated at
arm's-length) and (b) the Trustee charges and collects fees and expenses for
services rendered pursuant to the Indenture.
"Power Purchase Agreements" means the Aquila PPA, the Virginia Power PPA and
any other agreement for the sale of all or a portion of the net electric
capacity and generation from the Facility entered into by the Partnership from
time to time.
"PPA Buy-Outs" means a Voluntary PPA Buy-Out or an Involuntary PPA Buy-Out.
"Project Costs" means the costs associated with the development, financing,
design, engineering, acquisition, equipping, construction, assembly, inspection,
testing, completion and start-up of the Project (including the Infrastructure).
Project Costs include, without limitation, amounts advanced or payable under the
Infrastructure Financing Documents (including any retention relating to
construction costs paid or payable by the Partnership whenever due), management
fees (including under the management services agreement) and Operator Fees
payable prior to the commercial operation of the Project and a development fee
in the amount of $3,000,000 payable to an affiliate of the Partnership on the
Closing Date.
"Project Documents" means the Construction Contract, the Contractor
Guarantee, the Infrastructure Contracts (until any such contract is transferred
by the Partnership), the Power Purchase Agreements, the Fuel Interconnection
Agreements, the Electric Interconnection Agreements, the Water Supply Storage
Agreement, the O&M Agreement, the Partnership Agreement, the Consents, the
Engineering Services Agreement, the Parts Agreement, the Management Services
Agreement, the Ad Valorem Tax Agreement and, when entered into, any Additional
Project Document.
"Project Party" means any party to any Project Document other than the
Partnership.
"Projected Senior Debt Service Coverage Ratio" means, for any period, the
ratio of (a) the aggregate of all Cash Available for Debt Service for such
period to (b) the aggregate of all Senior Debt Service for such period, in each
case calculated on a projected basis (using, (1) if the period in question is
the 100% PPA Period, projections of Cash Available for Debt Service based on
projected sales under the Power Purchase Agreements or Replacement PPAs, as
applicable, (2) if the period in question is the Merchant Period, projections of
Cash Available for Debt Service based on projected merchant sales, and (3) if
the period in question is the One-Third PPA Period or the Two-Thirds PPA Period,
projections of Cash Available for Debt Service based on the appropriate
combination of projected sales under the Power Purchase Agreements or
Replacement PPAs, as applicable, and projected merchant sales) and confirmed by
the Independent Engineer.
"Qualified Institutional Buyer" means "qualified institutional buyer" as
defined in Rule 144A under the Securities Act.
"Qualified Transferee" means any person that acquires after the Closing Date
interests in the Partnership or the general partner of the Partnership so long
as:
(1) such person is, or is controlled by a person that is, reasonably
experienced in the business of owning and operating facilities similar to
the Project;
(2) such acquisition shall be in compliance with law and after giving
effect to such acquisition (a) the Partnership will not as a result of such
acquisition be in violation of any Applicable Laws (including, without
limitation, all Governmental Approvals) the compliance with which is
necessary to permit the Partnership to conduct its business in accordance
with the Project Documents and to maintain its status as an Exempt Wholesale
Generator and the Project's status as an Eligible Facility (if the
Partnership and the Project were certified as such at the time of such
acquisition) and the Trustee shall have received opinions of counsel to such
person and counsel to the
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Partnership to such effect, (b) no Default or Event of Default shall have
occurred and be continuing and (c) such acquisition would not reasonably be
expected to result in a Material Adverse Effect; and
(3) to the extent relevant to such acquisition, the Collateral Agent
shall have received a pledge of and lien on the general partnership
interests in the Partnership or shares of capital stock of LSP Energy so
acquired and the Partnership shall have furnished to the Trustee, the
Collateral Agent and the Administrative Agent such documents, certificates
and opinions from counsel to such person and the Partnership as the Trustee,
the Collateral Agent and the Administrative Agent shall have reasonably
required.
"Rating Agency" means S&P or Moody's.
"Rating Downgrade" means a downgrade in the then current ratings of the
Bonds by a Rating Agency either within a particular category or from one
category to another.
"Replacement Power" has the meaning given such term in the Power Purchase
Agreements.
"Replacement PPA" means a power purchase agreement in respect of which or
that (1) the Rating Agencies confirm in writing that no downgrade of the ratings
for the Bonds will occur solely as a result of such Replacement PPA, or (2) (a)
the counterparty of which or the credit support provider for such counterparty
(including any parent of such counterparty which guarantees such counterparty's
obligations) is rated at least BBB- by S&P and at least Baa3 by Moody's, (b) has
a minimum term of one year and (c) the pricing and commercial terms of which
are, as a whole, equivalent to or better than the pricing and commercial terms
under the Power Purchase Agreement being replaced (as confirmed by the
Independent Engineer).
"Required Modifications" means (1) those modifications or improvements
reasonably necessary for the Partnership to maintain its status as an Exempt
Wholesale Generator or the Project to maintain its status as an Eligible
Facility or for the Project to remain in compliance with all applicable laws and
governmental approvals and (2) those modifications or improvements reasonably
necessary to achieve Completion after the application of all Ordinary Equity
Contributions.
"Required Ratio" means (1) with respect to the 100% PPA Period, 1.20/1.00,
(2) with respect to the Two-Thirds PPA Period, 1.35/1.00, (3) with respect to
the One-Third PPA Period, 1.55/1.00, and (4) with respect to the Merchant
Period, 1.70/1.00.
"Restoration" or "Restoring" means repairing, rebuilding or otherwise
restoring the Project due to the occurrence of a Casualty Event or an
Expropriation Event or, with respect to any Title Event, curing such Title
Event.
"Revenue Account" means the account of such name established pursuant to the
Common Agreement.
"S&P" means Standard & Poor's Ratings Group.
"Scheduled Payment Date" means (a) with respect to any Bond or Additional
Bond, January 15 and July 15, and (b) with respect to any other amortizing
Senior Secured Obligation, the date on which any principal is scheduled to
become due, which shall be on April 15, July 15, October 15 and January 15.
"Security Documents" means the documents pursuant to which the Liens on the
Collateral will be pledged to the Collateral Agent.
"Senior Debt Service" means, for any period, without duplication, (1) the
aggregate of all fees payable to the Secured Parties during such period, plus
(2) the aggregate of all interest, principal and other amounts payable in
respect of the Senior Secured Obligations during such period (but not
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<PAGE>
including any interest during construction or other similar payments which are
pre-funded with the proceeds of a debt issuance or otherwise).
"Senior Debt Service Coverage Ratio" means for any period, the ratio of (1)
the aggregate of all Cash Available for Debt Service for such period to (2) all
Senior Debt Service for such period.
"Senior Indebtedness" means the Senior Secured Obligations, together with
such other Permitted Indebtedness, other than subordinated Indebtedness, of the
Partnership or the Funding Corporation.
"Senior Secured Obligations" means, collectively, without duplication: (1)
all Indebtedness, financial liabilities and obligations of the Partnership and
the Funding Corporation, of whatsoever nature and howsoever evidenced
(including, but not limited to, principal, interest, fees, reimbursement
obligations, penalties, indemnities and legal and other expenses, whether due
after acceleration or otherwise) to the Senior Secured Parties under or pursuant
to the Indenture, the Bonds, any Working Capital Agreement, any Debt Service
Reserve L/C Agreement, the Virginia Power L/C Agreement, any Aquila Reserve L/C
Agreement, any Additional Indebtedness Agreement, the Security Documents, the
Equity Documents, any other Financing Document or any other agreement, document
or instrument evidencing, securing or relating to such indebtedness, financial
liabilities or obligations, in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising out of or relating to
any such agreements; (2) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral or preserve its security interest in the
Collateral; and (3) in the event of any proceeding for the collection or
enforcement of the obligations described in clauses (1) and (2) above, after an
Event of Default has occurred and is continuing and unwaived, the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of
its rights under the Security Documents, together with reasonable attorneys'
fees and court costs.
"Senior Secured Obligations Payments" means, on any monthly disbursement
date, for any given facility constituting a series of Senior Secured Obligations
(including the Bonds), an amount equal to (1)(a) a fraction the numerator of
which is the number of months from and including such disbursement date to but
excluding the immediately preceding Scheduled Payment Date for such facility
constituting or series of Senior Secured Obligations and the denominator of
which is the number of months from but excluding such immediately preceding
Scheduled Payment Date to and including the next succeeding Scheduled Payment
Date for such facility constituting or series of Senior Secured Obligations (or,
if the disbursement date is on a Scheduled Payment Date for such facility
constituting or series of Senior Secured Obligations, such Scheduled Payment
Date) MULTIPLIED BY (b) principal, interest and other amounts due or coming due
in respect of such Senior Secured Obligations on the next succeeding Scheduled
Payment Date therefor (or, if such disbursement date is on a Scheduled Payment
Date for such facility constituting or series of Senior Secured Obligations,
such Scheduled Payment Date), minus (2) the funds then on deposit in or credited
to the Debt Service Payment Account in respect of such issuance or series of
Senior Secured Obligations.
"Senior Secured Parties" means (1) the Bondholders, (2) the Trustee, (3) the
Securities Intermediary, (4) the Virginia Power L/C Banks, the Virginia Power
L/C Issuer and the Virginia Power L/C Agent, (5) any Working Capital Bank and
any Working Capital Agent, (6) any Additional Indebtedness Holder and any
Additional Indebtedness Agent, (7) to the extent the Partnership or the Funding
Corporation is the account party to any letter of credit related thereto, any
Debt Service Reserve L/C Bank, any Debt Service Reserve L/C Issuer and any Debt
Service Reserve L/C Agent, (8) to the extent the Partnership or the Funding
Corporation is the account party to any letter of credit related thereto, any
Aquila Reserve L/C Bank, any Aquila Reserve L/C Issuer and any Aquila Reserve
L/C Agent, (9) the Collateral Agent, (10) the Intercreditor Agent and (11) the
Administrative Agent, in each case to the extent such party is, or pursuant to
the Intercreditor Agreement, it (or an agent on its behalf) becomes, a party to
the Intercreditor Agreement.
A-12
<PAGE>
"Site" means the approximately 60 acre parcel of land located near
Batesville, Mississippi on which the Facility will be located.
"Test Period" means, for any distribution date, the period beginning one
year prior to such distribution date and ending one year after such distribution
date; PROVIDED that if the Partnership has received written notice from Virginia
Power that Virginia Power has elected not to extend the Virginia Power PPA
beyond the Initial Term (as defined in the Virginia Power PPA), the "Test
Period" for any distribution date through the expiration of the Virginia Power
PPA will be the period beginning one year prior to such distribution date and
ending two years after such distribution date.
"Therm" means a unit of heating value equivalent to 100,000 British thermal
units (Btu).
"Title Event" means the existence of any defect of title or lien or
encumbrance on the Mortgage Estate (other than Permitted Liens in effect on the
Closing Date) that entitles the Collateral Agent to make a claim under the Title
Policy.
"Title Insurer" means First American Title Insurance Company.
"Title Proceeds" means all amounts and proceeds actually received under any
title insurance policy on account of a Title Event.
"Title Policy" means that certain policy of the title insurance issued by
the Title Insurer dated as of the Closing Date, including all amendments
thereto, endorsements thereof and substitutions or replacements therefor.
"Total Equity Amount" means $54,000,000.
"Transaction Documents" means the Project Documents and the Financing
Documents.
"Two-Thirds PPA Period" means any period during which at least 66 2/3% but
less than 100% of the then current capacity of the Facility is to be sold or
otherwise disposed of under an Acceptable PPA.
"Use Agreements" means, collectively, the Infrastructure Use Agreement
(Water Supply System and Wastewater Disposal System) to be entered into by and
among the Authority, the Mississippi Department of Economic and Community
Development, the County, the IDA, and the Partnership and the Infrastructure Use
Agreement (Lateral Pipeline) to be entered into by and among the Authority, the
Mississippi Department of Economic and Community Development, the County, the
IDA, the City of Batesville and the Partnership, the Panola Partnership
Agreement and any other agreements that may be entered into by the Partnership
pursuant to the terms of these agreements.
"Virginia Power L/C Agent" means, initially, Credit Suisse First Boston, and
any Person appointed as a substitute or replacement facility agent under the
Virginia Power L/C Agreement.
"Virginia Power L/C Agreement" means the Letter of Credit Agreement, dated
as of August 28, 1998, as amended, among the Partnership, the Virginia Power L/C
Agent, the Virginia Power L/C Issuer and the Virginia Power L/C Banks.
"Virginia Power L/C Banks" mean the financial institutions from time to time
party to the Virginia Power L/C Agreement.
"Virginia Power L/C Provider" means Credit Suisse First Boston and any other
issuer of a Virginia Power Letter of Credit.
"Virginia Power Letter of Credit" means any letter of credit issued under
the Virginia Power L/C Agreement.
"Virginia Power PPA" means the Power Purchase Agreement, dated as of May 18,
1998, between the Partnership and Virginia Power, as amended by the First
Amendment to Power Purchase
A-13
<PAGE>
Agreement, dated as of July 22, 1998 and as amended by the Second Amendment to
Power Purchase Agreement, dated as of August 11, 1998, between the Partnership
and Virginia Power.
"Voluntary PPA Buy-Outs" means any buy-out of a Power Purchase Agreement
that is not an Involuntary PPA Buy-Out.
"Watt" means the electric unit of real power or rate of doing work. The rate
of energy transfer equivalent to one ampere flowing due to an electrical
pressure of one volt at unity power factor.
"Working Capital Agent" means any agent for the Working Capital Banks under
a Working Capital Agreement.
"Working Capital Agreement" means an agreement among the Partnership, the
Working Capital Agent and the Working Capital Banks pursuant to which the
Working Capital Banks agree to make working capital loans to the Partnership on
the terms and conditions set forth therein and in accordance with the Financing
Documents; PROVIDED that any Working Capital Agreement shall require that no
working capital loans be outstanding for a period of at least ten days per year.
"Working Capital Banks" means the financial institutions from time to time
party to a Working Capital Agreement.
A-14
<PAGE>
ANNEX B
INDEPENDENT ENGINEER'S REPORT
LSP ENERGY LIMITED PARTNERSHIP
BATESVILLE COMBINED-CYCLE PROJECT
R W Beck
[LOGO]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX B
INDEPENDENT ENGINEER'S REPORT
LSP ENERGY LIMITED PARTNERSHIP
BATESVILLE COMBINED-CYCLE PROJECT
TABLE OF CONTENTS
Page
PROJECT PARTICIPANTS.........................................................B-2
The Partnership............................................................B-6
The Contractor.............................................................B-6
The Operator...............................................................B-6
THE FACILITY.................................................................B-6
Introduction...............................................................B-6
The Site...................................................................B-6
Site Access and Description..............................................B-6
Site Arrangement.........................................................B-7
Subsurface Conditions....................................................B-9
Environmental Site Assessment...........................................B-10
Site Summary............................................................B-10
Description of Facility...................................................B-11
Mechanical Equipment and Systems........................................B-11
Fuel Supply.............................................................B-12
Environmental Control Equipment.........................................B-12
Structural..............................................................B-13
Civil/Structural Design Criteria........................................B-13
Electrical System and Control...........................................B-13
Off-Site Requirements...................................................B-15
Review of Technology......................................................B-16
Combustion Turbine......................................................B-16
Heat Rate...............................................................B-19
Summary.................................................................B-20
Reliability and Availability..............................................B-20
Estimated Useful Life of Facility.........................................B-21
Construction Status and Schedule..........................................B-21
Performance Guarantees and Acceptance Tests...............................B-22
Performance Guarantees..................................................B-22
Acceptance Tests........................................................B-23
Status of Permits and Approvals...........................................B-25
THE FINANCING OF THE PROJECT................................................B-27
Facility Construction Cost................................................B-27
Sources and Uses of Funds.................................................B-27
PROJECTED OPERATING RESULTS.................................................B-28
Annual Operating Revenues.................................................B-28
Revenues from the Sale of Electricity to Virginia Power.................B-28
B-i
<PAGE>
ANNEX B
INDEPENDENT ENGINEER'S REPORT
LSP ENERGY LIMITED PARTNERSHIP
BATESVILLE COMBINED CYCLE PROJECT
TABLE OF CONTENTS (Continued)
Page
----
Revenues from the Sale of Electricity to Aquila/UtiliCorp...............B-30
Revenues from the Sale of Electricity to the Market.....................B-32
Interest Income.........................................................B-32
Annual Operating Expenses.................................................B-33
Fuel Costs..............................................................B-33
Operation and Maintenance...............................................B-33
Annual Debt Service.......................................................B-33
Debt Service Coverage.....................................................B-34
Sensitivity Analyses......................................................B-34
Summary Comparison of Projected Operating Results.........................B-35
Liquidated Damages Analyses...............................................B-35
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
IN THE PROJECTION OF OPERATING RESULTS......................................B-35
CONCLUSIONS.................................................................B-37
EXHIBITS....................................................................B-40
EXHIBIT B-1 Base Case Projected Operating Results.......................B-40
EXHIBIT B-2 Sensitivity Case A - Reduced Availability...................B-48
EXHIBIT B-3 Sensitivity Case B - Increased Heat Rate....................B-55
EXHIBIT B-4 Sensitivity Case C - Increased Operating Expenses...........B-62
EXHIBIT B-5 Sensitivity Case D - Increased Inflation (4%)...............B-69
EXHIBIT B-6 Sensitivity Case E - Increased Inflation (6%)...............B-76
EXHIBIT B-7 Sensitivity Case F - Increased Gas Escalation...............B-83
EXHIBIT B-8 Sensitivity Case G - Reduced Market Prices..................B-90
EXHIBIT B-9 Sensitivity Case H - Reduced Market Prices, No Power
Purchase Agreements Renewals ...............................B-97
EXHIBIT B-10 Sensitivity Case I - No Power Purchase Agreements
Renewals ..................................................B-104
Copyright (C) 1999, R. W. Beck, Inc.
All Rights Reserved
B-ii
<PAGE>
[LETTERHEAD OF R W BECK]
May 13, 1999
LSP Energy Limited Partnership
c/o LS Energy, Inc.
Two Tower Center, 10th Floor
East Brunswick, New Jersey 08816
Credit Suisse First Boston
Eleven Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
Subject: Independent Engineer's Report on
Batesville Combined-Cycle Project
Presented herein is the report (the "Report") of our review and
analyses of an 837 megawatt ("MW") combined-cycle plant under construction
primarily in Batesville, Mississippi (the "Facility"). The Facility sponsor is
LS Power, LLC ("LS Power"). The Facility will be owned by LSP Energy Limited
Partnership (the "Partnership"), a Delaware limited partnership.
The Facility is being designed and constructed by BVZ Power
Partners-Batesville (the "Contractor") under a Turnkey Engineering, Procurement
and Construction Agreement with the Partnership dated as of July 22, 1998, as
amended, and the Notice To Proceed, dated August 28, 1998 (the "Construction
Contract"), with the exception of certain infrastructure related to the
Facility, including lateral gas pipelines, water intake structure and pipelines,
transmission lines, and the electrical substation, which are the responsibility
of the Partnership. This infrastructure is being designed and constructed under
separate agreements between the Partnership and various contractors.. The
Facility will be operated by CEI Batesville Operations, LLC (the "Operator"),
pursuant to the Operation and Maintenance Agreement with the Partnership dated
August 24, 1998 (the "O&M Agreement").
A major portion of the costs of acquisition, design, and
construction of the Facility is being provided for through the issuance of
$150,000,000 of 7.164% Senior Secured Bonds due January 15, 2014 (the "Series A
Bonds") and $176,000,000 of 8.160% Senior Secured Bonds due July 15, 2025 (the
"Series B Bonds" and, together with the Series A Bonds, the "Bonds"). A portion
of the proceeds of the Bonds has been allocated in the construction budget for
payment of interest accruing on the Bonds through June 1, 2000, to fund a debt
service reserve fund equal to the next six months of principal and interest, and
to pay transaction costs.
The Facility and its related components are being constructed on a
60-acre parcel located in Batesville, Mississippi (the "Site"), as shown in
Figure B-1. The Partnership purchased the Site from the Industrial Development
Authority of the second Judicial District of Panola County, Mississippi (the
"IDA") on August 28, 1998.
The major equipment being incorporated into the Facility are: (1)
three thermal-cycle combustion turbine generators ("CTGs"), Model 501F,
manufactured by Westinghouse Power Generation ("Westinghouse"); (2) three heat
recovery steam generators ("HRSGs") manufactured by Nooter/Eriksen; and (3)
three steam turbine generators ("STGs") manufactured by ABB Power Generation
("ABB"). Control of oxides of nitrogen ("NOX") is to be achieved by equipping
the CTGs with Dry Low NOX ("DLN") combustors.
B-1
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Pursuant to the Construction Contract, the Contractor has
agreed to design and construct the Facility to generate a guaranteed
Maximum Unit Power Output, guaranteed Unit Power Output, and a guaranteed
Unit Heat Rate as summarized in the "Performance Guarantees and Acceptance
Tests" section of this Report. Electrical capacity and energy produced by
the Facility will be sold to: (1) Virginia Electric and Power Company
("Virginia Power") pursuant to a Power Purchase Agreement with the
Partnership dated May 18, 1998, as amended by the First Amendment to Power
Purchase Agreement dated as of July 22, 1998 and the Second Amendment to
Power Purchase Agreement dated as of August 11, 1998 (the "Virginia Power
Purchase Agreement"), and (2) Aquila Energy Marketing Corporation and
UtiliCorp United, Inc. (collectively, "Aquila/UtiliCorp") pursuant to a
Power Purchase Agreement with the Partnership dated May 21, 1998 (the
"Aquila/UtiliCorp Power Purchase Agreement" and, together with the
Virginia Power Purchase Agreement, the "Power Purchase Agreements").
Natural gas fuel for the Project will be supplied by each power purchaser
under tolling arrangements contained in the above-referenced respective
Power Purchase Agreements.
During the preparation of this Report, we have reviewed the executed
agreements related to the development of the Facility to which the Partnership
is a party. The executed agreements set forth the obligations of each of the
parties with respect to the construction and operation of the Facility. As
Independent Engineer, we have made no determination as to the validity and
enforceability of these agreements; however, for the purposes of this Report, we
have assumed these agreements will be fully enforceable in accordance with their
terms and that all parties will comply with the provisions of their respective
agreements.
In addition we have reviewed: (1) the Contractor's Scope of Services
and Scope of Supply (the "Design Criteria"), which is an exhibit to the
Construction Contract, and preliminary general engineering plans and
specifications for the Facility; (2) the construction costs and schedule; (3)
the separate agreements for the construction of certain infrastructure related
to the Facility for the limited purpose of their consistency with the overall
construction schedule and the inclusion of these costs in the overall
construction costs; (4) the status of permits and approvals; and the
environmental site assessment reports; (5) the Preliminary Site Investigation
Report and the Subsurface Investigation Data Report; (6) the projected levels of
production of the Facility; (7) the projected heat rate; (8) the projected
operation and maintenance expenses; and (9) the projected revenues. Based on our
review, we have prepared a projection of revenues, expenses, and debt service
coverage ratios for the Facility (the "Projected Operating Results").
During the course of our review, we have visited and made general
field observations of the Site. The general field observations were visual,
above-ground examinations of selected areas which we deemed adequate to comment
on the existing condition of the Site and were not in the detail which would be
necessary to reveal conditions with respect to safety; geological or
environmental conditions; or the conformance with agreements, codes, permits,
rules, or regulations of any party having jurisdiction with respect to the
Facility or the Site.
Certain analyses relied upon for the purposes of this Report,
specifically those related to the price of fuel and the market clearing price of
electricity, were performed by others and relied upon by us. The projections of
(1) fuel pricing for the purposes of projecting fuel-related components of the
energy payments under the Power Purchase Agreements and during the merchant
plant period of operation, and (2) the market clearing price of electricity for
the term of the Bonds were estimated by C.C. Pace Consulting, L.L.C. ("C.C.
Pace").
PROJECT PARTICIPANTS
Those partners, contractors, vendors and other service providers
responsible for the development, design, construction, and operation of the
Facility are discussed below. Construction is being performed pursuant to the
Construction Contract with the Contractor. Under the terms of the Construction
Contract, the Contractor is responsible for the performance of all
subcontractors and all vendors providing equipment for the Facility, with the
exception of the contracts for the construction of certain infrastructure
related to the Facility. Under the O&M Agreement, the Operator is responsible
for the performance of all subcontractors which it engages related to the
operation of the Facility. We are of the opinion that the Contractor and the
Operator have previously demonstrated the capability to perform their
responsibilities under the Construction Contract and the O&M Agreement,
respectively.
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The Partnership
The Partnership was formed to develop, design, construct, finance,
own, operate, and maintain the Facility. The general and limited partners in the
Partnership are LSP Energy, Inc. and LSP Batesville Holding, LLC. These entities
are affiliates of LS Power and Cogentrix Energy, Inc. ("CEI").
LS Power is a privately-owned independent power producer that
develops, finances, owns, and manages cogeneration and independent power
projects. Since 1990, LS Power and its affiliates have completed development of
over 2,000 MW of power generation capacity with approximately 1,400 MW of
additional capacity under development.
Cogentrix Energy, Inc is an independent power producer that
acquires, develops, owns and operates electric generating facilities,
principally in the United States. Cogentrix has net ownership interest in 26
facilities comprising approximately 2,110 MW.
The Contractor
The Contractor is responsible for the Construction Contract, which
includes the design, engineering, procurement, construction, start-up, and
testing of the Facility in accordance with the Construction Contract. The
Contractor was formed as a partnership in 1994 between Black & Veatch and H.B.
Zachry Company, both of which independently have extensive experience on similar
projects, to engineer, procure, and construct power plant projects. The
Contractor has experience on similar projects both domestically and
internationally. H. B. Zachry Company reports that total contracts in hand
exceed one billion dollars. Black and Veatch reports that since 1990 it has
completed, or has in progress, EPC projects totaling over 9 billion dollars and
from 1987 to 1996 it was awarded 62,530 MW in new power plant projects.
Included in the Contractor's design-construct portfolio is: (1) the
Tenaska IV Partners, Ltd. Plant, a 258 MW gas-fired combined cycle cogeneration
facility in Cleburne, Texas, which has Westinghouse 501F CTGs, three pressure
level, supplementary fired HRSGs, and a Westinghouse reheat steam turbine; and
(2) the E.I. Mid-Georgia Kathleen Project, a 250 MW combined cycle cogeneration
facility in Georgia which has two Westinghouse 501D5A combustion turbines with
dry low NOX combustors, a 100 MW non-reheat MHI steam turbine generator and two
Nooter/Erikson HRSGs.
The Operator
The O&M Agreement is based on compensation and reimbursement to the
Operator, a subsidiary of CEI, for all reimbursable costs, services and
management fees. In accordance with the O&M Agreement, CEI has commenced
Pre-Commencement Phase Services for the Facility.
CEI has both owned and operated fossil fuel facilities since 1985.
CEI owns and operates ten coal and four natural gas facilities, which generate
approximately 1,864 MW of electricity for sale. Two of the facilities utilize
Westinghouse 501F machines and one facility utilizes a General Electric 7FA
machine.
CEI has more than 400 employees with direction for safety and other
programs provided from its Charlotte, NC operations division. To emphasize focus
for its personnel, CEI reports it offers an incentive program based on
pre-determined goals for plant output, efficiency and performance. Each employee
is paid a bonus based on the output and efficiency relative to the
pre-determined goals.
CEI has developed its own computer-based maintenance management
system that incorporates areas of preventive maintenance, corrective maintenance
and maintenance history. Plant performance testing is used to complement
predictive maintenance measures. CEI has reported an operating record of over 95
percent availability for electric capacity.
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Figure B-1
Batesville Combined-Cycle Project
Site Location
[GRAPHIC OMITTED]
B-4
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Figure B-2
Batesville Combined-Cycle Project
Off-Site Requirements
[GRAPHIC OMITTED]
B-5
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THE FACILITY
Introduction
This section describes the Site and the environmental site
assessments for the Facility, the equipment and systems, the technology, the
reliability and availability, the estimated useful life, the construction status
and schedule, the performance guarantees and tests, and the status of permits
and approvals of the Facility.
The Facility is a combined-cycle electric generating facility being
designed to produce approximately 837 MW of electricity. The Facility is under
construction on an approximately 60-acre parcel of land located within the
Batesville Industrial Park in the City of Batesville, Mississippi, as shown on
Figure B-1, Site Location.
Major components of the Facility will include three power trains
that can be operated independently. Each train consists of a CTG, a HRSG, and a
STG. The CTGs and the duct burners incorporated in the HRSGs will only fire
natural gas.
Off-site connections are shown on Figure B-2, Off-Site Requirements.
The electrical interconnection will be via a new switchyard on the project site
and high voltage connections to the Batesville Substation along approximately
1,500 feet of Project-owned property, and along the transmission line right of
way. The Batesville Substation is shared between TVA and Entergy allowing for
direct access to either transmission system through interconnection points with
each utility. The Facility, through interstate gas pipeline connections with ANR
Pipeline Company ("ANR") and Tennessee Gas Pipeline Company ("TGPL"), will have
access to multiple supply basins in the United States and Canada plus indirect
access to two other pipeline systems (Texas Gas and Trunkline Gas). Procurement
and delivery of fuel will be performed by the power purchasers during the terms
of the Power Purchase Agreements, and may be the responsibility of the
Partnership after the expiration of the Power Purchase Agreements.
The Facility's potable water needs will be supplied by a permanent
connection to the Batesville municipal water system which has a potable water
main adjacent to the Site. Sanitary waste will be disposed of by a connection to
the Batesville sanitary sewer system. As of the date of this Report the Facility
is being served by temporary connections to the Batesville potable water and
sewer lines. The Facility's process water needs will be obtained from Enid Lake
pursuant to a Water Supply Storage Agreement between the Partnership and the US
Army Corps of Engineers dated June 8, 1998, and the State of Mississippi
Department of Environmental Quality Office of Land and Water Resources Permit
issued November 25, 1997. Process wastewater, after treatment on site, will be
discharged to the Little Tallahatchie River northwest of the site via a
pipeline. Stormwater runoff from the Site will be discharged to an unnamed
tributary of the Little Tallahatchie River in accordance with the Facility's
National Pollution Discharge Elimination System ("NPDES") permit for stormwater
discharge.
The Site
The main portion of the Facility is being constructed on property
located in the Batesville Industrial Park in the City of Batesville,
Mississippi. The Partnership purchased the Site from the IDA on August 28, 1998.
The deed is subject to restrictive covenants which govern the development of the
land, and the Partnership is currently working with the IDA toward a waiver of
ambiguous items and acknowledgment of compliance with the terms of the
covenants. The Facility also requires easements for construction of one or more
gas pipeline connections, a process water supply pipeline, a wastewater
discharge pipeline, and the electrical transmission line connections (the
"Easements"). The Site is described below, and the Easements are described under
the Off-Site Requirements section.
Site Access and Description
Vehicle access to the Site is relatively convenient over federal,
state and local roads. From the north, starting at the nearest international
airport in Memphis Tennessee, Interstate Highway 55 South provides access to
Mississippi State Route 35 ("Rt. 35") south and a two lane paved road named
Brewer Road (shown as Keating or Ballentine Road on some maps) currently
provides access east from Rt. 35 to the Site in the Batesville Industrial Park.
Portions of the industrial park border the east side of Rt. 35 and a new two
lane paved access road is to be constructed into the industrial park. The main
access to the Site will be from this new access road. From the
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south, the Site is accessible via Interstate 55 north to Mississippi State Route
6 ("Rt. 6") West into Batesville and then Rt. 35 north (or Rt. 51 north to Rt.
35) to the Batesville Industrial Park. There is already some industrial
development at the industrial park. The park is serviced by the surrounding
roadways.
The main line of the Illinois Central Gulf Railroad runs along the
west side of Rt. 35 and passes approximately 1,000 feet to the northwest of the
Site. The Mississippi River, accessible approximately 38 miles from the site, is
the closest navigable waterway. Due to the distance to the river, water-borne
deliveries of equipment and materials are not practical.
The main components of the Facility are being constructed on the
Site, which consists of approximately 60 acres of property within an
approximately 200-acre addition to the existing Batesville Industrial Park. The
Site is located in Panola County, Mississippi in portions of both the NW quarter
of Section 3 and the NE quarter of Section 4, Township 9S, Range 7W. The Site is
bordered to: (1) the north by vacant land in the Batesville Industrial Park and
the existing Harmon Industrial Park; (2) the east by vacant land in the
Batesville Industrial Park; (3) the south by Brewer Road, beyond which is vacant
land, a portion of which is currently planned for a commercial/residential
development; and (4) the west by Tri Star Mechanical Contractors ("Tri Star"),
Serta Mattress Company ("Serta"), Rt. 35, and Thermos ("Thermos") Manufacturing
Company (west of Rt. 35). The northern two-thirds of the Site is relatively
level while the southern third of the site slopes gradually upward. Site
elevation varies from approximately 215 to 260 feet above mean sea level. The
Site is mostly clear of large vegetation and has no known above- or below-grade
structures, with the exception of the existing electric transmission lines and
natural gas pipeline that cross the southern portion of the site. Former use of
the land was limited to agriculture. The existing drainage pattern runs to the
North by Northeast towards the unnamed tributary of the Little Tallahatchie
River, which crosses the northeast corner of the Site. A Preliminary Site
Investigation report, covering the entire Batesville Industrial Park site, was
prepared by Allan & Hoshall and dated March 1991. This report states that "the
Federal Emergency Management Agency's ("FEMA") Flood Insurance Rate Map for the
Batesville area does not indicate any floodplains or floodway areas on the
Industrial Park Site".
Site Arrangement
Based on information provided by the Contractor, the main power
block (the "Power Block"), including the generation area, multi-purpose
building, parking, storage tanks for various fluids, cooling tower, switchyard,
and substation areas comprises approximately 30 acres. The remaining Site area
is available for laydown, construction office space, and open area. As shown on
Figure B-3, Site Arrangement, the Power Block is located towards the northern
side of the Site, adjacent to the new Industrial Park Access Road that is to be
constructed from Rt. 35, and is also approximately centered on the Site in the
east-west direction. Access to the Site is currently provided by a temporary
road constructed by the Partnership from Rt. 35.
The three CTG and HRSG trains are oriented north-to-south with the
HRSGs on the north end. The three STGs are located east of each CTG. The
switchyard and substation are located on the south end of the CTGs, and the
multi-purpose building, storage tanks and parking lot are located north of the
HRSGs. The cooling tower is located to the east, with its axis oriented
north-south. The gas pipeline interconnection enters the Site from the west, the
process water supply pipeline enters from the east and the potable water and
sewer interconnections are to the south. The process wastewater discharge
pipeline leaves the Site via an easement to the northwest.
A plant access road system is to be provided consisting of a loop
around the Power Block area with connecting roadways to serve all of the major
equipment, the parking area and the multi-purpose building. Access to the Power
Block area will be through two gates from the new Industrial Park access road.
The area inside the loop road, around the CTGs, HRSGs and STGs, is to be
surfaced with crushed stone and will provide an additional means of temporary
access if required.
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Figure B-3
Batesville Combined-Cycle Project
Site Arrangement
[GRAPHIC OMITTED]
B-8
<PAGE>
Subsurface Conditions
A preliminary subsurface exploration for the Batesville Industrial
Park was performed by Professional Service Industries, Inc. ("PSI") in
connection with a preliminary investigation of the proposed Batesville
Industrial Park site. PSI's report was included in the Preliminary Site
Investigation report prepared by Allan & Hoshall and dated March 1991. This
investigation included information applicable to the Site.
A more specific subsurface investigation for the Site was recently
performed by PSI under the direction of the Contractor. The data collected
during this recent investigation is presented in a report prepared by the
Contractor and dated July 1998 (the "Subsurface Investigation Data Report").
The work documented in the Preliminary Site Investigation Report
included a limited boring program of 10 borings, with a maximum depth of 20.5
feet, spread across the industrial park property. Two of these borings were
located within the limits of the Site. Generally, the soils encountered were
composed of an upper stratum of fine-grained soils (silt or clay) underlain by a
lower stratum of sand or clayey sand. The upper stratum ranged from 8 to 15.5
feet thick. The Preliminary Site Investigation Report noted that the
fine-grained soils in the upper stratum are likely to be very sensitive to
changes in moisture content and that isolated areas of wet and soft soils should
be undercut and replaced with properly compacted fill. During the preliminary
investigation, ground water was found at depths ranging from 3.3 to 18.5 feet in
four of the borings, while the other six borings were dry.
The investigation documented in the Subsurface Investigation Data
Report was more detailed and Site specific than the Preliminary Site
Investigation Report data, and included 14 soil borings ranging in depth from 18
feet to 65 feet below ground surface, installation of 3 piezometers to monitor
groundwater elevations, 4 soil resistivity tests, and laboratory tests on
selected samples. The boring location plan included with the Subsurface
Investigation Data Report indicates that these 14 borings provide good coverage
of the area of the Site where the major portions of the Facility will be
constructed. The borings confirm an upper subsurface stratum of fine grained
soils including clayey silts, sandy silts and silty sands, and an underlying
stratum of layers of sands, silty sands and silty clays, including a dense sand
layer. The top elevation of the dense sand layer varies across the site, but was
located at 25 to 35 feet below grade in most of the borings. Groundwater levels
at the Site were measured during the field testing and one week after the
testing at the sites of the 3 piezometers and were found to be approximately 10
feet below grade at two locations, but varied from 10 feet just after drilling
to less than one foot below grade a week later at the location of piezometer
PZ-9. No notation was made in the report as to the possible reasons for this
high apparent water table.
The Preliminary Site Investigation Report states that subsurface
conditions encountered during the exploration appear to be adequate to support
foundations required by typical one, or two story industrial buildings using
typical shallow foundation construction, and provides a range of allowable soil
bearing capacities for design. This implies that the Facility's lightly loaded
structures can be supported on shallow spread footing or mats. The Preliminary
Site Investigation Report also states that these soils will adequately support
typical roadway and parking area pavements. The Subsurface Investigation Data
Report contains only factual data as determined by the field investigation and
laboratory test program and indicates that no analysis, engineering or reduction
of data was performed and no conclusions or recommendations for site-work and
foundation design are presented. However, the Design Criteria in the
Construction Contract indicate that "Based on the Subsurface Investigation Data
Report included in Attachment I-1, auger cast piling for heavily loaded
foundations such as the CTG, STG, HRSG and Step up transformer is included". No
criteria for the diameter, capacity, or length of the piling, or for the
allowable bearing capacity of shallow foundations is provided in the Design
Criteria. This indicates that analysis, engineering and reduction of the data
presented in the Subsurface Investigation Data Report, and development of
conclusions and recommendations (detailed design criteria) for site-work and
foundation design must be completed by the Contractor during the detailed design
of the Facility. The contract wording is similar to that we have seen in
contracts for similar projects, the Site Conditions clause of the Construction
Contract appears to properly assign the subsurface risk to the Contractor and
indicates that the only exceptions, or basis for change orders, will be the
discovery of pre-existing hazardous materials, archaeological remains or
artifacts.
B-9
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Environmental Site Assessment
We have reviewed the Phase I Environmental Site Assessment ("ESA"),
dated May 20, 1998, for the power plant site and associated right-of-ways
prepared by ECO-Systems, Inc., for the Partnership. The properties included in
the environmental site assessment are the power plant site, the transmission
line right-of-way, the wastewater pipeline right-of-way, and the water supply
pipeline right-of-way. The properties mostly lie within Panola County with
portions of the right-of-ways and water intake structure extending into
Yalobusha County, Mississippi. The objective of the environmental site
assessment was to discover readily-identifiable environmental impacts and
liabilities associated with the subject property. Specifically, the
environmental site assessment included: (1) a records review; (2) site
reconnaissance; (3) interviews with personnel knowledgeable about the property;
and (4) the preparation of a report with the findings of the environmental site
assessment.
The power plant site consists of approximately 60 acres of cleared
woods and former farmland which is part of a 200 acre addition to an existing
industrial park. The right-of-ways (the wastewater pipeline route is one mile,
the water supply route is 13.5 miles, and the transmission line properties are
seven acres) consist of primarily open pasture farmland, and undeveloped areas.
The subject properties are also bordered by certain industries located in the
industrial park.
The power plant site environmental site assessment report concludes
that based on the database search, no historical records contained in the
database appear to have identified an area of concern with the potential to have
impacted the properties. Furthermore, the assessment did not reveal evidence of
recognized environmental conditions in connection with the properties
investigated.
We have also reviewed another environmental site assessment, dated
June 9, 1998, for the natural gas pipeline right-of-way and associated easements
prepared by ECO-Systems, Inc., for the Partnership. The properties included in
this environmental site assessment are a 14-mile stretch extending from the Site
to the ANR Pipeline Company Sardis Station. The properties lie within Panola
County, Mississippi. The objective of the environmental site assessment was to
discover readily-identifiable environmental impacts and liabilities associated
with the subject property. Specifically, the environmental site assessment
included: (1) a records review; (2) site reconnaissance; (3) interviews with
personnel knowledgeable about the property; and (4) the preparation of a report
with the findings of the environmental site assessment.
The natural gas pipeline right-of-way environmental site assessment
report concludes that based on the database search, no historical records
contained in the database appears to have identified an area of concern with the
potential to have impacted the properties. Furthermore, the assessment did not
reveal evidence of recognized environmental conditions in connection with the
properties investigated.
Site Summary
Based on our review, we are of the opinion that sufficient data has
been gathered at the Site to perform the geotechnical analysis, engineering, and
reduction of data required to provide the geotechnical recommendations and
detailed site-work and foundation design criteria needed to properly complete
the Facility design. With proper foundation design, and adequate construction
controls to minimize the change in moisture content of the Site soils, the Site
should be suitable for construction and operation of the Facility.
Based on our review of the environmental site assessments for the
power plant site, the transmission line right-of-way, the wastewater pipeline
right-of-way, the water supply pipeline right-of-way, and the natural gas
pipeline right-of-way, we are of the opinion that there are no significant risks
identified regarding environmental contamination at the Site and that there are
no Site contamination issues that require substantial investigations or
significant allocation of funds.
Description of Facility
Mechanical Equipment and Systems
Each of the three natural gas fired 501F CTGs, nominally rated at
185,000 kW each, exhaust into a three-pressure, reheat HRSG with supplemental
firing for increased steam generation. The CTGs are equipped with DLN combustors
for emissions control. Combustion air conditioning consists of pulse-type,
self-cleaning air filters as well as evaporative coolers to reduce the inlet air
temperature for increased CTG
B-10
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performance during times of high ambient temperature. The CTGs are also equipped
for steam injection to augment power production. Each CTG is capable of starting
up by electricity being backfed from the utility grid. An on-line and off-line
compressor water wash system is also provided.
The three-pressure HRSGs will generate high pressure ("HP"),
intermediate pressure ("IP") and low pressure ("LP") steam at pressures and
temperatures of 1676 psia/1052(0)F, 382 psia/578(0)F and 54 psia/561(0)F,
respectively when not using duct burners for supplemental firing and at 59(0)F
ambient temperature. In addition, the design reheat outlet conditions are 350
psia/997(0)F under these conditions. The HRSGs are equipped with duct burners
located at the gas inlet to the HRSGs. These duct burners will allow
supplemental firing of gas to increase the temperature of the CTG exhaust gas
flow to the HRSG. Increasing the temperature of the gas flow increases steam
generation in the HRSG. At maximum load the duct burner will use approximately
12 percent of the total fuel consumption of the Facility. When using the duct
burners for supplemental firing, the HP steam flow increases from approximately
422,400 lb/hr to 575,400 lb/hr with pressures increasing and temperatures
decreasing. The HP steam outlet conditions change to 2,080 psia/1027(0)F. A
portion of this increased steam flow using duct burners is used for injection
into the CTGs for power augmentation. The HRSG is also equipped with a Selective
Catalytic Reduction ("SCR") system to limit NOX emissions. The HRSGs also have
provisions to allow the future installation of a catalyst to reduce carbon
monoxide ("CO") if required. The HRSGs utilize a cascading blowdown system along
with drum chemicals to control boiler water chemistry. Each HRSG has an HP, IP
and a LP economizer section.
The STGs are reheat units with axial exhaust, each nominally rated
at 92,000 kW. The exhaust of each steam turbine is directed to its own
water-cooled condenser. Circulating water from each condenser is routed to a
common forced-draft cooling tower. The cooling tower is positioned so as to be
oriented in the direction of the prevailing wind and to minimize the length of
the circulating water pipe. The condenser is a shell-and-tube type deaerating
condenser with the ability to operate with 100 percent of the HRSG output
(without duct burners) bypassing the steam turbine and being sent to the
condenser. Each condenser is equipped with a steam jet air removal system.
The HP steam from each HRSG is sent to its associated STG. The IP
steam from each HRSG is combined with the cold reheat steam coming from the STG.
This combined cold reheat/IP steam is reheated in the HRSG and sent to the STG
for admission to an intermediate pressure stage in the turbine. The LP steam
from each HRSG is also sent to the STG for admission to a low-pressure stage in
the turbine. When steam is injected to the CTG for power augmentation, a portion
of the cold reheat steam is used for this purpose. Each power train will utilize
two 50 percent condensate pumps and two 50 percent feedwater pumps, with an
uninstalled spare of each type of pump providing redundancy for all three power
trains. The common circulating water system will have three one-third capacity
pumps. The cooling tower will also provide auxiliary cooling water for equipment
cooling via two 100-percent cooling water pumps.
Raw water required by the Facility for cooling tower make-up, boiler
make-up and fire protection will be pumped to the 640,000 gallon raw water
storage tank at the site via a new 14-mile water supply pipeline from Enid Lake.
It has been recently determined that lake water sample analyses provided to the
Contractor prior to the NTP are not representative of actual conditions. The
Contractor, Partnership and Operator agree that pretreatment of the raw water is
required before the water can be used in the cooling tower and other equipment.
The Contractor and Partnership are in the process of developing an appropriate
pretreatment system. Wastewater will be treated and eventually disposed of in
the Tallahatchie River. These systems are further described in the section
entitled "Off-Site Requirements".
The demineralized boiler feedwater make-up system consists of two 50
percent capacity demineralizer trains. These two demineralizer trains provide
enough demineralized water to allow operation with continuous steam injection to
the CTGs. The system also has an 800,000 gallon demineralized water storage
tank.
The fire protection system is supplied with water from two 100
percent fire pumps, one motor-driven pump and one diesel engine-driven pump.
These pumps take suction from the 640,000 gallon raw water storage tank, which
is configured to provide 200,000 gallons of water dedicated to the fire
protection system. A fire main with hydrants serves the site and buildings.
Sprinkler systems protect the transformers, STG bearings and lube oil
reservoirs. The cooling tower is protected by a dry pipe sprinkler system.
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Natural gas is to be supplied to the site boundary via a new gas
supply line, which is further discussed in the section entitled "Off-Site
Requirements". Each CTG will have a gas scrubber to remove small amounts of
particulate matter and liquids.
The instrument and service air needs are supplied by two
50-percent-capacity rotary screw compressors. The instrument air will be
conditioned by passing through two 100-percent-capacity coalescing filters, one
100-percent regenerative dual tower desiccant-type air dryer and after filters.
The dryer and filters produce instrument air with a dewpoint of -40(degree)F. A
five-minute compressed air storage tank provides surge capacity. Backup air is
provided by an air bleed from the CTG compressors.
Fuel Supply
Under the terms of the Virginia Power Purchase Agreement and the
Aquila/UtiliCorp Power Purchase Agreement, Virginia Power and Aquila/UtiliCorp
are responsible for the procurement, payment, transportation and delivery to the
fuel metering points of the natural gas fuel required for the dispatch of the
respective Dedicated Units. Information provided by the Partnership regarding
the historical fuel quality of the gas in the ANR and Tennessee pipelines
indicates that this natural gas has met the pressure and quality requirements of
the CTG manufacturer's specifications.
Environmental Control Equipment
Air Pollution Control
The three Westinghouse 501F CTGs are to be equipped with DLN
combustors, a technology that has been developed by Westinghouse and its
alliance partners over several years. The CTGs are designed to utilize water or
steam injection while firing natural gas. NOX Emissions control is provided by
DLN combustors and Selective Catalytic Reduction ("SCR") systems. The
Construction Contract guarantees NOX emissions to 9 ppmvd, corrected to 15
percent oxygen when firing natural gas. Emissions are measured at the stack. The
Westinghouse Warranty Data Sheet indicates emissions from the CTGs prior to the
SCR. The sheet indicates a NOX guarantee of 25 ppmvd from base load to 70
percent and 45 ppmvd from 70 percent to 50 percent .
Emissions of other pollutants from operation of the Facility are to
be controlled primarily by burning clean fuels, by the inherently high
combustion efficiency of the CTGs and the use of SCR. We can identify no reason
why the emissions guarantees of the Construction Contract and the emissions
limitations of the applicable air permits cannot be met by the Facility provided
the SCR systems are properly designed and sized.
A continuous emission monitoring system ("CEMS") to measure the
concentrations of NOX, CO, and O2 will be installed.
Wastewater Disposal
Facility wastewater will be pre-treated utilizing an oil-water
separator and pH control and pumped to the Little Tallahatchie River. Sanitary
waste will be delivered to the municipal sewer system. Wastewater effluent
quality to the Partnership is guaranteed under the Construction Contract.
Noise Control
The Construction Contract requires that the Facility will be
designed to meet the near field sound levels recommended by OSHA for plant
equipment at base load operation, exclusive of transients, start-up and
shut-down, and off normal and emergency conditions.
The far field sound level has been guaranteed in the Construction
Contract, Attachment 1, Exhibit A. The near field sound level has been
guaranteed in the Construction Contract in accordance with OSHA. Sound shrouds
may be furnished by the Contractor to meet OSHA requirements.
Structural
Because the Facility is essentially an outdoor installation,
buildings are limited. The CTGs, and STGs are to be set on reinforced concrete
foundations with pilings and furnished with walk-in enclosures which will
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provide for weather protection and reduction of noise but still allow regular
maintenance. As specified in the Design Criteria included in the Construction
Contract the Facility will have one large Multi-purpose Building. The
Multi-purpose Building is to house the water treatment equipment, the control
room, control and electrical equipment, warehouse space (minimum 2,000 square
feet), repair shops (minimum 2,000 square feet), and an operator's
administration area (minimum 3,000 square feet) consisting of air conditioned
and heated offices, conference/training room, locker rooms, showers and sanitary
facilities. The building is to be an insulated pre-engineered metal building
approximately 100 foot by 160 foot in plan with an 18-foot eave height and
concrete foundations and floor slab. The control room, locker rooms, offices,
kitchen/lunch room and conference room are to be air-conditioned.
The remainder of the equipment and facilities will be located
outside on concrete foundations.
Civil/Structural Design Criteria
We have reviewed civil/structural provisions of the Design Criteria
included in the Construction Contract and find that they provide detailed
recommendations for design and construction and references to local, state and
national building codes and standards.
Electrical System and Control
The electrical and control system of the Facility is designed to
generate power in six generators, transfer the power to the transmission systems
of both TVA and Entergy, power the auxiliary electrical equipment associated
with the generators and the balance of the plant, and to control the processes
required to operate all the facilities. The six generators include three with an
output voltage of 18 kV associated with three combustion turbine units and three
with an output voltage of 13.8 kV associated with three steam turbines. All
generators will be rated for the full output of the prime mover to which they
are connected. All six generators are individually connected to a 161 kV
switchyard via isolated phase bus duct and generator step-up transformers which
raise the generator output voltage to the switchyard voltage which matches that
of the transmission system. In the unit connected configuration, the circuit
breaker(s) in the switchyard provide isolation and protection of the
generator(s) and the generator step up transformer(s). The transformers are
indicated to be sized for the maximum output of the generators. The bus duct
conductor material will be either aluminum or copper.
There is no black start capability. Normally auxiliary power will be
delivered from the switchyard via two unit auxiliary power transformers.
Start-up power will be purchased from TVA or Entergy. Prior to completion of the
substation and interconnection with TVA and Entergy, startup power is expected
to be taken from a temporary connection off the TVA Oxford transmission line to
an auxiliary power transformer. Each of these transformers reported to be
sufficient to allow either transformer to carry the entire Facility load in the
event of a failure of one of these units. The two unit auxiliary transformers
are connected to a double ended lineup of 4.16 kV switchgear which serves as the
main distribution center for electric power in the Facility. The lineup includes
a main circuit breaker for each of the transformers, a bus tie breaker, medium
voltage motor starters for motors greater than 250HP and feeder circuit breakers
to provide power to four 4.16 kV-480V transformers to supply the 480V system.
The 4.16 kV-480V transformers are used to feed two double ended 480V unit
substations. Each of the unit substations is fed by two of the transformers,
which are individually rated to carry the entire unit substation. These unit
substations are designed with two main circuit breakers and a bus tie circuit
breaker, to allow one or both of the connected transformers to carry the load on
the substation, and feeder circuit breakers to distribute power to motor control
centers ("MCC") throughout the plant. The MCC contain motor starters to feed
motors up to 200HP, as well as circuit breakers to feed lighting and panelboards
via small dry-type step down transformers as required.
There are appropriate protective relaying systems included in the
design of the Facility to limit the impact of electrical equipment faults to the
immediate area of the failed piece of equipment. The Facility design includes a
125Vdc system consisting of a station battery and dual redundant chargers to
provide switchgear control power, power to the STG and CTG shut-down systems and
other essential control and instrumentation systems. The 125Vdc system also
supplies the Uninterruptible Power Supply system ("UPS") which converts the
125Vdc to 120Vac upon loss of normal power supply in the plant to operate the
DCS and other control functions. The Facility design also includes lighting,
grounding, lightning protection, cathodic protection (if required) and other
electrical equipment and systems typically included in a project of this type.
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The Facility uses a distributed control system ("DCS") to integrate
the overall operation of the various systems and equipment within the plant. The
DCS will directly process most of the balance of plant instrument and control
loops and also communicate directly with the control systems provided with the
combustion and steam turbine-generator packages. It will also communicate with
the interconnected utilities' system operations centers for load control and
other data related to the dispatch of the Facility. The DCS is provided with
multiple workstations for operator interface and the level of redundancy, in
terms of power supply, processors and input/output ("I/O"), that would be
expected for reliable operation of a plant of this type.
Every organization in the country is faced with a potential problem
on January 1, 2000 when the calendars on the millions of computers and
microprocessors in the country change from the year 99 to 00 and certain other
dates (for example, but not limited to, Leap Year and 9/9/99), (the "Y2K
Issue"). It is unclear at this time how extensive the Y2K Issue may be, but
organizations should be reviewing their systems and undertaking whatever
remediation is required. The Y2K Issue occurs when computers or microcomputers
which use two-digit years misinterpret the year 2000 to be "00", zero, 1900, or
some other erroneous date. Some embedded software or hardware does not recognize
the year 2000 as a Leap Year or recognize 9/9/99 as an error code. It is
uncertain what action will be initiated by computers or microprocessors which
are programmed (software or firm-ware) with these instructions. The Y2K Issue
has the potential to affect any computer system, including hardware that is
microprocessor based, software, and databases at, among other places,
administration/office facilities, electric generating power plants, and
transmission and distribution systems. The Y2K Issue has the potential to impact
organizations like the Partnership in several ways. First, it could impact the
financial records of the Partnership; second, it could impact the operating data
of the Facility; and third, it could impact the instruments and controls of the
Facility. Although the Y2K Issue has received considerable publicity as it
relates to computer information systems such as billing and financial systems,
the problems regarding process control or embedded systems in operational
equipment have received limited attention. This includes instrument and control
systems for power plants and SCADA systems for substation, transmission and
distribution facilities. The potential problems with these operating facilities
are significant as is the effort required to identify and correct the problems.
Additionally, the Y2K Issue has the potential to affect other
organizations, whose continued performance could be critical to the operation of
the Facility. These other organizations may be located either "upstream" or
"downstream" of the Facility.
We have reviewed this matter with the management of the Partnership
and they have advised that the Construction Contract requirement that the
Facility be "Year 2000 Compliant" is considered sufficient, and is the
responsibility of the Contractor per the Construction Contract. The Construction
Contract defines "Year 2000" Compliant" to mean, with respect to the Work,
including without limitation any computer hardware, software and firmware
supplied by Contractor or its Subcontractors, that such Work, without any
operator intervention, will operate accurately and, without interruption,
accept, process and in all manner retain full functionality when referring to,
or involving, any year or date in the twentieth or twenty-first centuries.
Evaluation of the actual status of the entities with whom the
Partnership has business or operational relations, relative to the Y2K Issue is
well beyond the scope of this Report. We have not been engaged to conduct, and
in fact have not conducted, any independent evaluation or on-site testing of the
aforesaid entities in any way to independently ascertain the actual hardware and
software status. We caution that it is entirely possible that presently unknown
conditions could arise which lead to significant operational and/or
administrative problems, and that these problems could have an adverse impact on
the Facility.
Off-Site Requirements
Water Supply
The potable water requirements of the Facility will be served by a
new 8-inch line, approximately 1,500 feet long, which will tie into the
municipal water system. The new 8-inch line will be installed by the Partnership
or the municipality. The process water needs of the Facility will be serviced by
the raw water system. The raw water system will transport water from Enid Lake
to the Facility through a dedicated water line. The raw water system will
consist of three 50-percent pumps at a new intake structure at Enid Lake and
approximately 13.5 miles of 24-inch diameter pipe to convey the water to the
Facility. At the site the water will be received by the
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640,000-gallon raw water storage tank. Both the intake structure and pipeline
are currently being constructed by the Partnership.
Enid Lake was formed by the U.S. Army Corps of Engineers by
constructing the 85 ft high, 8,400 ft long Enid Dam on the Yocona River in 1952.
The flood control lake contains drainage from 560 square miles and has between
65 miles and 220 miles of shoreline, depending on its fluctuating level. The
level rises from el. 230, its lowest level, to el. 268, its flood control pool
level.
The raw water line right-of-way ("ROW") is approximately 13.5 miles
long by 25 feet wide and extends from the northwest end of Enid Lake at the
water intake structure location, north/northwestward toward Interstate 55
("I-55") near the Yalobusha/Panola county line. The raw water line ROW turns
north and follows the east side of Leslie Road before following an existing
Entergy electrical transmission right-of-way to approximately one-half mile
south of McNeely Road where the raw water line ROW begins to follow Johnson
Creek. The raw water line ROW proceeds along Johnson Creek to approximately
one-quarter mile north of McNeely Road where it begins to follow Hurt Creek. The
raw water line ROW follows Hurt Creek until it reaches Shiloh Road where it
again begins to follow the Entergy right-of-way lying just east of I-55.
Approximately one-half mile north of Shiloh Road, the raw water line ROW begins
to run 25 feet east of I-55, north to Brewer Road. The raw water line ROW then
crosses I-55 and proceeds westward on the north side of Brewer Road to the Site.
The Corps of Engineer's Report ("COE Report") which recommended the
reallocation of water from Enid Lake to the Facility also considered alternative
water supplies for the Facility. There were two alternatives in the COE Report
that were technically viable, but had higher evaluated costs than the
recommended reallocation from Enid Lake. One alternative was a new groundwater
wellfield in the Mississippi River Valley Alluvium aquifer located approximately
11 miles west of the Site. The other alternative was the damming of a creek and
the creation of a new single purpose water supply located approximately 10 miles
to the southeast of the Site.
Wastewater Disposal
Process wastewater is collected and treated by the Facility, as
described in the "Environmental Control Systems" Section of this Report. The
wastewater will be discharged to the Little Tallahatchie River. The wastewater
pipeline is currently being installed by the Partnership. The sanitary wastes
will be discharged to the municipal sewer system via a new 2,500-foot sewer
line.
The wastewater line ROW is one mile long by 25 feet wide and extends
from the Site to the Little Tallahatchie River. This tract of land is almost
entirely wooded and parallels a small, unnamed creek running from the Industrial
Park to the river. The ROW is bordered to the southwest by Thermos as it crosses
Rt. 35; to the north and to the east by more variably wooded terrain; and, to
the south by Rt. 35 and Illinois Central Gulf Railroad, across from which lies
the north corner of the cleared Industrial Park site.
Electrical Interconnection
A substation adjacent to the Site is currently being designed and
installed by the Partnership, which will serve to integrate the output of the
six generators, the input to the two station auxiliary transformers and the
transmission lines which tie the Facility to the Entergy and TVA portions of the
Batesville Substation approximately one-half mile from the site. Based on the
information contained in the Interconnection Agreements between the Partnership
and both TVA and Entergy the substation will operate at 161 kV and include
circuit breakers, switches, protective relaying, metering and other equipment
necessary to meet the utility grade requirements for a substation acceptable and
subject to the approval of both of the utilities. In addition, there will be a
161-230 kV step-up transformer to raise the voltage on the tie line to the
Entergy facilities at the Batesville Substation, which is operated at 230 kV.
The construction of the interconnecting substation also includes the tie lines
to the Batesville Substation.
In addition, there are system improvements on both the TVA and
Entergy systems in terms of both equipment replacement and transmission line
upgrades that are required to allow the Facility to transmit power through the
utility systems without overloading. These improvements are being made by the
utilities and paid for by the Partnership.
The transmission line ROW consists of approximately seven acres of
open farmland with small patches of trees. This property lies to the southwest
of the Site. It is bordered to the west by Rt. 35; to the north by
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Serta and Tri Star; to the east and south by pasture/rural land; and to the
southwest by the TVA and Entergy electrical substations to which the
transmission line ROW connects.
Natural Gas Interconnection
The Facility will be interconnected to the interstate natural gas
pipeline system through a new 20-inch diameter line that is currently being
installed by the Partnership. This 14.6-mile natural gas line runs from ANR's
existing Sardis Compressor Station located near Delta, Mississippi to the Site.
The gas interconnection pipeline ROW is 25 feet wide and runs from the Sardis
Compressor Station along Silo Road then southeast along Sandbed Road and across
Peach Creek. The easement then runs southeast, paralleling the Mississippi Power
& Light ("MP&L") transmission line ROW, crossing the MC/VOR Drainage Canal and
Amistead Creek. At the point where it crosses the TGPL's ROW, taps off of two
TGPL lines will join the interconnection line as it continues along the MP&L
ROW. The gas interconnection ROW turns east along the north bank of the Little
Tallahatchie River, crosses U.S. Rt. 51 and then turns south alongside a second
MP&L ROW and crosses the Little Tallahatchie River. The gas interconnection ROW
continues south along the MP&L ROW, turns southeast, crosses the Illinois
Central Gulf Railroad ROW and state Rt. 35. The gas interconnection ROW then
turns east terminating at the Site.
The interconnection agreements with ANR and TGPL both provide for
interconnection facilities with the capability of flowing up to 216 million
standard cubic feet per day of gas, which provides fully independent sourcing
capabilities. Gas metering stations will be located at the Sardis Compressor
Station and at the tap location on the TGPL pipelines.
Review of Technology
Combustion Turbine
The Facility is based on a combined-cycle technology, a technology
which has many years experience in cogeneration applications and the independent
power industry. This section comprises a discussion of the combustion turbine.
In general, the Facility will utilize equipment common in the
industry and with substantial operating history. However, the Westinghouse CTG
model 501F equipped with the DLN combustion system (the "501F-DLN") is a
relatively new application in the marketplace. Therefore, to aid in the
assessment of technology risk, the development and risk of the 501F-DLN is
addressed in this section. Our assessment of the 501F-DLN and its suitability
for the Facility is based on discussions with Westinghouse and published
literature provided by Westinghouse, discussions with the owners of other
Westinghouse CTGs, and information gathered during our review of other
Westinghouse based facilities.
The 501F is a 3,600 rpm heavy duty combustion turbine designed to
serve the 60 Hertz ("Hz") power generation needs for utility and industrial
service. The 501F was jointly developed by Westinghouse and Mitsubishi Heavy
Industries, Ltd. ("MHI") and is the fifth generation of Westinghouse combustion
turbine engines. This edition, the "F" technology, includes increases in air
flow and firing temperature, improved component efficiencies, and advances in
materials and turbine cooling.
To verify the basic design concepts of the 501F, full load shop
tests were completed at MHI's Takasago Machinery Works in the summer of 1989.
After the 1989 tests, several design enhancements were made and further testing
was conducted in 1991. Tests included starting and acceleration evaluations,
loading and unloading evaluations, cooling circuit flow modulation, part load
and full load performance, emissions testing of both the conventional "wet"
system combustors and the DLN systems combustors, and various system
evaluations. The design tested in 1991 was the basis for the production model of
the 501F. There are currently thirty 501Fs and one 701F (a 50 Hz model of the
501F) manufactured by Westinghouse in operation worldwide, as shown in Table 1.
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Table 1
Projects Utilizing the 501F or 701F
<TABLE>
<CAPTION>
Westinghouse Operation
Commercial Customer Station Country Quantity/Model Date
------------------- ------- ------- -------------- ---------
<S> <C> <C> <C> <C>
MHI/K-Point Station K-Point Japan (1) 701F 1992
Florida Power & Light Co. Lauderdale USA (4) 501F 1993
Kyushu Electric Power Co. Shinohita (1) Japan (4) 501F 1994
Kansai Electric Power Co. Himeji I (1) Japan (3) 501F 1994
Chubu Electric Power Co. Chita (1) Japan (2) 501F
Chubu Electric Power Co. Kawagoe (1) Japan (7) 501F
Korea Electric Power Co. Ulsan (1) Korea (4) 501F 1996
Tenaska IV Brazos USA (1) 501F 1997
LS Power Whitewater (1) USA (1) 501F 1997
LS Power Cottage Grove (1) USA (1) 501F 1997
Empire State Line Unit 2 (1) USA (1) 501F 1997
Termoflores Las Flores 3 (1) Colombia (1) 501F 1997
Calpine Pasadena (1) USA (1) 501F 1997
Termovalle Termovalle (1) Colombia (1) 501F 1998
Termomerilelectrica Merilelectrica (1) Colombia (1) 501F 1998
InterGen TermoEmcali (1) Colombia (1) 501F 1998
CFE El Sauz (1) Mexico (1) 501F 1998
CFE Hermosillo (1) Mexico (1) 501F 1998
CFE Huinala (1) Mexico (1) 501F 1998
AES Americas Uruguaiana (1) Brazil (2) 501F 1998
Thai Oil Refinery (1) Thailand (2) 701F 1998
KMR Power TermoCandelaria (1) Colombia (2) 501F 1999
Enron Penuelas (1) Puerto Rico (2) 501F 1999
PREPA Abengoa Puerto Rico (2) 501F 1999
El Dorado Energy El Dorado (1) USA (2) 501F 1999
AES Merida Mexico (2) 501F 2000
Nova Chemical (1) Canada (2) 501F 2000
CLECO (1) USA (3) 501F 2000
ENRON (1) USA (2) 501F 2000
</TABLE>
- ----------
(1) Denotes Plants with DLN combustion systems.
In addition, Westinghouse reports and Table 1 shows, twenty-five
additional 501F CTGs and two 701F CTGs that are expected to be in operation
prior to, or concurrent with, the start-up of the Facility. These 501F CTGs will
include a rotor inlet temperature and compressor ratio similar to that proposed
for the Facility. Westinghouse 501F CTGs began commercial operation in 1993 and
have 250,000 hours of operating history.
While the 501F has a reasonably long operating history, the
Westinghouse model 501F when used with the DLN combustion system (the
"501F-DLN"), which is to be used on the Facility, is still relatively new in the
marketplace. There are nine units currently in operation utilizing this specific
configuration. The following section contains a discussion of the 501F-DLN
combustion turbine and the problems which were encountered during start-up and
early operation at two (the "Early Plants") of these nine operating units. Since
the commissioning of the Early Plants, three 501F-DLN based simple cycle units
have been commissioned, two in Colombia (the "Colombian Plants") and one other
unit located in the United States. There were also three combined-cycle units,
with two in Colombia and one in the United States.
Performance and Emissions Issues
The Westinghouse 501F-DLN combustion turbine performance and
emissions deficiencies are similar at each of the Early Plants, each of which is
a dual fuel unit. At the Early Plants , the heat rate on natural gas was 2-3
percent above the construction contract performance guarantees while combustion
turbine NOX emissions were higher than expected. At this time, Westinghouse has
developed a number of modifications to address the performance and emissions
problems of the 501F-DLN combustion turbine at the Early Plants. Westinghouse
implemented these modifications on the combustion turbines at the Early Plants
during late 1998 and conducted
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further tuning and performance re-testing by the end of 1998. One installation,
with four 501F-DLN Combined Cycle units, was commissioned prior to the Early
Plants and Westinghouse reports that it operated within expected emission
limits. The remaining six 501F-DLN installations have come on line in recent
years and Westinghouse reports that they operated within the expected emissions
limits.
Like the Facility, each of the two Colombian Plants is equipped to
burn only natural gas. During performance testing and early operation,
Westinghouse reports neither of the Colombian Plants has experienced the same
problems with heat rate and power output. These Colombian Plants have reportedly
met contract performance guarantees and NOX emission limits. Westinghouse
reports that the commissioning and early operation of the Colombian Plants shows
that the heat rate and power output problems experienced at the Early Plants did
not recur. Under the terms of the Construction Contract, the Contractor has
guaranteed that the NOX emissions from the power trains would not exceed 9 ppm.
In addition, given the expected NOX emissions at the outlet of the CTG, the SCR
technology expected to be utilized at the Facility can be capable, if properly
designed with adequate margin, of achieving the level of NOX reduction required
with NOX inlet levels consistent with NOX levels observed in currently operating
501F-DLN combustion turbines.
A summary of the combined stack emissions guarantees contained
within the Construction Contract is indicated in Table 2 below.
Table 2
Summary of Construction Contract Combined Stack Emissions Guarantees
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Steam Injection Maximum Maximum None None
- ----------------------------------------------------------------------------------------------------
Duct Firing Maximum None None None
- ----------------------------------------------------------------------------------------------------
CTG Load CTG at Full CTG at Full CTG from 75% CTG from 50%
Load Load to 100% Load to 75% Load
- ----------------------------------------------------------------------------------------------------
Pollutants
- ----------------------------------------------------------------------------------------------------
Nitrogen Oxides ("NOX") 9.0 ppmvd 9.0 ppmvd 9.0 ppmvd 9.0 ppmvd
@ 15% O2 @ 15% O2 @ 15% O2 @ 15% O2
- ----------------------------------------------------------------------------------------------------
Carbon Monoxide ("CO") 30.3 ppmvd 30.3 ppmvd 30.3 ppmvd 200 ppmvd
- ----------------------------------------------------------------------------------------------------
Volatile Organic Compounds ("VOC") 9.3 ppmvd 9.3 ppmvd 9.3 ppmvd 20 ppmvd
- ----------------------------------------------------------------------------------------------------
Opacity 20% 20% 20% 20%
- ----------------------------------------------------------------------------------------------------
Ammonia ("NH4") Slip 20.0 ppmvd 20.0 ppmvd 20.0 ppmvd 20.0 ppmvd
- ----------------------------------------------------------------------------------------------------
</TABLE>
Blade Cracking Issues
The Westinghouse 501F-DLN combustion turbines at the Early Plants
have experienced power turbine blade cracking in two areas. In the first area,
the cracks were occurring at the roots of the first stage blades where the
rotating blades fit into the turbine shaft. Investigation showed that the blades
were fitted too tightly into the rotating shaft such that during start-up, the
blades were thermally expanding faster than the shaft itself. Westinghouse
machined more space between the blades to allow for adequate differential
expansion between the relatively hotter blades and the relatively cooler shaft.
This work has been completed and there is no sign of additional problems in this
regard. Westinghouse is continuing to monitor the issue by means of frequent
boroscope inspections. Blade cracking has the potential to affect plant
operation.
While the blade root cracking problem appears to have been resolved,
boroscope inspections have recently revealed new blade cracking in a different
area on the power turbine blades. Westinghouse has investigated the problem and
found that the new cracks are not in a critical, highly stressed area of the
blades. Westinghouse does not consider these cracks to be a threat to the
integrity of the machines at this time; however, Westinghouse is continuing to
monitor the cracks for further growth and may take further action if deemed
necessary to assure that summer availability goals will be achieved.
Should these problems occur on the Facility, the Construction
Contract contains warranty provisions requiring the Contractor to correct them.
In addition, the number of 501F-DLN units planned to be
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commissioned prior to the commissioning of the Facility suggests that
Westinghouse has sufficient time to identify and correct such problems, should
they occur, before the commissioning of the Facility.
Based on the foregoing, we believe that the technology risk at the
Facility is mitigated by: (1) the fact that the 501F-DLN at the Facility is a
single fuel, rather than a dual fuel design; (2) Westinghouse's ability to make
on-going adjustments and design refinements to the 501F-DLN based on the
experience at other facilities scheduled to reach commissioning prior to the
completion of the Facility; and (3) the capability of a properly designed SCR
system to maintain Facility NOX emissions at or below allowed levels while
accommodating CTG outlet NOX emissions levels that are comparable to facilities
which have experienced the emissions problems described herein.
Heat Rate
The Construction Contract Unit Heat Rate guarantee is stated on a
gross reading at the high side of the generator step-up transformer basis,
rather than on a "net plant" basis, and is 6,769 Btu/kWh higher heating value
("HHV") at 95(Degree)F, 60 percent relative humidity, 14.577 psia, and 0.90
generator power factor. This gross heat rate is guaranteed for the unfired,
non-power augmented case. No gross or net heat rate guarantee for the
supplementary-fired, power augmented case was required by the Construction
Contract.
There is a fixed commercial tolerance, or deadband, of plus or minus
1.25 percent on the Construction Contract heat rate guarantee. Accounting for
the potential impact of the 1.25 percent tolerance and adjusting for the
guaranteed auxiliary load of 15,300 kW for the unfired, non-power augmented
condition, the equivalent net plant heat rate is 7,000 Btu/kWh HHV at
95(Degree)F.
The net plant heat rate for the supplemental fired, power augmented
condition, with adjustments for the maximum guaranteed auxiliary load of 18,900
kW and the commercial tolerance band is 7,397 Btu/kWh (HHV) at 95(degree)F.
Adjusting the equivalent net plant heat rate at 95(Degree)F for
recoverable/operational degradation (fouling), short-term test vs. long term
commercial operating conditions, non-recoverable equipment degradation, upside
tuning potential, average annual ambient conditions, and the expected dispatch
scenario developed by C. C. Pace, we have projected the levelized annual average
net plant heat rate to be approximately 7,050 Btu/kWh (HHV).
Summary
Based on our review, we are of the opinion that the proposed method
of design, construction, operation, and maintenance of the Facility has been
developed in accordance with generally acceptable industry practice and has
taken into consideration the current environmental, license and permit
requirements that the Facility must meet.
After consideration of the emissions and blade cracking issues
experienced with the two dual-fuel installations of the 501F-DLN type of
combustion turbine being installed at the Facility as described herein, and the
effect that single-fuel firing, higher allowable NOX emission limits, and the
other mitigating factors described herein have on these emissions and blade
cracking issues, we are of the opinion that the combined-cycle technology
proposed for the Facility is a sound, proven method of energy generation and
recovery.
Based on our review, we are of the opinion that if designed,
constructed, operated, and maintained as currently proposed by the Partnership,
the Contractor, and the Operator, the Facility should be capable of passing the
Acceptance Tests pursuant to the Construction Contract and satisfying the
current environmental, license, and permit requirements which the Facility must
meet.
Based on our review, we are of the opinion that if designed,
constructed, operated and maintained as currently proposed and dispatched as
projected by C. C. Pace, the Facility should be capable of achieving an average
annual output of 806,100 kW and an average annual net plant heat rate of 7,050
Btu/kWh (HHV).
B-19
<PAGE>
Reliability and Availability
For the purposes of estimating energy delivered by the Facility,
plant availability was projected on an average annual basis based on indices as
defined by the North American Electric Reliability Council ("NERC"), modified as
necessary to conform to the Power Purchase Agreements. Our opinions regarding
average annual outage rates and availability factors are based on the assumption
that all annual scheduled maintenance outages will be scheduled and performed
during the Off-Peak periods, as required by the Power Purchase Agreements.
We have assembled statistical information on the historical
availability of combined-cycle plants and have researched a variety of published
reports and studies regarding gas turbine plant availability by vendors,
operators and engineering firms and commercially available databases, such as
those published by the NERC and Strategic Power Systems. The data we have
reviewed represents the experience of both utility and non-utility owned
facilities, aeroderivative and heavy-duty industrial frame-type gas turbine
plants. Our review of the data indicates that non-utility owned combined-cycle
plants in full dispatch service on average achieve annual availabilities,
calculated using generally accepted methods, which include the allowance for
scheduled and forced outages in the range of 88 percent to 96 percent, with the
average being 92 percent.
Under the terms of the Power Purchase Agreements, the Facility is
allowed specified amounts of forced outage hours. If these forced outage
allowances are exceeded, reservation payments will be reduced. Under the terms
of the Virginia Power Purchase Agreement, capacity payments are reduced if the
equivalent forced outage hours exceed 369 hours through May 31, 2001 and 245
hours per year thereafter. This is equivalent to a forced outage rate of 2.8
percent, which is also equivalent to a contract availability of 97.2 percent.
Under the terms of the Aquila/UtiliCorp Power Purchase Agreement, capacity
payments are reduced in the event that the annual contract availability, which
excludes forced outages, is less than 97 percent. The Power Purchase Agreements
contain notice provisions which can, in some circumstances, allow the
Partnership to effectively take deferrable forced outages as scheduled outages.
In addition, the Partnership is allowed to purchase replacement power to avoid
being charged for a forced outage hour. Based on this flexibility allowed by the
Power Purchase Agreements, we believe that the Facility should be capable of
achieving a forced outage rate of 2.8 percent per year.
Based on our review, we are of the opinion that the Facility should
be capable of achieving a contract availability under the Power Purchase
Agreements with Virginia Power and Aquila/UtiliCorp required to avoid reductions
in the reservation payments under those agreements.
The stipulated average availability factors represent the projected
average availabilities expected of the Facility over the term of the Bonds.
There may be years when the actual availability factors are above or below the
average availability factors stipulated herein. However, for the purpose of the
Projected Operating Results, we have utilized this average annual availability
factor.
Estimated Useful Life of Facility
Based on our review, we are of the opinion that assuming: (1) the
Facility is designed, constructed, operated, and maintained as proposed by the
Partnership, the Contractor, and the Operator; (2) all equipment is operated in
accordance with manufacturers' recommendations; (3) all required repairs,
refurbishments and replacements are made on a timely basis; and (4) natural gas
and water used by the Facility are within the expected range with respect to
quantity and quality, then the Facility will have a useful life extending beyond
the term of the Bonds.
Construction Status and Schedule
The Contractor commenced mobilization at the Site in October 1998.
The Contractor has provided summary and look ahead schedules as of March 31,
1999. As of that date, the Contractor reported focusing on engineering, design,
procurement, planning/scheduling and construction activities. As of the end of
March, engineering is reported to be approximately 59 percent complete with
procurement approximately 70 percent complete, based on the value of equipment
purchased, and construction is 7 percent complete. Overall the Project is
reported to be approximately 62 percent complete. Construction staffing is
increasing and as of March 31, the Contractor reports 221 were working at the
Site. The Contractor's schedule is based on working five ten-hour days a week
with spot overtime and makeup time as required to meet the schedule.
Construction work currently is concentrated on underground piping and electrical
conduit, and preparation of foundations. In March, the first
B-20
<PAGE>
sections of the Unit 1 HRSG were delivered to the Site and erection commenced.
CTGs are currently scheduled to commence shipment on June 15, 1999 and STGs on
August 16, 1999. On April 28, 1999, the Contractor submitted a Force Majeure
Event Notification to the Partnership because of a strike that began on April
26, 1999 at the Westinghouse manufacturing facility, which is manufacturing the
generators for the combustion turbines. The Partnership reports that
Westinghouse has verbally informed them that the strike has been settled in a
manner that should not adversely impact its schedule for completing the
generators for the Facility.
The Contractor has guaranteed completion by July 16, 2000 for Unit
1, July 26, 2000 for Unit 2 and July 31, 2000 for Unit 3. The Contractor's
schedule is based on a target completion date that is earlier than the
contractually guaranteed completion date. The schedule provides the Contractor's
planned completion of the Project based on the Target Operation of the Unit 1 on
March 16, 2000, the Target Operation of Unit 2 on April 1, 2000 and the Target
Operation of Unit 3 on May 1, 2000. The early completion bonus provisions of the
Construction Contract provide the Contractor financial incentive to attempt to
achieve early completion.
The Partnership is responsible for completion of the Infrastructure
Work such that it supports the planned completion and start-up of the Facility
by the Contractor per Exhibit R, Owner's Obligations, to the Construction
Contract. The Partnership is responsible for prosecution of the infrastructure
utility work required by the Project. This work includes the supply of potable
water and connection of the site sanitary sewer system to the City of Batesville
systems; installation of the raw water supply system from Enid Lake to the Site;
installation of the waste-water discharge pipeline; installation of a natural
gas lateral pipeline interconnecting the Facility to two interstate natural gas
pipelines; and finally, installation of the electrical interconnection systems
required to connect the Facility to two electrical transmission grid systems
(collectively, the "Infrastructure Work").
The infrastructure contracts for which the Partnership is
responsible have all been executed. The water supply and wastewater pipelines
are being laid and are scheduled to be completed by July 17, 1999. The water
intake structure at Lake Enid is expected to be completed by October 31, 1999.
Completion of the water intake by October 31, 1999 does not meet the
Partnership's obligation to the Contractor to have raw water supply available
for the demineralizer system to be placed in service by September 22, 1999. The
Contractor has expressed its willingness to accept potable water instead. The
Partnership is currently planning to increase the size of the potable water line
to the Facility to provide the flow rate required.
The fuel gas pipeline contractor has ordered pipe and is scheduled
to mobilize in May 1999, is scheduled for initial operation by September 23,
1999, and to be completed by October 15, 1999. The electrical contractor
constructing the electrical substation/interconnection facilities has mobilized
at the Site and is scheduled to be completed on December 1, 1999. TVA and
Entergy are scheduled to have their system upgrades and interconnections
completed by November 19, 1999 and December 20, 1999, respectively.
Neither the substation/interconnection facilities nor the TVA and
Entergy upgrades and interconnections are scheduled to be completed in time to
energize the step-up transformers and supply backfeed power to the Facility by
September 1, 1999 as required by the Construction Contract. The Partnership is
therefore arranging to have TVA provide a temporary 161 kV power supply to one
of the Facility's auxiliary transformers from the TVA Oxford transmission line.
Based on our review and assuming the absence of events such as
delivery delays, labor difficulties, unusually adverse weather conditions, force
majeure events, the discovery of hazardous materials or waste not previously
known or other abnormal events that are prejudicial to normal construction or
installation, and although the construction contracts that the Partnership has
entered into for the electrical substation, transmission lines, and water
infrastructure do not provide for the facilities to be completed by the dates by
which the Contractor needs electrical backfeed and water in order to conduct
certain tests, we are of the opinion that commercial operation of the Facility
by June 1, 2000 is achievable and within the previously demonstrated
capabilities of the Contractor and the Partnership using generally accepted
construction and project management practices. It should be noted that the
Partnership will not receive any liquidated damages for delays until the day
following the guaranteed completion dates under the Construction Contract.
If Substantial Completion of a unit has not occurred on or prior to
the unit's Guaranteed Completion Date, then liquidated damages (a) in an amount
of $43,333 per unit per day in the months of May
B-21
<PAGE>
through September and (b) in an amount of $33,333 per unit in the months of
October through April, shall be paid by the Contractor to the Partnership.
In the event Substantial Completion of three units occurs prior to
the Guaranteed Completion Date, then $50,000 per day shall be paid by the
Partnership to the Contractor, but not to exceed $3,000,000.
Performance Guarantees and Acceptance Tests
Performance Guarantees
Under the terms of the Construction Contract, the Contractor
guarantees the thermodynamic performance of the Facility with respect to: (1)
gross electrical power output per unit with duct firing and power augmentation
in service ("Maximum Unit Power Output"); (2) gross electrical power output per
unit without duct firing and power augmentation in service ("Unit Power
Output"); (3) gross plant heat rate without duct firing and power augmentation
in service ("Unit Heat Rate"), (4) total auxiliary power load for all three
units with duct firing and power augmentation in service ("Maximum Auxiliary
Load"); and (5) total auxiliary power load for all three units without duct
firing and power augmentation in service ("Auxiliary Load"). These performance
guarantees and the conditions under which they are guaranteed, are summarized in
Table 3 below:
Table 3
Performance Guarantees
Maximum Unit Power Output (fired) 285,400 kW (gross, per unit)
Unit Power Output (unfired) 248,290 kW (gross, per unit)
Unit Heat Rate (unfired) 6,769 Btu/kWh HHV (gross)
Maximum Auxiliary Load (fired) 18,890 kW (total 3 units)
Auxiliary Load (unfired) 15,300 kW (total 3 units)
Ambient Dry Bulb Temperature 95(degree)F
Relative Humidity 60 Percent
Barometric Pressure 14.577 psia
Fuel Natural Gas (per spec.)
Generator Power Factor 0.90 lagging
Evaporative Cooler(s) In Service
HRSG Blowdown 0% (isolated)
Emissions Compliance Per CEMS or alternate
The Maximum Unit Power Output and the Unit Power Output guarantees
are subject to fixed commercial tolerances of 0.75 percent. The Unit Heat Rate
guarantee is subject to a fixed commercial tolerance of 1.25 percent. The
Contractor is also entitled to degradation credits after more than 400 CTG fired
hours or 250 equivalent starts at the time of initial testing. CTG degradation
credits are capped at 2.5 Percent for CTG gross power. CTG heat rate degradation
credits are to be two-thirds of the percentage calculated for power.
We have received and reviewed heat balance data and preliminary
major equipment performance data from the Contractor. We have not reviewed
performance information covering all individual equipment components and piping
systems, however, the performance levels represented in the heat balance data
sheets were generally found to be within the ranges we have seen specified or
demonstrated on comparable equipment of similar size and type. The heat balances
data and equipment data reviewed, while preliminary and subject to modification,
appear to support the overall plant thermodynamic performance guarantees stated
above.
Additional plant and equipment guarantees related to initial
reliability, long-term dispatch availability, stack emissions, sound level,
start-up durations, and various plant equipment capabilities are included in the
Construction Contract and are discussed below under the applicable Acceptance
Tests.
Acceptance Tests
In order to demonstrate that the Facility meets or exceeds the
Performance Guarantees, the Construction Contract requires the Contractor to
successfully complete certain performance, reliability, emissions,
B-22
<PAGE>
and demonstration-type tests (collectively, the "Acceptance Tests"). The
Acceptance Tests are required to be conducted and passed, at Performance
Minimums where applicable, as a requirement of Substantial Completion, except as
otherwise noted below.
The Performance Minimums are defined as follows: Maximum Unit Power
Output Test, 94.25 percent of guarantee; Unit Power Output Test, 96.25 percent
of guarantee; and Unit Heat Rate Test, 104.25 percent of guarantee. Performance
Minimums are calculated without the benefit of commercial tolerances.
The Acceptance Tests include the following:
o Maximum Unit Power Output Test - 4 continuous hours within an
8-hour period
o Unit Power Output Test - 4 continuous hours within an 8-hour
period
o Unit Heat Rate Test - 4 continuous hours within an 8-hour
period
o Maximum Auxiliary Load Test - 4 continuous hours within an
8-hour period
o Auxiliary Load Test - 4 continuous hours within an 8-hour
period
o Reliability Test - 96-hour test with duct firing and power
augmentation with 99 percent Equivalent Availability Factor
for 88 hours, 70 percent unfired output minimum, and no
trips allowed
o Availability Test - rolling 480-hour test with 95 percent
Availability Factor (required for Final Completion only)
o Stack Emissions Test - emissions per contract (required for
Final Completion only)
o Sound Level Test - sound levels per contract (required for
Final Completion only)
o Cold Start-up Duration Test - 210 minutes maximum
o Hot Start-up Duration Test - 130 minutes maximum
o Cooling Tower
o Test Capability Tests (see below)
o CTG Benchmark Test
Capability Tests include the following Substantial Completion
Capability Tests; the Ramp Rate Test and the Minimum Load Operation. Capability
Tests also include the following Final Completion Capability Tests; Duct Burner
Capacity Test, Water/Steam Purity Test, Steam Turbine Bypass Test, Facility
Backup Power Transfer Test, Boiler Feed Pump Trip Test, Wastewater Discharge
Test, Demineralizer Capacity Demonstration Test, and Power Factor Test.
Utility Tests described in the Power Purchase Agreements are not
currently included in the scope of the Construction Contract and will need to be
conducted by the Partnership.
Various liquidated damages are available under the Construction
Contract. The liquidated damage calculations include allowances for commercial
tolerance bands. The tolerances are 0.75 percent with respect to Unit Power
Output and Maximum Unit Power Output, and 1.25 percent with respect to Unit Heat
Rate and are based on assumed accuracies, or uncertainty. Both tolerance
allowances are subject to adjustment if the actual accuracy of either the
Partnership's electrical meter or the fuel supply meter is such that the
uncertainty of either is higher than assumed. The various liquidated damages are
as follows:
(1) If the Unit Power Output is below guaranteed output, the
Contractor shall pay $800 per kW of shortfall.
(2) If the Maximum Unit Power Output exceeds the guaranteed
output, the Partnership shall pay $400 per kW of excess.
(3) If the Unit Heat Rate is greater than guaranteed, the
Contractor shall pay $67,200 per Btu/kWh.
(4) If the Auxiliary Load is greater than guaranteed, the
Contractor shall pay $800 per kW.
If the Auxiliary Load is less than guaranteed, the Partnership
shall pay $800 per kW plus $200 per kW times the difference
between the adjusted auxiliary load kW credit minus the
facility power shortfall.
B-23
<PAGE>
If the auxiliary load heat rate is greater than guaranteed,
the Contractor shall pay $201,600 per Btu/kWh times the
auxiliary load exceedance. If the auxiliary load heat rate is
less than guaranteed, the Partnership shall pay $201,600 per
Btu/kWh times the lesser if the auxiliary load heat rate
credit and the facility heat rate exceedance.
(5) If the Maximum Auxiliary Load is greater than guaranteed, the
Contractor shall pay $400 per kW. If the Maximum Auxiliary
Load is less than guaranteed, the Partnership shall pay $400
per kW times the lesser of the Maximum Auxiliary Load kW
credit and the Maximum Unit Output shortfall.
(6) If the cooling tower performance is poorer than guaranteed,
the Contractor shall pay $800 per kW by which amount the Unit
Power Output is less; and shall pay $67,200 per Btu/kWh by
which the Unit Heat Rate exceeds the Unit Heat Rate guarantee;
and shall pay $400 per kW by which amount the Maximum Unit
Power Output is less than guaranteed.
The aggregate of schedule and performance bonuses the Contractor may
earn shall not exceed $5,000,000. The aggregate of Contractor liquidated damages
liability shall not exceed 30 percent of the Construction Contract price.
Based on our review, we are of the opinion that the scope and
duration of the Acceptance Tests included in the Construction Contract are
similar to the tests of other projects with which we are familiar and should be
adequate to verify the guarantees in accordance with the Construction Contract.
Status of Permits and Approvals
The Facility must be designed, constructed, and operated in
accordance with applicable environmental laws, regulations, policies, codes and
standards. Based on our review, we are of the opinion that the Partnership has
received the key environmental permits and approvals required from the various
federal, state, and local agencies that are currently necessary to construct the
Facility. While not all required permits and approvals have been issued,
including some which cannot be obtained until the Facility is ready to operate,
we are not aware of any technical circumstances that would prevent the issuance
of the remaining permits.
The status of the key permits and approvals required for
construction and operation of the Facility is presented in Table 4, which is
based on our review of documents including permit applications, permits
received, and related agency correspondence provided by the Partnership.
B-24
<PAGE>
The DEQ co-issued both a Prevention of Significant Deterioration
Permit To Construct ("PSD Permit") and an Air Permit To Operate ("Air Permit")
on November 25, 1997. The permits were modified on July 14, 1998. The permits
limit oil firing to 876 hours per year (i.e., 10 percent maximum annual use),
which allows the Facility to be defined a "Gas-Fired Unit" under applicable
federal regulations.
On July 14, 1998, the DEQ modified both the PSD Permit and Air
Permit to incorporate a change in project design as requested by the Partnership
on July 13, 1998. These permit modifications included changing the CTGs to
Westinghouse Model 501-F units with a corresponding decrease in unit electric
output to 185,000 kW and increasing the supplemental duct firing fuel input rate
of the HRSGs to 268.0 MMBtu/hr. No other Permit changes appear to have been
made.
Table 4
Status of Key Permits and Approvals
<TABLE>
<CAPTION>
====================================================================================================================================
TYPE OF
AGENCY PERMIT ACTION REASON FOR ACTION STATUS
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL/STATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FERC Exempt Wholesale FERC Required for status as an exempt wholesale Notice in Federal Register 63
Generator Status Certification generator of electricity pursuant to the FR 16, 489
Public Utilities Holding Company Act Authorized by FERC: April 28,
1998
Docket # EG98-59-000
- ------------------------------------------------------------------------------------------------------------------------------------
Department of Certification Self-Certification Required for energy facilities that will Self-Certification submitted to
Energy Alternate Fuel burn fossil fuels other than coal. DOE on March 19, 1998
Capability Compliance with Industrial Fuel Use Act
- ------------------------------------------------------------------------------------------------------------------------------------
EPA & DEQ NPDES - runoff Notice of Required for runoff control from the Received October 23, 1998
during Intent under site(s) during construction
construction General Permit
Program
- ------------------------------------------------------------------------------------------------------------------------------------
EPA & DEQ PSD Permit to Permit Required for the construction of an air PSD Permit # 2100-00054
Construct emissions source under Prevention of Issued: November 25, 1997;
Significant Deterioration Program of the Modified: July 14, 1998
Clean Air Act
- ------------------------------------------------------------------------------------------------------------------------------------
EPA & DEQ Air Permit to Permit Required for the operation of an air PSD Permit # 2100-00054
Operate emissions source under Prevention of Issued: November 25, 1997;
Significant Deterioration of the Clean Air Modified: July 14, 1998
Act and the Mississippi Air and Water
Pollution Control Law
- ------------------------------------------------------------------------------------------------------------------------------------
DEQ Title V - Permit Permit Required for the air emission source To be obtained by the
to Operate Partnership; application must
be submitted within 12 months
of commencing operation
- ------------------------------------------------------------------------------------------------------------------------------------
DEQ Title IV - Acid Permit Required for the air emission source prior To be obtained by the
Rain Permit to start of operations Partnership; application was
submitted on June 2, 1998. The
DEQ indicates separate issuance
by end of 1998 and then to be
rolled up into Title V Permit
when issued
- ------------------------------------------------------------------------------------------------------------------------------------
EPA Spill Prevention Self-Certification Required for Oil Pollution Prevention To be prepared by the
Control and Regulations (40 CFR 112) for facilities Partnership within six months
Countermeasure meeting certain requirements, including after start of operations
Plan oil storage in electrical transformers
- ------------------------------------------------------------------------------------------------------------------------------------
EPA Hazardous Waste Registration Required if hazardous wastes are to be To be obtained, if required by
Identification generated or stored at the site the Partnership
Number
- ------------------------------------------------------------------------------------------------------------------------------------
Department of Nationwide Permit Required for construction of intake Nationwide Permits #7, 12, 14,
the Army Permits and structure, water supply and discharge 25 & 26 General Permit # 22,
General Permit pipeline, outfall pipe(s), access road(s), Authorization #144 Issued:
tower footing(s), and fill in waterways December 4, 1997
areas
- ------------------------------------------------------------------------------------------------------------------------------------
Department of Permit for Gas Permit(s) Required for construction of gas pipeline Nationwide Permit #12
the Army Transmission Line
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Notice of Permit Required for construction of exhaust Notified by the Partnership on
Aviation Proposed stack, the three electric transmission May 12, 1998
Administration Construction lines, and temporary construction cranes
- ------------------------------------------------------------------------------------------------------------------------------------
DEQ Water Use Permit Permit Required to divert or withdraw water for Permit # MS-SW-02744
the Facility from public waters, Issued: November 25, 1997;
specifically Enid Lake Expires: November 25, 2007
Limited to 12,300 acre-feet per
year and 7,600 gallons per
minute
- ------------------------------------------------------------------------------------------------------------------------------------
Public Service Order Granting Docket Order Required to authorize the Partnership to Docket No. 97-UA-513
Commission Certificate of acquire, install, construct, own, operate, Ordered: December 12, 1997;
Public and maintain certain electric generation No expiration
Convenience and equipment
Necessity
- ------------------------------------------------------------------------------------------------------------------------------------
LOCAL
- ------------------------------------------------------------------------------------------------------------------------------------
City of Zoning Approval Approval Required for construction and operation of Issued: April 24, 1997
Batesville Facility in a Heavy Industrial Zone
- ------------------------------------------------------------------------------------------------------------------------------------
Local Building Building Permit Permit Required for compliance with local Permit number
Department building codes and standards issued September 9, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Local Building Certificate of Certificate Required to demonstrate project completion To be obtained by the
Department Occupancy Contractor at project
completion
- ------------------------------------------------------------------------------------------------------------------------------------
Local Fire Safety Approval Approval Required to demonstrate compliance with To be obtained by the
Marshall fire safety regulations Contractor
====================================================================================================================================
</TABLE>
B-25
<PAGE>
THE FINANCING OF THE PROJECT
Facility Construction Cost
The Construction Contract includes a fixed price, including change
orders, of approximately $239,967 (the "Construction Contract Price"). The
Contractor's estimates which serve as the basis of the Construction Contract
Price are based on the requirements as stated in the Partnership's request for a
proposal, design drawings, site plans and general arrangement drawings, quotes
obtained from manufacturers, suppliers, vendors and subcontractors with whom the
Contractor is familiar and from in-house knowledge and experience gained by the
Contractor on other similar projects.
The Partnership has estimated other construction costs of
$71,345,000 (the "Other Construction Costs"), which are based on the aggregate
of $5,273,000 for start-up and spare parts, $2,466,000 for contractor's fee,
$1,987,000 for construction management, $27,669,000 for
infrastructure-gas/water/electrical system costs, $21,859,000 for electrical
interconnection costs, $1,442,000 for land and easements costs, and $10,649,000
for project contingency (the "Project Contingency"). The Project Contingency
equates to approximately 5.8 percent of the aggregate of the expected balance of
the Construction Contract Price of $144,281,000, $24,703,000 for gas, water, and
electrical infrastructure work, and the Partnership's estimate of $15,458,000
for electrical interconnection costs. The Project Contingency is consistent with
other projects at a similar stage of completion with which we are familiar. The
aggregate of the Other Construction Costs of $71,345,000 and the Construction
Contract Price of $239,967,000 is $311,312,000 (the "Total Construction Cost").
Table 6
Total Construction Costs
($000)
Total(1) Remaining
-------- ---------
Construction Contract Price $239,967 $144,281
Other Construction Costs
Start-up and Spare Parts 5,273 5,273
Contractor's Fee 2,466 1,944
Construction Management 1,987 1,419
Infrastructure - Gas/Water/Electrical 27,669 24,703
Electrical Interconnection 21,859 15,458
Land and Easements 1,442 0
Project Contingency 10,649 10,649
-------- --------
Subtotal - Other Construction Costs 71,345 59,446
Total Construction Cost $311,312 $203,727
(1) - Total cost of construction from Notice-to-Proceed, as
estimated by the Partnership.
B-26
<PAGE>
Based on our review, we are of the opinion that the estimates which
serve as the basis for the Construction Contract Price and the Total
Construction Cost were prepared in accordance with generally accepted
engineering and estimating practices and methods. The Construction Contract
Price and the Total Construction Cost, including the Project Contingency, are
comparable to the costs and contingency of similar projects at a similar stage
of completion and utilizing similar technologies with which we are familiar.
Sources and Uses of Funds
The estimated sources and uses of funds in connection with the
financing of the Facility, as estimated by the Partnership, are set forth in
Table 7.
Table 7
Estimated Sources and Uses of Funds (1)
($000)
Sources of Funds
The Bonds $326,000
Partner Equity Contributions 54,000
--------
Total Sources of Funds $380,000
========
Uses of Funds
Term and Construction Loan Payment $136,600
Remaining Construction Cost 203,727
Financing and Development Fees 5,392
Debt Service Reserve 12,551
Net Interest During Construction 21,730
--------
Total Uses of Funds $380,000
========
(1) - As estimated by the Partnership.
Based upon the interest and reinvestment rates as estimated by
Credit Suisse First Boston (the "Initial Purchasers") and the total uses of
funds as estimated by the Partnership, we are of the opinion that the principal
amount of the Bonds, when combined with the $54,000,000 of equity that the
Partnership expects will be contributed by its parent and interest income during
the construction period, should be sufficient to fund the Total Construction
Cost and interest on the Bonds through June 1, 2000.
PROJECTED OPERATING RESULTS
We have reviewed estimates and projections of electrical generating
capacity, fuel consumption, and capital and operating costs of the Facility made
available to us by the Partnership and the Operator. On the basis of our review
of such data, we have prepared the Project Operating Results. For purposes of
preparing the Projected Operating Results we have assumed that the Facility will
be fully operational by June 1, 2000. The Projected Operating Results are
presented herein for each year ending December 31, beginning June 1, 2000
through July 1, 2025, the date upon which the final deposit to the Trustee is
due on the Bonds. Revenues will be derived from the sale of electricity from the
three generating units, which comprise the Facility. The electric output of one
of the generating units is dedicated to Aquila/UtiliCorp and the output of the
other two generating units is dedicated to Virginia Power pursuant to the Power
Purchase Agreements. At the termination of each of the Power Purchase
Agreements, revenues will be derived from the sale of power from the units to
the market over the remaining term of the Bonds. Revenues will also be derived
to a lesser extent, from the interest income on certain funds created pursuant
to the Bonds. Expenses will consist of the cost of fuel based on a unit fuel
cost estimated by C.C. Pace, operations and maintenance expenses, property
taxes, replacement power, general and administrative expenses, as estimated by
the Partnership and debt service on the Bonds, as estimated by the Initial
Purchasers. The Projected Operating Results are set forth in Exhibits B-1 to
B-10. The Projected Operating Results are based on current contractual
commitments as described herein and have been prepared using assumptions and
considerations set forth in this Report.
B-27
<PAGE>
Annual Operating Revenues
Revenues from the Sale of Electricity to Virginia Power
Commencing with the commercial operation date, scheduled for June 1,
2000, the Partnership shall receive from Virginia Power monthly reservation,
energy, replacement power fuel, excess start-up, tracking account, and
transmission system upgrade credit payments. The initial term of the Virginia
Power Purchase Agreement is 13 years from the commercial operation date.
The term of the Virginia Power Purchase Agreement may be extended
for an additional 12 years (the "Extended Term"), provided that Virginia Power
requests in writing an extension of the Virginia Power Purchase Agreement not
less than two years prior to expiration of the initial 13-year term. For
purposes of the Base Case Projected Operating Results, it has been assumed that
Virginia Power will choose the Extended Term because the projected market prices
are higher than Virginia Power's cost under the Virginia Power Purchase
Agreement.
Reservation Payment
Reservation payments are based on Summer Condition Standard Capacity
and Summer Condition Supplemental Capacity for the dedicated Virginia Power
units. The Summer Condition Standard Capacity and Summer Condition Supplemental
Capacity will be based on performance tests performed in each 12-month period
after commercial operation. Summer Condition Standard Capacity will be measured
as the generating capacity of the unit at full combustion turbine output without
duct firing or steam injection at 95(Degree)F and 60 percent relative humidity.
Summer Condition Supplemental Capacity will be measured as the additional
generating capacity derived from duct firing and steam injection. In no event
can the sum of the Summer Condition Standard Capacity and the Summer Condition
Supplemental Capacity be greater than 283 MW or less than 241 MW. The
reservation charge is $5.00 per kW-month for Summer Condition Standard Capacity
for the first 5 years following commercial operation, $6.00 per kW-month for the
next 8 years and $4.50 per kW-month for the 12-year extension term. The
reservation charge is $3.25 per kW-month for Summer Condition Supplemental
Capacity for the first five years, $3.50 per kW-month for the next eight years,
and $3.00 per kW-month for the 12-year extension term. The capacity charge is
the product of the Summer Condition Capacity and the appropriate reservation
charge. The reservation payment is determined by multiplying the sum of the
Summer Condition Standard Capacity charge and the Summer Condition Supplemental
Capacity Charge by the Availability Adjustment Factor. Pursuant to the Virginia
Power Purchase Agreement, the Availability Adjustment Factor is equal to 1.0 in
the event that the Facility's equivalent forced outage hours are less than 369
in the first twelve months and 245 hours per year thereafter. The Availability
Adjustment Factor is equivalent to the ratio of 8,760 hours less the equivalent
forced outage hours divided by 8,760 hours less the allowance for forced outage
hours. If the annual equivalent forced outage hours exceed 1,752 hours or 2,628
hours, the amount by which equivalent forced outage hours exceed these levels
are increased by 25 percent and 40 percent, respectively, thereby creating a
further Availability Adjustment Factor penalty.
For the purpose of estimating the capacity for the reservation
payment under the Virginia Power Purchase Agreement, we have assumed: (1) a
Summer Condition Standard Capacity and Summer Condition Supplemental Capacity,
after allowing for degradation and expected actual operation condition, of
473,000 kW and 69,800 kW, respectively; (2) an Availability Adjustment Factor of
1.0, based on an annual contract availability, which excludes scheduled
maintenance, of 95.8 percent during the first twelve months and 97.2 percent
thereafter; and (3) Virginia Power will exercise its option to extend the
Virginia Power Purchase Agreement for the Extended Term.
The Energy Policy Act of 1992 (the "Act") fundamentally changed the
Federal regulation of the electric utility industry. The Act provides for, among
other matters, open access to transmission facilities for transactions involving
sales of electric energy for subsequent resale by a receiving entity, or
"wholesale sales". This is changing the level of control that a utility owning
transmission facilities has over its facilities and is changing the arrangements
between parties for transmission services. The authority for retail wheeling,
which allows a customer located in one utility's service area to obtain power
from another utility or non-utility source, is specifically excluded from the
enhanced authority granted to the FERC under the Act. This leaves authority for
retail wheeling with individual state legislative and regulatory bodies. Several
states are now receiving and considering requests to facilitate retail wheeling.
Federal legislation has also been introduced which, if passed, would extend
retail wheeling to all states. One potential effect of the proposed changes is
that utilities or electric service providers with low-cost
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power may be better able to compete for new customers and retain existing ones.
Future legislative and regulatory actions will likely continue to affect
developments related to both wholesale and retail wheeling. At this time we
cannot predict what impact changes in legislation, regulation or market
conditions will have on the ability or willingness of Virginia Power and
Aquila/UtiliCorp to pay the stipulated capacity costs contained in the Power
Purchase Agreements. Accordingly, we have therefore assumed that the capacity
pricing provisions contained in the Power Purchase Agreements will remain
effective throughout the term of the Power Purchase Agreements.
Energy Payment and Tracking Account
The energy payment is equal to the product of: (1) the sum of the
energy generated by the unit dedicated to Virginia Power and the energy supplied
as replacement power which is delivered to Virginia Power at the interconnection
point, and (2) $1.00 per MWh, escalated at a contractually fixed escalation rate
of 3.0 percent per year commencing on June 1, 2000.
The tracking account payment or credit is equal to the monthly
summation of the product of the hourly delivered cost of fuel and the hourly
difference determined by the actual amount of fuel required to produce the net
output delivered to Virginia Power less the fuel amount estimated to produce
such output based on the guaranteed heat rate under the Virginia Power Purchase
Agreement. Pursuant to the Virginia Power Purchase Agreement, the guaranteed
heat rate is a function of the hourly energy dispatched from the unit divided by
the Standard Capacity taking into account ambient conditions when the energy
dispatched in an hour is less than the Standard Capacity. The guaranteed heat
rate associated with energy dispatched above Standard Capacity is based on a
formula also set forth in the Virginia Power Purchase Agreement.
For purposes of estimating the energy payments from Virginia Power,
we have assumed: (1) an annual average net capacity of 537,400 kW; (2) capacity
factors as projected by C.C. Pace adjusted for our availability assumptions; (3)
a resulting guaranteed heat rate under the Virginia Power Purchase Agreement of
approximately 7,105 Btu/kWh over the period 2000-2025; (4) an actual Facility
heat rate of 7,050 Btu/kWh; and (5) an annual average delivered cost of fuel, as
estimated by C.C. Pace, of $2.30/MMBtu in 1998 dollars escalated at 0.5 percent
above the assumed general inflation rate. The guaranteed heat rate under the
Virginia Power Purchase Agreement was estimated based upon a net capacity at
95(Degree)F without augmentation of 473,000 kW and a supplemental capacity at
95(Degree)F due to augmentation of 69,800 kW, which have been adjusted for
assumed actual ambient conditions and dispatch of the Facility as projected by
C.C. Pace. The dispatch of the unit at various ambient conditions was based on
information from C.C. Pace.
Replacement Power Fuel Payment
The replacement power fuel payment is based on the product of the
delivered cost of fuel, the guaranteed heat rate, and the amount of energy
supplied as replacement power by the Partnership. The Partnership has the option
of having Virginia Power provide replacement power, or being penalized by the
availability adjustment factor. If replacement power is provided by Virginia
Power, the Partnership must pay Virginia Power the positive difference, if any
between replacement power cost and contract energy cost. For purposes of the
Projected Operating Results, no replacement power was assumed.
Excess Start-up Payment
The Facility will receive excess start-up payments for start-ups in
the event the number of start-ups for a unit exceeds 250 per contract year.
Virginia Power will pay the Partnership the amount of $5,000 for each excess
start-up. For the purposes of the Projected Operating Results, no excess
start-ups were assumed.
System Upgrade Credits
Based on the installation of the electrical infrastructure, the
Partnership will receive a system upgrade credit based on the amount of payment,
credit or discount received by Virginia Power under its transmission service
agreement with Entergy and TVA as described in the Interconnection Agreement
between TVA and the Partnership, and the Interconnection and Operating Agreement
between the Partnership and Entergy, and the Power Purchase Agreements. The
total amount is not to exceed two-thirds of the total reimbursable transmission
system upgrade cost, which is currently estimated by the Partnership to be
approximately $20,000,000. The annual system upgrade credit has been included
based on two-thirds of the total system upgrade credit estimate prepared by C.C.
Pace of $3,400,000 per year until the balance is repaid in the sixth year of
operation.
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Revenues from the Sale of Electricity to Aquila/UtiliCorp
Commencing with the commercial operation date, scheduled for June 1,
2000, the Partnership receives from Aquila/UtiliCorp monthly reservation,
energy, replacement power fuel, excess start-up, tracking account; and
transmission system upgrade credit payments. The initial term of the
Aquila/UtiliCorp Power Purchase Agreement is 15 years, 7 months from the
commercial operation date. The Aquila/UtiliCorp Power Purchase Agreement may be
extended an additional 5 years at Aquila/UtiliCorp's option, provided that
Aquila/UtiliCorp notifies the Partnership by the later of July 31, 2013 or
twenty-nine (29) months prior to the expiration of the initial term. For
purposes of Projected Operating Results, it was assumed that Aquila/UtiliCorp
would extend the term of the Aquila/UtiliCorp Power Purchase Agreement because
the projected market prices are higher than Aquila/UtiliCorp's cost under the
Aquila/UtiliCorp Power Purchase Agreement.
Reservation Payment
Reservation payments are based on Standard Capacity, Supplemental
Capacity and Surplus Supplemental Capacity. The Standard Capacity, Supplemental
Capacity and Surplus Supplemental Capacity will be based on performance tests
performed in each 12-month period after commercial operation. Standard Capacity
will be measured as the generating capacity of the unit at full combustion
turbine output without duct firing or steam injection at 95(Degree)F and 60
percent relative humidity. Supplemental Capacity will be measured as the
additional amount of capacity with duct firing and steam injection, up to
267,000 kW. Surplus Supplemental Capacity is equal to the total capacity above
267 MW at 95(Degree)F and 60 percent relative humidity. The reservation payment
is equal to $4.90 per kW-month for Standard Capacity and Supplemental Capacity
for the first 60 months following commercial operation, and $5.00 per kW-month
for the remainder of the initial term and extension period. The reservation
payment is $2.50 per kW-month for Surplus Supplemental Capacity for the initial
term and the extension period. The reservation payment is subject to a monthly
and annual adjustment for availability. Reservation payments are reduced if the
monthly availability excluding periods of force majeure and Delivery Excuse on a
cumulative weighted average is less than 96 percent, or if the annual
availability excluding periods of force majeure and Delivery Excuse is less than
97 percent. In the event that the availability is less than the contractual
requirements, the reservation payment is multiplied by an availability
adjustment factor equal to the ratio of the actual contract availability and the
appropriate monthly or annual availability criteria.
For the purpose of estimating the capacity for the reservation
payment under the Aquila/UtiliCorp Power Purchase Agreement, we have assumed:
(1) a Summer Condition Standard Capacity, Summer Condition Supplemental
Capacity, and Surplus Supplemental Capacity, after allowing for degradation and
expected actual operation condition, of 236,500 kW, 30,500 kW, and 4,400 kW,
respectively; (2) an annual availability adjustment factor of 1.0, based on an
annual contract availability, which excludes scheduled maintenance, of 97.2
percent; and (3) Aquila/UtiliCorp will exercise its option to extend the
Aquila/UtiliCorp Power Purchase Agreement.
Energy Payment and Tracking Account
The Energy Payment is equal to the product of: (1) the sum of the
energy generated by the unit and the energy supplied as replacement power which
is delivered to Aquila/UtiliCorp at the interconnection point, and (2) $1.00 per
MWh, escalated at the ratio of the current Gross Domestic Product Implicit Price
Deflator ("GDP-IPD") to the January 1, 1997 GDP-IDP of 110.95.
The tracking account payment or credit is equal to the monthly
summation of the product of the hourly delivered cost of fuel and the hourly
difference determined by the actual amount of fuel required to produce the net
output delivered to Aquila/UtiliCorp less the fuel amount estimated to produce
such output based on the heat rate guaranteed under the Aquila/UtiliCorp Power
Purchase Agreement. Pursuant to the Aquila/UtiliCorp Power Purchase Agreement,
the guaranteed heat rate is a function of the hourly energy dispatched from the
unit divided by the Standard Capacity taking into account ambient conditions
when the energy dispatched in an hour is less than the Standard Capacity. The
guaranteed heat rate associated with energy dispatched above Standard Capacity
is based on a formula also set forth in the Aquila/UtiliCorp Power Purchase
Agreement.
For purposes of estimating the energy payments from
Aquila/UtiliCorp, we have assumed: (1) an annual average net capacity 268,700
kW; (2) capacity factors as projected by C.C. Pace and adjusted for our
availability assumptions; (3) a resulting guaranteed heat rate under the
Aquila/UtiliCorp Power Purchase Agreement of approximately 7,040 Btu/kWh over
the period 2000-2020; (4) an actual Facility heat rate of 7,050 Btu/kWh; and
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(5) an annual average delivered cost of fuel, as estimated by C.C. Pace, of
$2.30/MMBtu in 1998 dollars escalated at 0.5 percent above the assumed general
inflation rate. The guaranteed heat rate under the Aquila/UtiliCorp Power
Purchase Agreement was estimated based upon a net capacity at 95(Degree)F
without augmentation of 236,500 kW and a supplemental capacity at 90(Degree)F
due to augmentation of 34,900 kW, which have been adjusted for assumed actual
ambient conditions and dispatch of the Facility as projected by C.C. Pace. The
dispatch of the unit at various ambient conditions was based on information from
C.C. Pace.
Replacement Power Fuel Payment
The replacement power fuel payment is based on the product of the
Delivered Cost of Fuel, the guaranteed heat rate, and the amount of energy
supplied as replacement power by the Partnership. During a forced outage the
Partnership has the option of providing replacement power or being penalized
through the availability adjustment factor. If replacement power is provided,
Aquila/UtiliCorp will pay the Partnership replacement power fuel payments in an
amount per MWh which is equal to the delivered cost of fuel times the guaranteed
heat rate. For purposes of the Projected Operating Results, no replacement power
was assumed.
Excess Start-up Payment
The Facility will receive excess start-up payments for start-ups in
the event the number of start-ups for a unit exceeds 200 per contract year.
Aquila/UtiliCorp will pay the Seller the amount of $5,000 for each excess
start-up. The payment will be made monthly as each additional excess start-up
occurs. For the purposes of the Projected Operating Results, no excess start-ups
were assumed.
System Upgrade Credits
Based on the installation of the electrical infrastructure, the
Partnership will receive a system upgrade credit based on the amount of payment,
credit or discount received by Aquila/UtiliCorp under its transmission service
agreement with Entergy and TVA as described in the Interconnection Agreement
between TVA and the Partnership, and the Interconnection and Operating Agreement
between the Partnership and Entergy, and the Power Purchase Agreements. The
total amount is not to exceed one-third of the total reimbursable transmission
system upgrade cost, which is currently estimated by the Partnership to be
approximately $20,000,000. The annual system upgrade credit has been included
based on one-third of the total system upgrade credit estimate prepared by C.C.
Pace of $3,400,000 per year until the balance is repaid in the sixth year of
operation.
Revenues from the Sale of Electricity to the Market
After the termination of the Power Purchase Agreements with
Aquila/UtiliCorp and Virginia Power which are assumed to be December 31, 2020
and May 31, 2025, respectively, the Partnership has projected that the available
output which would no longer be dedicated to the purchasers, will be sold to the
market at the forecasted market clearing price. For purposes of the Projected
Operating Results we have assumed the market clearing price forecast prepared by
C.C. Pace. The dispatch of the units in the market was based on capacity factors
also provided by C.C. Pace. The projected revenues are assumed to be the product
of the net output of the non-dedicated units at the assumed capacity factor
multiplied by the forecast average market-based revenues projected by C.C. Pace.
Interest Income
Pursuant to the Indenture, a debt service reserve fund will be
created for the Bonds (the "Debt Service Reserve Account"). We have included
interest income on the Debt Service Reserve Account at a rate, as estimated by
the Initial Purchasers, of 5.5 percent per year. The initial deposit to the Debt
Service Reserve Account is $12,551,000. The annual Debt Service Reserve Account
requirement is assumed to be equal to the next semi-annual debt service payment.
Any required additions to the Debt Service Reserve Account are to be made from
funds available after the payment of debt service. Interest income and excess
funds in the Debt Service Reserve Account are to be transferred to the Revenue
Account and will be available to pay debt service.
The Major Maintenance Reserve Account is to be funded through annual
deposits which were based on a schedule projected by the Partnership based on
the base case dispatch estimated by C.C. Pace. Deposits to the Major Maintenance
Reserve Account will be made after the payment of debt service on the Bonds. We
have
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included interest income on the Major Maintenance Reserve Account at a
reinvestment rate, as estimated by the Initial Purchasers, of 5.5 percent per
year. Interest income on the Major Maintenance Reserve Account has been assumed
to be retained in the Major Maintenance Reserve Account.
Annual Operating Expenses
Fuel Costs
We have reviewed the potential for the Facility to experience an
increase in net plant heat rate, therefore the potential for an increase in fuel
costs, over the term of the Bonds. The adjustment to the net plant heat rate, to
reflect average annual operations, part-load conditions, and ambient conditions
was assumed to be 4.2 percent above the guaranteed net plant heat rate at 95oF,
60 percent relative humidity. This adjustment reflected the assumed dispatch
estimated by C.C. Pace. Fuel prices were based on an assumed gas price of
$2.30/MMBtu in 1998, including transportation, and an assumed escalation of 0.5
percent above inflation as provided by C.C. Pace. During the term of the Power
Purchase Agreements, fuel will be provided and paid for by Aquila/UtiliCorp and
Virginia Power under a tolling arrangement. After the term of the Power Purchase
Agreements, the Partnership is assumed to procure and pay for fuel.
Operation and Maintenance
The Partnership's estimate of operating and maintenance expenses
includes provision for labor, repair and maintenance, including renewals and
replacements, utilities, and consumables. The Partnership has estimated that the
Operator will receive an annual fee of $500,000 in the first year of operation,
escalating at the rate of change in the GDP-IPD thereafter. Pursuant to the
Financing Documents and the O&M Agreement, the Operator's fee is subordinated to
all debt service and reserve fund obligations.
We have included deposits to the Major Maintenance Reserve Account
as required pursuant to the Financing Documents based on a schedule of deposits
projected by the Partnership based on the base case dispatch estimated by C.C.
Pace. The cost of overhauls which is to be funded from the Major Maintenance
Reserve Fund is based on information provided by the Partnership based on an
inflation rate of 2.6 percent. Based upon an assumed rate of inflation of 2.6
percent per year, the deposits to the Major Maintenance Reserve Account as shown
in the Projected Operating Results are estimated to be sufficient to fund the
projected major maintenance costs in all years.
Based on our review, we are of the opinion that the basis for the
Partnership's estimates of the cost of operating and maintaining the Facility,
including provision for major maintenance, is reasonable.
The Partnership has also estimated general and administrative
expenses, property taxes, insurance, site use fee, corps of engineers' fees,
lateral pipeline operations and maintenance, electrical transmission operations
and maintenance, backup power expenses, trustee and rating agency fees, and
other expenses, all of which are assumed to increase at the projected rate of
change in inflation of 2.6 percent per year, with the exception of Panola fees,
property taxes, corps of engineers' fees, trustee and rating agency fees, and
the site use fees, which were based on the estimates provided by the
Partnership. The Partnership's local counsel has stated that the first property
taxes are expected to be due in year 2002.
Annual Debt Service
Based on information provided by the Initial Purchasers, we have
included debt service payments based on the principal amount of the Bonds of
$326,000,000 at a weighted average interest rate of approximately 7.70 percent,
as reported by the Initial Purchasers. Semi-annual principal payments are due
each January 15 and July 15. Monthly deposits to the Trustee are assumed to be
made on the first of each month prior to the due dates. Interest is assumed to
be paid from the proceeds of the Bonds through the June 1, 2000 deposit. The
Indenture defines Debt Service to include Letter-of-Credit fees. The Initial
Purchasers have estimated the Letter-of-Credit fees to be $92,000 per year for
the first five years of operation and $64,000 per year thereafter.
Debt Service Coverage
The debt service coverage ratio has been calculated as the Cash
Available for Debt Service divided by the Debt Service (the "Debt Service
Coverage Ratio"). The Indenture defines Cash Available for Debt Service to
exclude the deposits to the Major Maintenance Reserve Account, although the
deposits to the Major Maintenance
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Reserve Account are subordinate to the payment of Debt Service. On the basis of
our studies and analyses of the Facility and the assumptions set forth in this
Report, we are of the opinion that, for the Base Case Projected Operating
Results, which assumes the extension of the Virginia Power and the
Aquila/UtiliCorp Power Purchase Agreements, the projected revenues from the sale
of electricity are adequate to pay annual operating and maintenance expenses
(including deposits to the Major Maintenance Reserve Account), fuel expense, and
other operating expenses and to provide an annual Debt Service Coverage Ratio of
at least 1.42 in each year during the term of the Bonds and a weighted average
Debt Service Coverage Ratio of 1.63 over the term of the Bonds. The average
coverage has been calculated as the total net operating revenues divided by the
total Debt Service over the term of the Bonds. Annual Debt Service Coverage
Ratios for the term of the Bonds are presented in Exhibit B-1.
Sensitivity Analyses
Due to the uncertainties necessarily inherent in relying on
assumptions and projections, it should be anticipated that certain circumstances
and events may differ from those assumed and described herein and that such will
affect the results of our Base Case Projected Operating Results for the
Facility. In order to demonstrate the impact of certain circumstances on the
Base Case Projected Operating Results, certain sensitivity analyses have been
developed. It should be noted that other examples could have been considered and
those presented are not intended to reflect the full extent of possible impacts
on the Facility. The sensitivities are not presented in any particular order
with regard to the likelihood of any case actually occurring. In addition, no
assurance can be given that all relevant sensitivities have been presented, that
the level of each sensitivity is the appropriate level for testing purposes, or
that only one (rather than a combination of more than one) of such variations or
sensitivities could impact the Facility in the future.
These sensitivity analyses present the Projected Operating Results
assuming, respectively, that: and (a) the Facility contract availability is
reduced by 5 percentage points from the Base Case; (b) the Facility heat rate is
5 percent higher than that assumed in the Base Case; (c) the Facility non-fuel
operating expenses are 10 percent higher than that assumed in the Base Case; (d)
the rate of general inflation is 4.0 percent per year, or 1.4 percent above the
Base Case assumption, which also increases the natural gas escalation rate to
4.5 percent per year, (e) the rate of general inflation is 6.0 percent per year,
or 3.4 percent above the Base Case assumption, which also increases the natural
gas escalation rate to 6.5 percent per year; (f) escalation for natural gas fuel
expense for the Facility increases to 1.0 percent above inflation while market
prices are assumed to remain the same as the Base Case; (g) average market
energy prices are equal to the Downside Case prepared by C.C. Pace; (h) average
market energy prices are equal to the Downside Case prepared by C.C. Pace and
the Power Purchase Agreements are not renewed; and (i) the Power Purchase
Agreements are not renewed. The sensitivity analyses are presented as Exhibits
B-2 through B-9 to this Report. In preparing these sensitivity analyses, we have
assumed that there would be no liquidated damage payments made by the Contractor
under the Construction Contract. For the purposes of sensitivity case (a), we
have not taken into consideration any potential reduction in major maintenance
costs resulting from lower levels of operation. For the purposes of sensitivity
cases (a) and (b), C.C. Pace has estimated that it is reasonable to assume that
the dispatch and market prices would not change from the Base Case. For the
purposes of sensitivity cases (d) and (e), the Initial Purchasers have estimated
that the reinvestment rate on the Debt Service Reserve Account and Major
Maintenance Reserve Account would be equal to 6.5 and 8.5 percent per year,
respectively. In addition, the Partnership has provided additional projections
of deposits to the Major Maintenance Reserve Account for sensitivity cases (d)
and (e).
Sensitivity case (h) includes a combination of certain other
sensitivity case assumptions. The particular combination is not intended to
present a combination of events that would cause the most significant impact to
the Facility, nor does it represent the only possible combinations of variables
that could simultaneously occur.
Summary Comparison of Projected Operating Results
A summary of the debt service coverages on the Bonds for the Base
Case Projected Operating Results and each sensitivity case is presented in Table
8.
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Table 8
Projected Debt Service Coverage
<TABLE>
<CAPTION>
Base Case Sensitivity Cases
--------- -----------------
A D C D E F G H I
No Renewal
of PPAs &
Year Increased Increased Increased Increased Reduced Reduced No
Ending Reduced Increased Operating Inflation Inflation Gas Market Market PPA
Dec 31 Availability Heat Rate Expenses (4%) (6%) Escalation Prices Prices Renewal
------ ------------ --------- -------- ---- ---- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 1.45 1.37 1.29 1.38 1.76 1.74 1.45 1.44 1.44 1.45
2001 1.43 1.36 1.31 1.40 1.41 1.38 1.43 1.42 1.42 1.43
2002 1.43 1.35 1.30 1.39 1.40 1.37 1.43 1.42 1.42 1.43
2003 1.43 1.35 1.30 1.39 1.40 1.37 1.43 1.42 1.42 1.43
2004 1.43 1.35 1.29 1.39 1.40 1.37 1.43 1.42 1.42 1.43
2005 1.42 1.34 1.29 1.38 1.39 1.36 1.42 1.41 1.41 1.42
2010 1.43 1.34 1.28 1.39 1.35 1.27 1.43 1.41 1.41 1.43
2015 1.50 1.39 1.27 1.43 1.41 1.24 1.50 1.47 2.97 3.40
2020 1.92 1.78 1.57 1.81 1.69 1.32 1.93 1.90 5.70 6.66
Minimum 1.42 1.33 1.24 1.36 1.35 1.24 1.42 1.41 1.41 1.42
Average 1.63 1.52 1.45 1.57 1.67 1.78 1.60 1.57 2.39 2.66
</TABLE>
Liquidated Damages Analyses
We have performed a series of analyses to estimate the impact on the
average debt service coverage ratio if the Facility fails to pass certain
performance tests and there is a long-term performance deficiency over the term
of the Bonds. In these analyses, we have assumed that, if performance liquidated
damages are paid to the Partnership by the Contractor the total damages payment
will be used to redeem the principal of the Bonds on a pro rata basis. These
analyses have been performed to demonstrate the sufficiency of the performance
liquidated damages for the Maximum Unit Power Output, Unit Power Output, and
Unit Heat Rate to maintain debt service coverage at the level projected in the
Base Case Projected Operating Results. Under the terms of the Construction
Contract, the Facility must meet Performance Minimums equivalent to a deficiency
in Maximum Unit Power Output of 5.75 percent, in Unit Power Output of 3.75
percent, and in Unit Heat Rate of 4.25 percent. These analyses assume that: (1)
only one type of performance deficiency would occur at a time; (2) the
deficiency would exist in all units; and (3) that the maximum liquidated damages
of 30 percent of the Construction Contract Price would be available to pay the
damages associated with that deficiency.
Based on these analyses, we are of the opinion that, if the
Contractor pays the Partnership performance liquidated damages due to a failure
to achieve the Maximum Unit Power Output, Unit Power Output, or Unit Heat Rate,
then the weighted average Debt Service Coverage Ratio over the term of the Bonds
is projected to remain at the same level as in the Base Case Projected Operating
Results for a deficiency consistent with the Performance Minimums for Maximum
Unit Power Output, Unit Power Output, and Unit Heat Rate set forth in the
Construction Contract.
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
IN THE PROJECTION OF OPERATING RESULTS
In the preparation of this Report and the opinions that follow, we
have made certain assumptions with respect to conditions which may exist or
events which may occur in the future. While we believe these assumptions to be
reasonable for the purpose of this Report, they are dependent upon future events
and actual conditions may differ from those assumed. In addition, we have used
and relied upon certain information provided to us by sources which we believe
to be reliable. While we believe the use of such information and assumptions to
be reasonable for the purposes of our Report, we offer no other assurances with
respect thereto and some assumptions may vary significantly due to unanticipated
events and circumstances. To the extent that actual future conditions differ
from those assumed herein or provided to us by others, the actual results will
vary from those projected herein.
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This Report summarizes our work up to the date of the Report. Thus, changed
conditions occurring or becoming known after such date could affect the material
presented to the extent of such changes.
The principal considerations and assumptions made by us in
developing the Base Case Projected Operating Results and the principal
information provided to us by others include the following:
1. As Independent Engineer, we have made no determination as to the
validity and enforceability of any contract, agreement, rule, or
regulation applicable to the Facility and their operations. However, for
purposes of this Report, we have assumed that all such contracts,
agreements, rules and regulations will be fully enforceable in accordance
with their terms and that all parties will comply with the provisions of
their respective agreements.
2. The Construction Contract will be implemented as described to us
by the Partnership and the Contractor.
3. The Contractor has taken into account the information in the
Preliminary Site Investigation report and the Subsurface Investigation
Data Report; complete the geotechnical analysis, engineering, and
reduction of data required to provide the geotechnical recommendations and
detailed site-work and foundation design criteria; and take into account
those recommendations during the design and construction of the Facility.
4. The Contractor and the Operator will construct and operate the
Facility as currently proposed in the Construction Contract and the O&M
Agreement.
5. The Contractor will undertake generally accepted project
management techniques to closely monitor construction and will react in a
timely fashion to lagging performance such that the Facility will be
constructed in accordance with the construction schedule developed by the
Contractor.
6. The Operator will maintain the Facility in accordance with
generally accepted industry practices, make all required renewals and
replacements in a timely manner, and will not operate the equipment to
cause it to exceed the equipment manufacturers' recommended maximum
ratings.
7. The Operator will employ qualified and competent personnel who
will properly operate and maintain the equipment in accordance with the
manufacturers' recommendations and generally accepted engineering practice
and will generally operate the Facility in a sound and businesslike
manner.
8. Inspections, overhauls, repairs, and modifications will be
planned for and conducted in accordance with manufacturers'
recommendations, and with special regard for the need to monitor certain
operating parameters to identify early signs of potential problems.
9. The design parameters and delivery dates of the major equipment
incorporated in the Facility will conform to performance and design data
in the Construction Contract and the construction schedule submitted by
the Contractor.
10. The three units will meet the emission guarantees in the
Construction Contract. Any exceedances will be resolved by the Contractor
in a manner which does not increase the Total Construction Cost, the
construction schedule, Facility availability, or Facility operating and
maintenance costs.
11. All permits and approvals necessary to construct and operate the
Facility will be obtained on a timely basis and any changes in required
permits and approvals will not require changes in design resulting in
either material delays in the scheduled Commercial Operation Date of the
Facility or in significant increases in the costs of the Facility.
12. There will be no increases in the Construction Contract Price
and the Other Construction Costs of the Facility that are greater than the
funded Project Contingency.
13. There will be no excess start-ups as defined in the Power
Purchase Agreement.
14. The market clearing price used for projecting the sales revenue
received by the Partnership after the termination of the Power Purchase
Agreements will be as estimated by C.C. Pace. The capacity factors of the
Facility and associated market-based revenues assuming an economic
dispatch in a market environment will be as estimated by C.C. Pace.
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<PAGE>
15. Upon commercial operation, the Debt Service Reserve Account will
earn interest at a rate of 5.5 percent, as estimated by the Initial
Purchasers. The Major Maintenance Reserve Fund will earn interest at a
rate of 5.5 percent, as estimated by the Initial Purchasers.
16. The Virginia Power letters of credit will not be drawn upon.
17. The GDP-IPD and general inflation will escalate at a rate of 2.6
percent per year, and the average 1998 natural gas Price will be
$2.30/MMBtu and will escalate at a rate of 0.5 percent per year above
inflation, as estimated by C.C. Pace.
18. The non-fuel operating and maintenance expenses of the Facility,
including the cost of overhauls, will be equal to those estimated by the
Partnership, and will increase at a rate of 2.6 percent per year, except
for property taxes, corps of engineer's fees, trustee and rating agency
fees and site use fees, which were based on estimates prepared by the
Partnership. Deposits to the Major Maintenance Reserve Fund will be as
estimated by the Partnership. The cost of major maintenance will be as
estimated by the Partnership as adjusted for the assumed rate of change in
general inflation.
19. The principal amount of the Bonds will be $326,000,000.
20. The annual interest rate on the Series A and Series B Bonds
outstanding upon commencement of commercial operation will be 7.164 and
8.16 percent, respectively, as reported by the Initial Purchasers.
Interest will be funded from the proceeds of the Bonds through the June 1,
2000 deposit to the Trustee.
21. The amortization schedule of the Bonds will be as estimated by
the Initial Purchasers.
22. If performance liquidated damages are paid to the Partnership by
the Contractor, the total damages payment will be paid on the Substantial
Completion Date and will be used to repay the Bonds on a pro rata basis.
CONCLUSIONS
Set forth below are the principal opinions which we have reached
regarding our review of the Facility. For a complete understanding of the
estimates, assumptions, and calculations upon which these opinions are based,
the Report should be read in its entirety. On the basis of our studies,
analyses, and investigations of the Facility and the assumptions set forth in
this Report, we are of the opinion that:
1. The Contractor and the Operator have previously demonstrated the
capability to perform their responsibilities under the Construction
Contract and the O&M Agreement, respectively.
2. Sufficient data has been gathered at the Site to perform the
geotechnical analysis, engineering, and reduction of data required to
provide the geotechnical recommendations and detailed site-work and
foundation design criteria needed to properly complete the Facility
design. With proper foundation design, and adequate construction controls
to minimize the change in moisture content of the Site soils, the Site
should be suitable for construction and operation of the Facility.
3. Based upon our review of the environmental site assessments for
the power plant site, the transmission line right-of-way, the wastewater
pipeline right-of-way, the water supply pipeline right-of-way, and the
natural gas pipeline right-of-way:
o there are no significant risks identified regarding
environmental contamination at the Site; and
o there are no Site contamination issues that require
substantial investigations or significant allocation of
funds.
4. The proposed method of design, construction, operation, and
maintenance of the Facility has been developed in accordance with
generally acceptable industry practice and has taken into consideration
the current environmental, license and permit requirements that the
Facility must meet.
B-36
<PAGE>
5. After consideration of:
o the emissions and blade cracking issues experienced with
the two dual-fuel installations of the 501F-DLN type of
combustion turbine being installed at the Facility as
described herein, and
o the effect that single-fuel firing, higher allowable NOX
emission limits, and the other mitigating factors
described herein have on these emissions and blade
cracking issues,
the combined-cycle technology proposed for the Facility is a sound, proven
method of energy generation and recovery.
6. If designed, constructed, operated, and maintained as currently
proposed by the Partnership, the Contractor, and the Operator, the
Facility should be capable of passing the Acceptance Tests included in the
Construction Contract and satisfying the current environmental, license,
and permit requirements which the Facility must meet.
7. If designed, constructed, operated and maintained as currently
proposed and dispatched as projected by C. C. Pace, the Facility should be
capable of achieving:
o an average annual output of 806,100 kW; and
o an average annual net plant heat rate of 7,050 Btu/kWh
(HHV).
8. The Facility should be capable of achieving a contract
availability under the Power Purchase Agreements with Virginia Power and
Aquila/UtiliCorp required to avoid reductions in the reservation payments
under those agreements.
9. Assuming:
o the Facility is designed, constructed, operated, and
maintained as proposed by the Partnership, the
Contractor, and the Operator;
o all equipment is operated in accordance with
manufacturers' recommendations;
o all required repairs, refurbishments and replacements
are made on a timely basis; and
o natural gas and water used by the Facility are within
the expected range with respect to quantity and quality,
then the Facility will have a useful life extending beyond the term of the
Bonds.
10. Assuming the absence of events such as:
o delivery delays;
o labor difficulties;
o unusually adverse weather conditions;
o force majeure events;
o the discovery of hazardous materials or wastes not
previously known; or
o other abnormal events prejudicial to normal construction
or installation,
and although the construction contracts that the Partnership has
entered into for the electrical substation, transmission lines, and
water infrastructure do not provide for the facilities to be
completed by the dates by which the Contractor needs electrical
backfeed and water in order to conduct certain tests, commercial
operation of the Facility by June 1, 2000 is achievable and within
the previously demonstrated capabilities of the Contractor and the
Partnership using generally accepted construction and project
management practices.
11. The scope and duration of the Acceptance Tests included in the
Construction Contract are similar to the tests of other projects with
which we are familiar and should be adequate to verify the performance
guarantees in accordance with the Construction Contract.
12. The Partnership has received the key environmental permits and
approvals required from the various federal, state, and local agencies
that are currently necessary to construct the Facility. While not all the
required permits and approvals have been issued, including some which
cannot be obtained until the Facility is ready to operate, we are not
aware of any technical circumstances that would prevent the issuance of
the remaining permits.
13. The estimates which serve as the basis for the Construction
Contract Price and the Total Construction Cost were prepared in accordance
with generally accepted engineering and estimating practices and methods.
The Construction Contract Price and the Total Construction Cost, including
the
B-37
<PAGE>
Project Contingency, are comparable to the costs and contingency of
similar projects at a similar stage of completion and utilizing similar
technologies with which we are familiar.
14. Based upon the interest and reinvestment rates as estimated by
the Initial Purchasers and the total uses of funds as estimated by the
Partnership, the principal amount of the Bonds, when combined with the
$54,000,000 of equity that the Partnership expects will be contributed by
its parent and interest income during the construction period, should be
sufficient to fund the Total Construction Cost and interest on the Bonds
through June 1, 2000.
15. The basis for the Partnership's estimates of the cost of
operating and maintaining the Facility, including provision for major
maintenance, is reasonable.
16. For the Base Case Projected Operating Results, which assumes the
extension of the Virginia Power and the Aquila/UtiliCorp Power Purchase
Agreements, the projected revenues from the sale of electricity are
adequate:
o to pay annual operating and maintenance expenses
(including deposits to the Major Maintenance Reserve
Account), fuel expense, and other operating expenses;
and
o to provide an annual Debt Service Coverage Ratio of at
least 1.42 in each year during the term of the Bonds and
a weighted average Debt Service Coverage Ratio of 1.63
over the term of the Bonds.
17. If the Contractor pays the Partnership performance liquidated
damages due to a failure to achieve the Maximum Unit Power Output, Unit
Power Output or Unit Heat Rate, then the weighted average Debt Service
Coverage Ratio over the term of the Bonds is projected to remain at the
same level as in the Base Case Projected Operating Results for a
deficiency consistent with the Performance Minimums for Maximum Unit Power
Output, Unit Power Output, and Unit Heat Rate set forth in the
Construction Contract.
Respectfully submitted,
/s/ R. W. BECK, INC.
B-38
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-39
<PAGE>
Exhibit B-1
Batesville Project
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005 2006
- ------------------------ ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04% 61.23%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700 2,882,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300 1,441,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895 30,493
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62 68.14
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36 1.39
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24 1.27
Market Electricity Rates (16) $34.55 35.56 36.59 37.95 39.36 40.54 41.75
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848 2.936
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535 36,988
Energy $1,832 3,060 3,150 3,218 3,284 3,359 3,402
Tracking Account Payment $322 544 561 575 588 599 609
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267 678
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152 16,152
Energy $980 1,647 1,690 1,722 1,754 1,777 1,799
Tracking Account Payment $20 34 35 36 37 37 38
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133 339
Market $0 0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944 951
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $32,919 56,536 56,634 56,747 56,858 60,803 60,956
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876 1,925
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111 111
Subcontractor $115 203 208 214 219 225 231
Lateral Pipeline O&M $10 18 19 19 20 20 21
Back Up Power $158 279 286 294 302 309 317
Balance of Plant Parts $231 387 396 407 413 421 424
Equipment and Materials $173 293 302 304 311 315 320
Water Treatment Chemicals $98 164 168 171 175 177 179
SCR Chemicals $77 126 131 134 138 136 138
Supply/Waste Water Pumping Costs $102 171 176 179 182 184 186
Electrical Transmission O&M $6 10 10 11 11 11 12
Insurance $346 609 625 641 658 675 692
Administrative & General $462 812 833 855 877 900 923
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331 338
Trustee & Rating Agency Fees $54 93 93 93 93 93 93
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $11,534 9,800 11,832 11,958 12,089 12,209 12,335
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $21,385 46,736 44,802 44,789 44,769 48,594 48,621
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700 108,300
Principal $0 8,250 6,900 7,350 7,800 11,400 12,450
Interest $6,269 10,598 10,031 9,529 8,994 8,371 7,536
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75 64
------- ------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208 34,411
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0 371
ANNUAL DEBT SERVICE COVERAGE (26) 1.45 1.43 1.43 1.43 1.43 1.42 1.42
AVERAGE DEBT COVERAGE (27) 1.63
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117 (371)
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285 16,914
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0 3,047
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 8,565 13,561 15,785
<CAPTION>
Year Ending December 31, 2007 2008
- ------------------------ ---- ----
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14
Energy Rate ($/MWh)(13) 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51
Energy Rate ($/MWh)(15) 1.31 1.34
Market Electricity Rates (16) 42.82 43.92
Natural Gas Price ($/MMBtu)(17) 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988
Energy 3,469 3,565
Tracking Account Payment 625 641
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152
Energy 1,836 1,874
Tracking Account Payment 39 40
Transmission (18) 0 0
Market 0 0
Interest Income (19) 930 918
------ ------
Total Operating Revenues 60,039 60,178
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0
Labor 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,975
Corps of Engineers 111 111
Subcontractor 237 243
Lateral Pipeline O&M 21 22
Back Up Power 325 333
Balance of Plant Parts 434 441
Equipment and Materials 327 334
Water Treatment Chemicals 183 187
SCR Chemicals 142 145
Supply/Waste Water Pumping Costs 189 193
Electrical Transmission O&M 12 12
Insurance 710 729
Administrative & General 947 972
Property Taxes (22) 1,900 1,900
Panola Partnership / Inducement A Payments 345 351
Trustee & Rating Agency Fees 93 93
------ ------
Total Operating Expenses 12,476 13,067
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 47,563 47,111
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 95,850 83,250
Principal 12,600 13,050
Interest 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000
Principal 0 0
Interest 14,362 14,362
Letter-of-Credit Fees 64 64
------ ------
Total Debt Service 33,667 33,206
TRANSFERS FROM DSRA (25) 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.42 1.43
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (226) (242)
Debt Service Reserve Account Balance (28) 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,975
Major Overhaul Expenses (29) 3,126 0
Major Maintenance Reserve Balance (30) 18,052 24,020
</TABLE>
B-40 & B-41
<PAGE>
Exhibit B-1
Batesville Project
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014 2015
- ------------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10% 56.02%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000 2,637,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000 1,318,700
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,790 28,434 27,898
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69 51.69
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 1.76 1.82
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57 1.61
Market Electricity Rates (16) $45.31 46.74 48.69 50.71 52.36 54.07 56.68
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749 3.865
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005 4,061
Tracking Account Payment $655 670 685 700 712 725 734
Transmission (18) $0 0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,906 1,940 1,973 2,006 2,033 2,060 2,074
Tracking Account Payment $41 42 43 44 45 45 46
Transmission (18) $0 0 0 0 0 0 0
Market $0 0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651 650
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $60,294 60,416 60,549 60,643 55,414 51,694 51,772
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0 0
Labor $2,079 2,133 2,189 2,246 2,304 2,364 2,425
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000 5,375
Corps of Engineers $111 111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283 291
Lateral Pipeline O&M $22 23 24 24 25 26 26
Back Up Power $343 351 361 370 379 389 399
Balance of Plant Parts $450 459 463 471 478 484 487
Equipment and Materials $339 345 350 355 359 367 368
Water Treatment Chemicals $190 193 196 200 202 205 207
SCR Chemicals $148 151 154 157 159 161 162
Supply/Waste Water Pumping Costs $195 202 204 207 208 214 214
Electrical Transmission O&M $12 13 13 13 14 14 15
Insurance $748 767 787 808 829 850 872
Administrative & General $997 1,023 1,050 1,077 1,105 1,134 1,163
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489 4,358
Panola Partnership / Inducement A Payments $359 366 373 380 388 396 404
Trustee & Rating Agency Fees $93 93 93 93 93 93 93
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,583 14,135 14,710 17,863 18,458 16,580 16,970
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $46,711 46,281 45,839 42,780 36,956 35,114 34,802
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0 0
Principal $13,500 14,100 15,300 15,300 12,000 0 0
Interest $4,787 3,809 2,778 1,682 645 0 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000 166,672
Principal $0 0 0 0 0 9,328 10,032
Interest $14,362 14,362 14,362 14,362 14,362 14,171 13,396
Letter-of-Credit Fees $64 64 64 64 64 64 64
------- ------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563 23,492
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29 409
ANNUAL DEBT SERVICE COVERAGE (26) 1.43 1.43 1.43 1.43 1.43 1.49 1.50
AVERAGE DEBT COVERAGE (27) 1.63
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29) (409)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816 11,407
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000 5,375
Major Overhaul Expenses (29) $19,843 10,269 0 6,447 21,249 0 5,091
Major Maintenance Reserve Balance (30) $10,846 6,923 13,484 14,423 1,109 6,170 6,793
<CAPTION>
Year Ending December 31, 2016 2017
- ------------------------ ---- ----
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 27,362 26,974
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69
Energy Rate ($/MWh)(13) 1.88 1.93
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51
Energy Rate ($/MWh)(15) 1.65 1.69
Market Electricity Rates (16) 59.38 61.45
Natural Gas Price ($/MMBtu)(17) 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055
Energy 4,113 4,157
Tracking Account Payment 742 754
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152
Energy 2,087 2,111
Tracking Account Payment 46 47
Transmission (18) 0 0
Market 0 0
Interest Income (19) 627 619
------ ------
Total Operating Revenues 51,822 51,895
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0
Labor 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,778 6,211
Corps of Engineers 111 111
Subcontractor 298 306
Lateral Pipeline O&M 27 28
Back Up Power 409 421
Balance of Plant Parts 493 497
Equipment and Materials 369 375
Water Treatment Chemicals 208 210
SCR Chemicals 163 164
Supply/Waste Water Pumping Costs 217 218
Electrical Transmission O&M 15 15
Insurance 895 918
Administrative & General 1,193 1,224
Property Taxes (22) 4,239 4,180
Panola Partnership / Inducement A Payments 412 420
Trustee & Rating Agency Fees 93 93
------ ------
Total Operating Expenses 17,408 17,944
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 34,414 33,951
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 156,640 146,608
Principal 10,032 10,560
Interest 12,577 11,748
Letter-of-Credit Fees 64 64
------ ------
Total Debt Service 22,673 22,372
TRANSFERS FROM DSRA (25) 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.52 1.54
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (145) (607)
Debt Service Reserve Account Balance (28) 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,778 6,211
Major Overhaul Expenses (29) 0 4,040
Major Maintenance Reserve Balance (30) 12,945 15,828
</TABLE>
B-42 & B-43
<PAGE>
Exhibit B-1
Batesville Project
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023 2024
- ------------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 52.04% 50.26% 49.41% 48.50%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,450,000 2,366,000 2,326,000 2,283,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,225,000 1,183,000 1,163,000 1,141,700
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,586 26,445 26,304 25,916 25,028 24,604 24,153
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $1.98 2.04 2.10 2.17 2.23 2.31 2.38
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $1.74 1.78 1.83 0.00 0.00 0.00 0.00
Market Electricity Rates (16) $63.59 65.17 66.79 70.04 71.91 73.50 76.13
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934 5.087
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,508 4,472 4,536 4,589
Tracking Account Payment $766 786 806 819 815 826 836
Transmission (18) $0 0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0 0
Energy $2,134 2,178 2,223 0 0 0 0
Tracking Account Payment $48 49 50 0 0 0 0
Transmission (18) $0 0 0 0 0 0 0
Market $0 0 0 85,799 85,070 85,481 86,918
Interest Income (19) $586 616 463 746 715 677 780
------- ------ ------ ------- ------- ------- -------
Total Operating Revenues $51,963 52,161 52,176 119,927 119,127 119,575 121,179
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 40,098 39,924 40,465 40,956
Labor $2,619 2,688 2,757 2,829 2,903 2,978 3,056
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586 525
Corps of Engineers $111 111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357 366
Lateral Pipeline O&M $28 29 30 31 31 32 33
Back Up Power $432 442 454 465 478 490 503
Balance of Plant Parts $501 514 522 529 525 530 534
Equipment and Materials $377 386 395 397 394 398 401
Water Treatment Chemicals $213 217 221 224 222 224 225
SCR Chemicals $166 169 172 173 174 174 175
Supply/Waste Water Pumping Costs $222 225 231 232 231 234 233
Electrical Transmission O&M $16 16 17 17 17 18 18
Insurance $942 967 992 1,018 1,044 1,071 1,099
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428 1,465
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161 3,921
Panola Partnership / Inducement A Payments $428 437 446 455 464 473 483
Trustee & Rating Agency Fees $93 93 93 93 93 93 93
------- ------ ------ ------- ------- ------- -------
Total Operating Expenses $18,460 19,048 19,935 60,907 61,599 62,823 54,197
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $33,503 33,113 32,241 59,020 57,528 56,752 66,982
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0 0
Principal $0 0 0 0 0 0 0
Interest $0 0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816 49,808
Principal $10,208 12,144 7,568 18,480 18,832 19,008 24,288
Interest $10,893 10,021 9,123 8,283 6,768 5,228 3,569
Letter-of-Credit Fees $64 64 64 64 64 64 64
------- ------ ------ ------- ------- ------- -------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300 27,921
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.58 1.61 1.92 2.22 2.27 2.34 2.40
AVERAGE DEBT COVERAGE (27) 1.63
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864 12,385
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176 26,561
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586 525
Major Overhaul Expenses (29) $21,486 0 10,061 0 14,894 0 17,861
Major Maintenance Reserve Balance (30) $1,890 9,172 7,332 16,030 10,935 21,122 4,948
<CAPTION>
Year Ending December 31, 2025(1)
- ------------------------ -------
<S> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100
Availability Factor (%)(3) 92.00%
Capacity Factor (4) 47.19%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800
Contract Availability (%)(6) 97.20%
Energy Sales (MWh) 925,600
Contract Heat Rate (Btu/kWh)(7) 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700
Standard Capacity (kW)(5) 236,500
Supplemental Capacity (kW)(5) 30,500
Surplus Supplemental Capacity (kW)(8) 4,400
Contract Availability (%)(6) 97.20%
Energy Sales (MWh) 0
Contract Heat Rate (Btu/kWh)(9) 7,061
Market Energy Sales 740,400
Heat Rate (Btu/kWh)(10) 7,052
Fuel Consumption (BBtu) 11,749
COMMODITY PRICES
General Inflation (%)(11) 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 43.07
Energy Rate ($/MWh)(13) 2.45
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00
Energy Rate ($/MWh)(15) 0.00
Market Electricity Rates (16) 78.65
Natural Gas Price ($/MMBtu)(17) 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 11,688
Energy 1,916
Tracking Account Payment 350
Transmission (18) 0
Aquila/UtiliCorp
Capacity 0
Energy 0
Tracking Account Payment 0
Transmission (18) 0
Market 58,232
Interest Income (19) 730
------
Total Operating Revenues 72,916
OPERATING EXPENSES ($000)(20)
Fuel Expense 27,384
Labor 1,567
Deposits to Major Maintenance Reserve (21) 282
Corps of Engineers 55
Subcontractor 188
Lateral Pipeline O&M 17
Back Up Power 359
Balance of Plant Parts 267
Equipment and Materials 200
Water Treatment Chemicals 112
SCR Chemicals 88
Supply/Waste Water Pumping Costs 117
Electrical Transmission O&M 9
Insurance 564
Administrative & General 752
Property Taxes (22) 1,795
Panola Partnership / Inducement A Payments 246
Trustee & Rating Agency Fees 46
------
Total Operating Expenses 34,048
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 38,868
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0
Principal 0
Interest 0
Series B Bonds
Balance Outstanding 25,520
Principal 25,520
Interest 1,041
Letter-of-Credit Fees 32
------
Total Debt Service 26,593
TRANSFERS FROM DSRA (25) 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.46
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (26,561)
Debt Service Reserve Account Balance (28) 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 282
Major Overhaul Expenses (29) 0
Major Maintenance Reserve Balance (30) 5,366
</TABLE>
B-44 & B-45
<PAGE>
Footnotes to Exhibit B-1
1. Represents six months of operation for 1999 based on a Commercial
Operation Date of June 1, 2000, and six months of operation for 2025 based
on the months during which deposits to the Trustee will be required for
the final amortization of the Bonds on July 15, 2025.
2. Plant output for purposes of determining the energy output based on three
(3) units with a total net capacity of 268,700 kW per unit, based on
guaranteed gross capacity adjusted for allowed measurement margin,
auxiliary loads, degradation and adjustments, and normal operating
conditions.
3. Annual average availability estimate includes allowances for scheduled
maintenance, major overhauls and forced outages.
4. The capacity factor is based on the typical dispatch projected by C.C.
Pace adjusted to reflect R. W. Beck availability assumptions.
5. Pursuant to the Aquila/UtiliCorp and Virginia Power Purchase Agreements,
capacity ratings are based on test conditions and do not include
adjustments for normal operating conditions. Under the Aquila/UtiliCorp
Power Purchase Agreement, Supplemental Capacity is limited to the
additional capacity up to a total capacity of 267,000 kW.
6. Based on availability including unscheduled forced outage hours, but
excluding scheduled maintenance.
7. Estimated based on the terms of the Virginia Power Purchase Agreement and
the dispatch projected by C.C. Pace.
8. Pursuant to the Aquila/UtiliCorp Power Purchase Agreement, Surplus
Supplemental Capacity is the amount by which the sum of standard and
supplemental capacity exceed 267,000 kW adjusted to ambient conditions of
95oF and 60 percent relative humidity.
9. Estimated based on the terms of the Aquila/UtiliCorp Power Purchase
Agreement and the dispatch projected by C.C. Pace.
10. Net heat rate based on gross guaranteed heat rate adjusted for allowed
test margin, auxiliary energy requirements, degradation and adjustments,
and seasonality and part-load operating conditions. The adjustment for
seasonality and part-load operating conditions was based on projected
dispatch provided by C.C. Pace.
11. General inflation and the GDP-IPD assumed to increase at a rate of 2.6
percent per year.
12. The capacity rates pursuant to the Virginia Power Purchase Agreement are
equal to the sum of the Summer Condition Standard Capacity charge and the
Summer Condition Supplemental Capacity charge times the Availability
Adjustment Factor. The Summer Condition Standard Capacity charge is equal
to $5.00 per kW-month for the first 60 months following commercial
operation, and $6.00 next 8 years and $4.50/kW-month for the remainder of
the term, if extended. The Summer Condition Supplemental Capacity charge
is equal to $3.25 per kW-month for the first five years, $3.50 per
kW-month for the next eight years, and $3.00 per kW-month for the
remainder of the term, if extended. The Availability Adjustment Factor is
equal to 1.0 unless the contract availability is less than 97.2 percent.
13. The energy rate pursuant to the Virginia Power Purchase Agreement is equal
to the sum of the energy payment, fuel expense, and the Tracking Account
payment divided by energy sales to Virginia Power. The energy payment is
equal to a rate of $1.0 per MWh escalated at the GDP-IPD index from June
1, 2000. The fuel expense is assumed to be the actual fuel expense based
on an assumed average annual net heat rate of 7,050 Btu/kWh. The Tracking
Account payment reflects the difference in fuel cost between actual fuel
expense and the fuel expense based on the guaranteed heat rate.
14. The capacity rates pursuant to the Aquila/UtiliCorp Purchase Power
Agreement are equal to the sum of the reservation charge and the Surplus
Supplemental Capacity charge times the Availability Adjustment Factor. The
reservation charge, which is applicable to the first 267,000 kW of
capacity is equal to $4.90 per kW-month for the first 60 months following
commercial operation, $5.00 per kW-month for the reminder of the initial
term of 15 years, 7 months and the extended term of five years. The
Surplus Supplemental Capacity charge, which is applicable to capacity
above 267,000 kW, is equal to $2.50 per kW-month for the 15-year, 7-month
and the extended term of five years. The availability adjustment factor is
equal to 1.0 unless the contract availability is less than 97 percent.
15. The energy rate pursuant to the Aquila/UtiliCorp Power Purchase Agreement
is presented as the sum of the energy expense, fuel expense, and the
Tracking Account payment divided by energy sales to Aquila/UtiliCorp. The
energy payment is equal to the product of energy sales and a rate of $1.0
per MWh escalated at the GDP-IPD index from January 1, 1997. The fuel
expense is assumed to be the actual fuel expense based on an assumed
average annual net heat rate of 7,050 Btu/kWh. The Tracking Account
payment reflects the difference in fuel cost between actual fuel expense
and the fuel expense based on the guaranteed heat rate.
16. Market electricity rates as estimated by C.C. Pace adjusted to reflect the
assumed general escalation rate of 2.6 percent per year.
17. Natural gas prices have been estimated by C.C. Pace and are based on the
price of gas delivered to Mississippi of $2.30/MMBtu in 1998 dollars,
escalated at 0.5 percent above general inflation.
B-46
<PAGE>
Footnotes to Exhibit B-1
(Continued)
18. Transmission revenues are based on the Partnership receiving a credit
against transmission service charges in an amount equal to system upgrades
made by Partnership pursuant to the Interconnection and Operating
Agreements between the Partnership and Entergy and TVA, respectively.
These agreements state that Entergy and TVA shall credit against the
Partnership's use an amount equal to the equivalent point-to-point
transmission service rate for such services until such time as the cost of
the system upgrades has been fully offset. The Power Purchase Agreements
state that to the extent the purchaser's receive such credit under
transmission service agreements with Entergy and TVA, the purchaser will
pay the Partnership an amount equal to such credit. Based on C. C. Pace,
the total amount of the credit is assumed to be approximately $3,400,000
per year. The total amount will not exceed the reimbursable cost of
transmission system upgrades which have been estimated by the Partnership
to be $20,000,000.
19. Based on a reinvestment rate on the Debt Service Reserve Account of 5.5
percent, as estimated by the Initial Purchasers. The Debt Service Reserve
Account requirements are equal to the next semiannual debt service
payment.
20. Non-fuel operating expenses estimated by the Partnership and escalated at
the change in inflation, with the exception of property taxes, the Panola
Partnership/Inducement fee, and the Corps of Engineer's fee. Also as
estimated by the Partnership, Panola Partnership inducement fee was
assumed to increase at 2.0 percent per year, and the Corps of Engineers'
fee for the use of Lake Enid was assumed to remain flat.
21. Payments into Major Maintenance Reserve Account are based on a projected
schedule of deposits provided by the Partnership.
22. The Partnership's local counsel has determined that the first property tax
payment will be due in 2002.
23. Pursuant to the Indenture, Cash Available for Debt Service includes the
deposits into the Major Maintenance Reserve Account, although these
deposits will be made after the payment of Debt Service.
24. Based on a principal amount of the Series A Bonds of $150,000,000 at an
interest rate, as reported by the Initial Purchasers, of 7.164 percent and
a principal amount of the Series B Bonds of $176,000,000 at an interest
rate, as reported by the Initial Purchasers, of 8.16 percent. Monthly
deposits to the Trustee are assumed to be made on the first of each month
prior to the due dates. Interest is to be funded from the proceeds of the
Bonds through the June 1, 2000 deposit. Pursuant to the Indenture,
letter-of-credit fees are included in the definition of Debt Service.
25. Represents any required transfers from the Debt Service Reserve Account to
meet debt service requirements. Amounts in excess of the Debt Service
Reserve Account requirement are to be transferred to the Revenue Account.
26. As defined in the Indenture.
27. Weighted average debt service coverage calculated as total net revenues
over the term of the Bonds divided by total Debt Service over the same
period.
28. Based on an initial Debt Service Reserve Account deposit of $12,551,000,
which is to be funded from the proceeds of the Bonds. The Debt Service
Reserve Account requirement is equal to the next semi-annual debt service
payment.
29. Major turbine overhaul expenses as estimated by the Partnership, adjusted
to reflect a general inflation rate of 2.6 percent per year.
30. Balance includes interest income based on a reinvestment rate of 5.5
percent per year, as estimated by the Initial Purchasers.
B-47
<PAGE>
Exhibit B-2
Batesville Project
Projected Operating Results
Sensitivity A - Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00% 87.00% 87.00% 87.00% 87.00%
Capacity Factor (4) 63.61% 60.84% 60.84% 60.04% 59.24% 58.89%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 1,746,700 2,864,000 2,864,000 2,826,300 2,788,700 2,772,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 873,300 1,432,000 1,432,000 1,413,200 1,394,300 1,386,200
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 18,476 30,295 30,295 29,897 29,499 29,326
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $55.15 54.69 54.35 54.35 54.35 60.35
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $55.45 55.45 55.45 55.45 55.45 56.57
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $34.91 35.77 36.65 38.17 39.75 40.89
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $17,463 29,684 29,502 29,502 29,502 32,759
Energy $1,747 2,921 3,007 3,052 3,095 3,188
Tracking Account Payment $307 520 536 545 555 568
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $8,778 15,049 15,049 15,049 15,049 15,353
Energy $934 1,572 1,613 1,633 1,653 1,686
Tracking Account Payment $19 32 33 34 35 36
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
--------- --------- --------- --------- --------- ---------
Total Operating Revenues $31,635 54,095 54,005 54,079 54,150 57,934
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $220 369 378 386 389 399
Equipment and Materials $165 279 288 288 293 299
Water Treatment Chemicals $93 157 161 163 165 168
SCR Chemicals $73 120 125 127 130 129
Supply/Waste Water Pumping Costs $97 163 168 170 172 175
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $11,501 9,747 11,779 11,897 12,019 12,146
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $20,134 44,348 42,226 42,182 42,131 45,788
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
--------- --------- --------- --------- --------- ---------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.37 1.36 1.35 1.35 1.35 1.34
AVERAGE DEBT COVERAGE (27) 1.52
MINIMUM SENIOR DEBT COVERAGE 1.33
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 8,565 13,561
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ---- ---- ----
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00% 87.00%
Capacity Factor (4) 58.54% 57.89% 57.24%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20% 92.20%
Energy Sales (MWh) 2,756,000 2,725,300 2,694,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20% 92.20%
Energy Sales (MWh) 1,378,000 1,362,700 1,347,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,153 28,829 28,504
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 64.64 64.64 64.64
Energy Rate ($/MWh)(13) 1.39 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 56.57 56.57 56.57
Energy Rate ($/MWh)(15) 1.27 1.31 1.34
Market Electricity Rates (16) 42.06 42.89 43.73
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 35,085 35,085 35,085
Energy 3,252 3,298 3,368
Tracking Account Payment 583 594 606
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 15,353 15,353 15,353
Energy 1,720 1,745 1,770
Tracking Account Payment 36 37 38
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
--------- --------- ---------
Total Operating Revenues 57,997 57,042 57,138
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 405 413 416
Equipment and Materials 306 311 315
Water Treatment Chemicals 171 174 176
SCR Chemicals 132 135 137
Supply/Waste Water Pumping Costs 178 180 182
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
--------- --------- ---------
Total Operating Expenses 12,280 12,414 12,993
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 45,717 44,628 44,145
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
--------- --------- ---------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.34 1.33 1.34
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 0 3,207
Major Maintenance Reserve Balance (30) 15,785 21,178 24,111
</TABLE>
B-48 & B-49
<PAGE>
Exhibit B-2
Batesville Project
Projected Operating Results
Sensitivity A - Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00% 87.00% 87.00% 87.00% 87.00%
Capacity Factor (4) 57.16% 57.07% 56.31% 55.56% 55.03% 54.51%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 2,690,700 2,686,700 2,651,000 2,615,300 2,590,700 2,566,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 1,345,300 1,343,300 1,325,500 1,307,700 1,295,300 1,283,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 28,462 28,420 28,042 27,665 27,404 27,143
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $64.64 64.64 64.64 64.64 55.53 49.03
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 1.76
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $56.57 56.57 56.57 56.57 56.57 56.57
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $45.28 46.89 48.85 50.88 52.38 53.92
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $35,085 35,085 35,085 35,085 30,142 26,612
Energy $3,471 3,573 3,632 3,688 3,757 3,823
Tracking Account Payment $623 642 653 664 678 693
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $15,353 15,353 15,353 15,353 15,353 15,353
Energy $1,814 1,858 1,881 1,904 1,935 1,966
Tracking Account Payment $39 40 41 42 42 43
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651
--------- --------- --------- --------- --------- ---------
Total Operating Revenues $57,290 57,445 57,545 57,604 52,657 49,141
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $428 439 441 447 455 462
Equipment and Materials $323 330 334 337 342 350
Water Treatment Chemicals $181 185 187 190 193 196
SCR Chemicals $141 145 147 149 152 154
Supply/Waste Water Pumping Costs $186 193 195 196 198 204
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $13,520 14,077 14,647 17,792 18,392 16,515
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $43,770 43,368 42,898 39,812 34,265 32,626
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
--------- --------- --------- --------- --------- ---------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.34 1.34 1.34 1.34 1.33 1.39
AVERAGE DEBT COVERAGE (27) 1.52
MINIMUM SENIOR DEBT COVERAGE 1.33
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $19,843 0 10,536 6,447 0 21,802
Major Maintenance Reserve Balance (30) $10,942 17,293 13,888 14,849 22,808 7,260
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ---- ---- ----
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00% 87.00%
Capacity Factor (4) 53.29% 52.07% 51.41%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20% 92.20%
Energy Sales (MWh) 2,508,700 2,451,300 2,420,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20% 92.20%
Energy Sales (MWh) 1,254,300 1,225,700 1,210,200
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,537 25,930 25,602
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 49.03 49.03 49.03
Energy Rate ($/MWh)(13) 1.82 1.88 1.93
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 56.57 56.57 56.57
Energy Rate ($/MWh)(15) 1.61 1.65 1.69
Market Electricity Rates (16) 56.72 59.63 61.47
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 26,612 26,612 26,612
Energy 3,863 3,898 3,945
Tracking Account Payment 698 703 716
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 15,353 15,353 15,353
Energy 1,973 1,978 2,003
Tracking Account Payment 44 44 45
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 650 627 619
--------- --------- ---------
Total Operating Revenues 49,193 49,215 49,293
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 463 467 472
Equipment and Materials 350 349 356
Water Treatment Chemicals 196 197 200
SCR Chemicals 154 154 156
Supply/Waste Water Pumping Costs 203 206 207
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
--------- --------- ---------
Total Operating Expenses 16,898 17,331 17,871
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 32,295 31,884 31,422
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
--------- --------- ---------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.39 1.41 1.43
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 0 5,224 0
Major Maintenance Reserve Balance (30) 13,034 14,305 21,303
</TABLE>
B-50 & B-51
<PAGE>
Exhibit B-2
Batesville Project
Projected Operating Results
Sensitivity A - Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00% 87.00% 87.00% 87.00% 87.00%
Capacity Factor (4) 50.75% 50.85% 50.95% 48.40% 47.41% 46.39%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 2,389,300 2,394,000 2,398,700 2,278,700 2,232,000 2,184,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20% 92.20% 92.20% 92.20% 92.20%
Energy Sales (MWh) 1,194,700 1,197,000 1,199,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,139,300 1,116,000 1,092,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 25,274 25,324 25,373 24,104 23,610 23,102
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $49.03 49.03 49.03 49.03 49.03 49.03
Energy Rate ($/MWh)(13) $1.98 2.04 2.10 2.17 2.23 2.31
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $56.57 56.57 56.57 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $1.74 1.78 1.83 0.00 0.00 0.00
Market Electricity Rates (16) $63.36 65.23 67.15 70.20 71.23 73.71
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $26,612 26,612 26,612 26,612 26,612 26,612
Energy $4,014 4,142 4,270 4,193 4,218 4,259
Tracking Account Payment $729 753 778 762 769 776
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $15,353 15,353 15,353 0 0 0
Energy $2,029 2,086 2,144 0 0 0
Tracking Account Payment $46 47 49 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 79,979 79,493 80,491
Interest Income (19) $586 616 463 746 715 677
--------- --------- --------- --------- --------- ---------
Total Operating Revenues $49,368 49,608 49,668 112,291 111,807 112,814
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 37,293 37,663 37,995
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $477 492 504 492 496 498
Equipment and Materials $358 370 381 369 372 373
Water Treatment Chemicals $202 208 214 208 209 210
SCR Chemicals $158 162 166 161 164 164
Supply/Waste Water Pumping Costs $211 215 223 215 218 219
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $18,387 18,984 19,882 57,992 59,251 60,257
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $30,981 30,624 29,786 54,299 52,556 52,557
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
--------- --------- --------- --------- --------- ---------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.46 1.50 1.78 2.05 2.07 2.16
AVERAGE DEBT COVERAGE (27) 1.52
MINIMUM SENIOR DEBT COVERAGE 1.33
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $4,145 22,045 0 10,323 0 15,281
Major Maintenance Reserve Balance (30) $25,007 11,515 19,865 18,930 28,888 24,782
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ---- -------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 87.00% 87.00%
Capacity Factor (4) 46.17% 44.92%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 92.20% 92.20%
Energy Sales (MWh) 2,173,300 881,100
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 92.20% 92.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,086,700 704,900
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 22,990 11,184
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 49.03 40.85
Energy Rate ($/MWh)(13) 2.38 2.45
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 76.79 78.79
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 26,612 11,087
Energy 4,368 1,824
Tracking Account Payment 796 333
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 83,448 55,539
Interest Income (19) 780 730
--------- -------
Total Operating Revenues 116,004 69,512
OPERATING EXPENSES ($000)(20)
Fuel Expense 38,983 26,071
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 509 254
Equipment and Materials 381 190
Water Treatment Chemicals 214 107
SCR Chemicals 166 84
Supply/Waste Water Pumping Costs 222 111
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
--------- -------
Total Operating Expenses 52,148 32,697
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 63,856 36,815
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
--------- -------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.29 2.38
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 0 0
Major Maintenance Reserve Balance (30) 26,670 27,685
</TABLE>
B-52 & B-53
<PAGE>
Footnotes to Exhibit B-2
The footnotes to Exhibit B-2 are the same as the footnotes for Exhibit B-1,
except:
3. Assumed to be 5 percentage points less than that assumed in the Base Case
and no liquidated damage payments are due from the Contractor.
6. Assumed to be 5 percentage points less than that assumed in the Base Case
and no liquidated damage payments are due from the Contractor.
21. Assumes no reduction in major maintenance requirements due to decreased
availability.
B-54
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,405 7,405 7,405 7,405 7,405 7,405
Fuel Consumption (BBtu) 20,348 33,321 33,321 33,091 32,862 32,440
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $0.31 0.31 0.32 0.33 0.33 0.35
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $0.23 0.23 0.23 0.24 0.24 0.24
Market Electricity Rates (16) $34.55 35.56 36.59 37.95 39.36 40.54
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment ($1,257) (2,122) (2,188) (2,240) (2,293) (2,334)
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $980 1,647 1,690 1,722 1,754 1,777
Tracking Account Payment ($769) (1,299) (1,339) (1,371) (1,404) (1,429)
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $30,550 52,537 52,511 52,525 52,535 56,404
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $231 387 396 407 413 421
Equipment and Materials $173 293 302 304 311 315
Water Treatment Chemicals $98 164 168 171 175 177
SCR Chemicals $77 126 131 134 138 136
Supply/Waste Water Pumping Costs $102 171 176 179 182 184
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $11,534 9,800 11,832 11,958 12,089 12,209
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $19,016 42,737 40,679 40,567 40,446 44,195
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,405 7,405 7,405
Fuel Consumption (BBtu) 32,017 31,847 31,677
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 0.36 0.36 0.37
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 0.24 0.24 0.24
Market Electricity Rates (16) 41.75 42.82 43.92
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment (2,375) (2,436) (2,498)
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,799 1,836 1,874
Tracking Account Payment (1,454) (1,491) (1,529)
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 56,479 55,448 55,470
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 424 434 441
Equipment and Materials 320 327 334
Water Treatment Chemicals 179 183 187
SCR Chemicals 138 142 145
Supply/Waste Water Pumping Costs 186 189 193
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 12,335 12,476 13,067
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 44,144 42,972 42,403
</TABLE>
B-55
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.29 1.31 1.30 1.30 1.29 1.29
AVERAGE DEBT COVERAGE (27) 1.45
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 8,565 13,561
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.29 1.28 1.28
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 3,126 0
Major Maintenance Reserve Balance (30) 15,785 18,052 24,020
</TABLE>
B-56
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,405 7,405 7,405 7,405 7,405 7,405
Fuel Consumption (BBtu) 31,414 31,151 30,877 30,603 30,229 29,855
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $0.39 0.40 0.41 0.42 0.43 0.44
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $0.24 0.24 0.24 0.24 0.24 0.24
Market Electricity Rates (16) $45.31 46.74 48.69 50.71 52.36 54.07
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005
Tracking Account Payment ($2,554) (2,611) (2,668) (2,726) (2,777) (2,827)
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,906 1,940 1,973 2,006 2,033 2,060
Tracking Account Payment ($1,564) (1,599) (1,634) (1,669) (1,700) (1,731)
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $55,481 55,494 55,519 55,504 50,180 46,364
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $450 459 463 471 478 484
Equipment and Materials $339 345 350 355 359 367
Water Treatment Chemicals $190 193 196 200 202 205
SCR Chemicals $148 151 154 157 159 161
Supply/Waste Water Pumping Costs $195 202 204 207 208 214
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $13,583 14,135 14,710 17,863 18,458 16,580
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $41,898 41,359 40,809 37,641 31,722 29,784
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.02% 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,637,300 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,318,700 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,405 7,405 7,405
Fuel Consumption (BBtu) 29,293 28,730 28,323
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 0.46 0.47 0.48
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 0.24 0.24 0.24
Market Electricity Rates (16) 56.68 59.38 61.45
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 4,061 4,113 4,157
Tracking Account Payment (2,860) (2,892) (2,939)
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,074 2,087 2,111
Tracking Account Payment (1,751) (1,771) (1,800)
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 46,381 46,371 46,354
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 487 493 497
Equipment and Materials 368 369 375
Water Treatment Chemicals 207 208 210
SCR Chemicals 162 163 164
Supply/Waste Water Pumping Costs 214 217 218
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 16,970 17,408 17,944
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 29,411 28,963 28,410
</TABLE>
B-57
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.29 1.28 1.27 1.27 1.24 1.27
AVERAGE DEBT COVERAGE (27) 1.45
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $19,843 10,269 0 6,447 21,249 0
Major Maintenance Reserve Balance (30) $10,846 6,923 13,484 14,423 1,109 6,170
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.27 1.28 1.30
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 5,091 0 4,040
Major Maintenance Reserve Balance (30) 6,793 12,945 15,828
</TABLE>
B-58
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 51.39% 49.45% 48.80%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,419,300 2,328,000 2,297,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,209,700 1,164,000 1,148,700
Heat Rate (Btu/kWh)(10) 7,405 7,405 7,405 7,405 7,405 7,405
Fuel Consumption (BBtu) 27,915 27,767 27,619 26,871 25,857 25,516
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $0.49 0.50 0.52 0.54 0.55 0.57
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $0.24 0.24 0.24 0.00 0.00 0.00
Market Electricity Rates (16) $63.59 65.17 66.79 70.58 72.58 73.97
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,452 4,400 4,480
Tracking Account Payment ($2,987) (3,063) (3,141) (3,151) (3,126) (3,181)
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $2,134 2,178 2,223 0 0 0
Tracking Account Payment ($1,829) (1,876) (1,923) 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 85,381 84,483 84,969
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $46,333 46,387 46,254 115,482 114,527 115,000
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 41,577 41,247 41,966
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $501 514 522 523 517 524
Equipment and Materials $377 386 395 392 388 393
Water Treatment Chemicals $213 217 221 221 218 221
SCR Chemicals $166 169 172 171 171 172
Supply/Waste Water Pumping Costs $222 225 231 229 227 231
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $18,460 19,048 19,935 62,367 62,897 64,305
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $27,873 27,339 26,319 53,115 51,630 50,695
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 47.68% 46.46%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,244,700 911,400
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,122,300 729,100
Heat Rate (Btu/kWh)(10) 7,405 7,405
Fuel Consumption (BBtu) 24,931 12,147
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 0.58 0.60
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 76.89 79.33
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,512 1,887
Tracking Account Payment (3,204) (1,341)
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 86,294 57,840
Interest Income (19) 780 730
------ ------
Total Operating Revenues 116,437 70,803
OPERATING EXPENSES ($000)(20)
Fuel Expense 42,273 28,314
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 525 262
Equipment and Materials 394 197
Water Treatment Chemicals 221 111
SCR Chemicals 172 87
Supply/Waste Water Pumping Costs 229 115
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 55,487 34,966
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 60,950 35,837
</TABLE>
B-59
<PAGE>
Exhibit B-3
Batesville Project
Projected Operating Results
Sensitivity B - Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.32 1.36 1.57 2.00 2.04 2.09
AVERAGE DEBT COVERAGE (27) 1.45
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $21,486 0 10,061 0 14,894 0
Major Maintenance Reserve Balance (30) $1,890 9,172 7,332 16,030 10,935 21,122
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.18 2.35
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 17,861 0
Major Maintenance Reserve Balance (30) 4,948 5,366
</TABLE>
B-60
<PAGE>
Footnotes to Exhibit B-3
The footnotes to Exhibit B-3 are the same as the footnotes for Exhibit B-1,
except:
10. Assumes Facility heat rate is 5 percent higher than that assumed in the
Base Case and no liquidated damage payments are due from the Contractor.
B-61
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $34.55 35.56 36.59 37.95 39.36 40.54
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment $322 544 561 575 588 599
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $980 1,647 1,690 1,722 1,754 1,777
Tracking Account Payment $20 34 35 36 37 37
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $32,919 56,536 56,634 56,747 56,858 60,803
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $1,059 1,862 1,911 1,961 2,012 2,064
Deposits to Major Maintenance Reserve (21) $9,350 4,978 4,978 4,978 4,978 4,978
Corps of Engineers $71 122 122 122 122 122
Subcontractor $127 223 229 235 241 247
Lateral Pipeline O&M $11 20 21 21 22 22
Back Up Power $175 307 315 323 331 340
Balance of Plant Parts $253 428 437 447 453 460
Equipment and Materials $192 320 329 335 342 346
Water Treatment Chemicals $107 180 185 189 192 195
SCR Chemicals $82 140 144 147 151 153
Supply/Waste Water Pumping Costs $113 189 194 197 200 202
Electrical Transmission O&M $6 11 11 12 12 12
Insurance $381 670 687 705 724 742
Administrative & General $508 893 917 940 965 990
Property Taxes (22) $0 0 2,090 2,090 2,090 2,090
Panola Partnership / Inducement A Payments $193 337 343 350 357 364
Trustee & Rating Agency Fees $59 102 102 102 102 102
------ ------ ------ ------ ------ ------
Total Operating Expenses $12,687 10,782 13,015 13,154 13,294 13,429
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $20,232 45,754 43,619 43,593 43,564 47,374
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 30,493 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.39 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.27 1.31 1.34
Market Electricity Rates (16) 41.75 42.82 43.92
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment 609 625 641
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,799 1,836 1,874
Tracking Account Payment 38 39 40
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 60,956 60,039 60,178
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,118 2,173 2,229
Deposits to Major Maintenance Reserve (21) 4,978 4,978 5,473
Corps of Engineers 122 122 122
Subcontractor 254 261 267
Lateral Pipeline O&M 23 23 24
Back Up Power 348 358 368
Balance of Plant Parts 467 477 483
Equipment and Materials 350 357 364
Water Treatment Chemicals 197 201 205
SCR Chemicals 156 155 158
Supply/Waste Water Pumping Costs 203 211 214
Electrical Transmission O&M 13 13 13
Insurance 762 782 802
Administrative & General 1,016 1,042 1,069
Property Taxes (22) 2,090 2,090 2,090
Panola Partnership / Inducement A Payments 372 379 387
Trustee & Rating Agency Fees 102 102 102
------ ------ ------
Total Operating Expenses 13,571 13,724 14,370
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 47,385 46,315 45,808
</TABLE>
B-62
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.38 1.40 1.39 1.39 1.39 1.38
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.36
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $9,350 4,978 4,978 4,978 4,978 4,978
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0
Major Maintenance Reserve Balance (30) $9,350 8,992 14,465 17,418 11,586 17,201
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.39 1.38 1.39
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,978 4,978 5,473
Major Overhaul Expenses (29) 3,047 3,126 0
Major Maintenance Reserve Balance (30) 20,078 23,034 29,774
</TABLE>
B-63
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,790 28,434
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 1.76
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $45.31 46.74 48.69 50.71 52.36 54.07
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005
Tracking Account Payment $655 670 685 700 712 725
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,906 1,940 1,973 2,006 2,033 2,060
Tracking Account Payment $41 42 43 44 45 45
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $60,294 60,416 60,549 60,643 55,414 51,694
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,287 2,346 2,407 2,470 2,534 2,600
Deposits to Major Maintenance Reserve (21) $5,883 6,324 6,798 7,308 7,856 5,500
Corps of Engineers $122 122 122 122 122 122
Subcontractor $274 281 289 296 304 312
Lateral Pipeline O&M $25 25 26 27 27 28
Back Up Power $376 386 396 407 417 429
Balance of Plant Parts $492 501 513 521 527 532
Equipment and Materials $373 379 384 393 396 403
Water Treatment Chemicals $209 213 216 220 223 226
SCR Chemicals $161 164 167 169 176 177
Supply/Waste Water Pumping Costs $216 219 225 227 233 234
Electrical Transmission O&M $14 14 14 15 15 16
Insurance $823 844 866 889 912 935
Administrative & General $1,097 1,125 1,155 1,185 1,215 1,247
Property Taxes (22) $2,090 2,090 2,090 4,882 4,825 4,938
Panola Partnership / Inducement A Payments $394 402 410 419 427 435
Trustee & Rating Agency Fees $102 102 102 102 102 102
------ ------ ------ ------ ------ ------
Total Operating Expenses $14,938 15,537 16,180 19,652 20,311 18,236
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $45,356 44,879 44,369 40,991 35,103 33,458
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.02% 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,637,300 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,318,700 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,898 27,362 26,974
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 1.82 1.88 1.93
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.61 1.65 1.69
Market Electricity Rates (16) 56.68 59.38 61.45
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 4,061 4,113 4,157
Tracking Account Payment 734 742 754
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,074 2,087 2,111
Tracking Account Payment 46 46 47
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 51,772 51,822 51,895
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,668 2,737 2,808
Deposits to Major Maintenance Reserve (21) 5,913 6,356 6,833
Corps of Engineers 122 122 122
Subcontractor 320 328 337
Lateral Pipeline O&M 29 30 30
Back Up Power 439 450 462
Balance of Plant Parts 538 539 547
Equipment and Materials 404 407 413
Water Treatment Chemicals 227 229 231
SCR Chemicals 178 178 180
Supply/Waste Water Pumping Costs 237 237 241
Electrical Transmission O&M 16 16 17
Insurance 960 985 1,010
Administrative & General 1,280 1,313 1,347
Property Taxes (22) 4,794 4,663 4,598
Panola Partnership / Inducement A Payments 444 453 462
Trustee & Rating Agency Fees 102 102 102
------ ------ ------
Total Operating Expenses 18,671 19,145 19,740
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 33,101 32,677 32,155
</TABLE>
B-64
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.39 1.39 1.38 1.38 1.36 1.42
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.36
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,883 6,324 6,798 7,308 7,856 5,500
Major Overhaul Expenses (29) $19,843 10,269 0 6,447 21,249 0
Major Maintenance Reserve Balance (30) $17,452 14,467 22,061 24,135 12,069 18,233
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.43 1.45 1.46
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,913 6,356 6,833
Major Overhaul Expenses (29) 5,091 0 4,040
Major Maintenance Reserve Balance (30) 20,058 27,517 31,823
</TABLE>
B-65
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 52.04% 50.26% 49.41%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,450,000 2,366,000 2,326,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,225,000 1,183,000 1,163,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,586 26,445 26,304 25,916 25,028 24,604
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $1.98 2.04 2.10 2.17 2.23 2.31
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $1.74 1.78 1.83 0.00 0.00 0.00
Market Electricity Rates (16) $63.59 65.17 66.79 70.04 71.91 73.50
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,508 4,472 4,536
Tracking Account Payment $766 786 806 819 815 826
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $2,134 2,178 2,223 0 0 0
Tracking Account Payment $48 49 50 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 85,799 85,070 85,481
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $51,963 52,161 52,176 119,927 119,127 119,575
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 40,098 39,924 40,465
Labor $2,881 2,956 3,033 3,112 3,193 3,276
Deposits to Major Maintenance Reserve (21) $7,345 7,896 8,488 9,125 9,809 10,545
Corps of Engineers $122 122 122 122 122 122
Subcontractor $345 354 364 373 383 393
Lateral Pipeline O&M $31 32 33 34 34 35
Back Up Power $475 487 500 513 526 539
Balance of Plant Parts $554 563 574 581 578 583
Equipment and Materials $415 424 433 437 433 440
Water Treatment Chemicals $234 239 244 246 244 246
SCR Chemicals $181 188 190 191 192 192
Supply/Waste Water Pumping Costs $241 248 254 257 252 255
Electrical Transmission O&M $17 18 18 19 19 20
Insurance $1,036 1,063 1,091 1,119 1,149 1,178
Administrative & General $1,382 1,418 1,455 1,493 1,531 1,571
Property Taxes (22) $4,472 4,362 4,536 4,668 4,764 4,577
Panola Partnership / Inducement A Payments $471 481 490 500 510 520
Trustee & Rating Agency Fees $102 102 102 102 102 102
------ ------ ------ ------ ------ ------
Total Operating Expenses $20,304 20,953 21,927 62,990 63,765 65,059
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $31,659 31,208 30,249 56,937 55,362 54,516
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 48.50% 47.19%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,283,300 925,600
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,141,700 740,400
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 24,153 11,749
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 2.38 2.45
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 76.13 78.65
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,589 1,916
Tracking Account Payment 836 350
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 86,918 58,232
Interest Income (19) 780 730
------ ------
Total Operating Revenues 121,179 72,916
OPERATING EXPENSES ($000)(20)
Fuel Expense 40,956 27,384
Labor 3,361 1,724
Deposits to Major Maintenance Reserve (21) 578 310
Corps of Engineers 122 61
Subcontractor 403 207
Lateral Pipeline O&M 36 19
Back Up Power 554 396
Balance of Plant Parts 586 293
Equipment and Materials 442 220
Water Treatment Chemicals 248 124
SCR Chemicals 192 97
Supply/Waste Water Pumping Costs 257 128
Electrical Transmission O&M 20 10
Insurance 1,209 620
Administrative & General 1,612 827
Property Taxes (22) 4,313 1,975
Panola Partnership / Inducement A Payments 531 271
Trustee & Rating Agency Fees 102 51
------ ------
Total Operating Expenses 55,522 34,717
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 65,657 38,199
</TABLE>
B-66
<PAGE>
Exhibit B-4
Batesville Project
Projected Operating Results
Sensitivity C - Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.50 1.53 1.81 2.14 2.18 2.24
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.36
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $7,345 7,896 8,488 9,125 9,809 10,545
Major Overhaul Expenses (29) $21,486 0 10,061 0 14,894 0
Major Maintenance Reserve Balance (30) $19,432 28,397 28,386 39,072 36,136 48,668
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.35 2.44
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 578 310
Major Overhaul Expenses (29) 17,861 0
Major Maintenance Reserve Balance (30) 34,062 35,309
</TABLE>
B-67
<PAGE>
Footnotes to Exhibit B-4
The footnotes to Exhibit B-4 are the same as the footnotes for Exhibit B-1,
except:
20. Non-fuel related operating and maintenance costs assumed to be 10 percent
higher than that assumed in the Base Case.
21. Assumed to be 10 percent higher than that assumed in the Base Case.
B-68
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00 4.00 4.00 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.21 1.25 1.29 1.33 1.38
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.12 1.17 1.21 1.26 1.31 1.37
Market Electricity Rates (16) $35.50 37.03 38.63 40.61 42.69 44.57
Natural Gas Price ($/MMBtu)(17) $2.512 2.625 2.743 2.866 2.995 3.130
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment $331 567 592 615 638 658
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $1,007 1,715 1,784 1,842 1,903 1,953
Tracking Account Payment $21 35 37 38 40 41
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $476 1,084 1,021 1,020 1,017 1,116
------ ------ ------ ------ ------ ------
Total Operating Revenues $33,028 56,795 56,918 57,067 57,216 61,215
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $976 1,740 1,809 1,882 1,957 2,035
Deposits to Major Maintenance Reserve (21) $4,100 5,475 5,475 5,475 5,475 5,475
Corps of Engineers $64 111 111 111 111 111
Subcontractor $117 209 217 226 235 244
Lateral Pipeline O&M $11 19 20 20 21 22
Back Up Power $163 291 303 315 328 341
Balance of Plant Parts $234 401 414 429 444 456
Equipment and Materials $176 302 311 322 333 342
Water Treatment Chemicals $99 169 175 181 187 192
SCR Chemicals $77 131 135 143 146 149
Supply/Waste Water Pumping Costs $102 176 180 188 195 197
Electrical Transmission O&M $6 10 11 11 12 12
Insurance $351 626 651 677 704 732
Administrative & General $468 834 868 902 939 976
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $7,173 10,893 12,985 13,193 13,405 13,608
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $25,855 45,902 43,933 43,874 43,811 47,607
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 30,493 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.42 1.46 1.51
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.42 1.48 1.54
Market Electricity Rates (16) 46.53 48.38 50.30
Natural Gas Price ($/MMBtu)(17) 3.271 3.418 3.572
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment 679 706 733
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,005 2,074 2,146
Tracking Account Payment 42 44 46
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 1,124 1,099 1,085
------ ------ ------
Total Operating Revenues 61,408 60,532 60,715
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,117 2,201 2,289
Deposits to Major Maintenance Reserve (21) 5,475 5,475 5,738
Corps of Engineers 111 111 111
Subcontractor 254 264 274
Lateral Pipeline O&M 23 24 25
Back Up Power 354 369 382
Balance of Plant Parts 467 482 501
Equipment and Materials 350 361 376
Water Treatment Chemicals 197 204 211
SCR Chemicals 156 159 163
Supply/Waste Water Pumping Costs 203 211 218
Electrical Transmission O&M 13 13 14
Insurance 761 792 823
Administrative & General 1,015 1,056 1,098
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 13,827 14,060 14,567
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 47,581 46,472 46,148
</TABLE>
B-69
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.76 1.41 1.40 1.40 1.40 1.39
AVERAGE DEBT COVERAGE (27) 1.67
MINIMUM SENIOR DEBT COVERAGE 1.35
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $4,100 5,475 5,475 5,475 5,475 5,475
Major Overhaul Expenses (29) $0 6,092 0 3,019 12,765 0
Major Maintenance Reserve Balance (30) $4,100 3,750 9,469 12,540 6,065 11,934
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.39 1.39 1.40
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,475 5,475 5,738
Major Overhaul Expenses (29) 3,395 3,531 0
Major Maintenance Reserve Balance (30) 14,790 17,695 24,583
</TABLE>
B-70
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,790 28,434
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00 4.00 4.00 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $1.56 1.61 1.66 1.72 1.77 1.82
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.60 1.66 1.73 1.80 1.87 1.95
Market Electricity Rates (16) $52.60 55.00 58.07 61.30 64.17 67.17
Natural Gas Price ($/MMBtu)(17) $3.733 3.901 4.076 4.260 4.451 4.652
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005
Tracking Account Payment $760 788 816 845 872 900
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $2,213 2,282 2,353 2,425 2,491 2,559
Tracking Account Payment $48 49 51 53 55 56
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $1,069 1,057 1,063 1,028 885 770
------ ------ ------ ------ ------ ------
Total Operating Revenues $60,878 61,046 61,231 61,375 56,178 52,497
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,381 2,476 2,575 2,678 2,785 2,897
Deposits to Major Maintenance Reserve (21) $7,500 7,900 8,250 8,500 8,750 6,159
Corps of Engineers $111 111 111 111 111 111
Subcontractor $285 297 309 321 334 347
Lateral Pipeline O&M $26 27 28 29 30 31
Back Up Power $398 414 430 448 466 484
Balance of Plant Parts $513 530 546 562 580 593
Equipment and Materials $386 400 413 426 437 448
Water Treatment Chemicals $217 224 231 238 245 251
SCR Chemicals $170 177 179 186 192 198
Supply/Waste Water Pumping Costs $225 231 242 248 253 262
Electrical Transmission O&M $14 15 15 16 17 17
Insurance $856 891 926 963 1,002 1,042
Administrative & General $1,142 1,188 1,235 1,284 1,336 1,389
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $16,576 17,240 17,856 20,921 21,405 19,207
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $44,302 43,806 43,375 40,454 34,773 33,290
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.02% 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,637,300 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,318,700 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,898 27,362 26,974
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 1.89 1.96 2.01
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 2.02 2.10 2.19
Market Electricity Rates (16) 71.36 75.79 79.50
Natural Gas Price ($/MMBtu)(17) 4.861 5.080 5.308
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 4,061 4,113 4,157
Tracking Account Payment 923 946 975
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,611 2,663 2,731
Tracking Account Payment 58 59 61
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 768 741 732
------ ------ ------
Total Operating Revenues 52,628 52,729 52,862
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 3,013 3,133 3,258
Deposits to Major Maintenance Reserve (21) 6,714 7,319 7,978
Corps of Engineers 111 111 111
Subcontractor 361 376 391
Lateral Pipeline O&M 33 34 35
Back Up Power 504 524 545
Balance of Plant Parts 605 617 635
Equipment and Materials 455 466 478
Water Treatment Chemicals 257 262 268
SCR Chemicals 202 206 210
Supply/Waste Water Pumping Costs 265 272 279
Electrical Transmission O&M 18 19 20
Insurance 1,084 1,127 1,172
Administrative & General 1,445 1,503 1,563
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 19,922 20,713 21,636
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 32,706 32,016 31,226
</TABLE>
B-71
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.36 1.35 1.35 1.36 1.35 1.41
AVERAGE DEBT COVERAGE (27) 1.67
MINIMUM SENIOR DEBT COVERAGE 1.35
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $7,500 7,900 8,250 8,500 8,750 6,159
Major Overhaul Expenses (29) $23,033 12,083 0 7,794 26,040 0
Major Maintenance Reserve Balance (30) $10,648 7,157 15,872 17,610 1,465 7,719
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.41 1.42 1.42
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 6,714 7,319 7,978
Major Overhaul Expenses (29) 6,411 0 5,227
Major Maintenance Reserve Balance (30) 8,524 16,397 20,214
</TABLE>
B-72
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 52.04% 50.26% 49.41%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,450,000 2,366,000 2,326,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,225,000 1,183,000 1,163,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,586 26,445 26,304 25,916 25,028 24,604
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00 4.00 4.00 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $2.08 2.15 2.22 2.30 2.37 2.45
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $2.28 2.37 2.46 0.00 0.00 0.00
Market Electricity Rates (16) $83.39 86.63 89.99 95.66 99.56 103.14
Natural Gas Price ($/MMBtu)(17) $5.547 5.797 6.057 6.330 6.615 6.913
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,508 4,472 4,536
Tracking Account Payment $1,004 1,043 1,085 1,117 1,127 1,158
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $2,799 2,896 2,995 0 0 0
Tracking Account Payment $63 65 68 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 117,184 117,779 119,952
Interest Income (19) $693 728 547 882 844 800
------ ------ ------ ------ ------ ------
Total Operating Revenues $52,988 53,264 53,327 151,745 152,276 154,500
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 54,683 55,184 56,693
Labor $3,389 3,524 3,665 3,812 3,964 4,123
Deposits to Major Maintenance Reserve (21) $8,696 9,479 10,333 11,263 12,278 13,383
Corps of Engineers $111 111 111 111 111 111
Subcontractor $406 423 439 457 475 494
Lateral Pipeline O&M $37 38 40 41 43 44
Back Up Power $567 590 613 638 664 690
Balance of Plant Parts $652 671 698 713 717 733
Equipment and Materials $490 506 522 537 539 551
Water Treatment Chemicals $275 285 294 302 303 310
SCR Chemicals $215 221 231 235 238 241
Supply/Waste Water Pumping Costs $287 296 306 312 316 321
Electrical Transmission O&M $20 21 22 23 24 25
Insurance $1,219 1,268 1,318 1,371 1,426 1,483
Administrative & General $1,625 1,690 1,758 1,828 1,901 1,977
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $22,575 23,618 25,013 81,118 83,071 85,906
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $30,413 29,646 28,314 70,627 69,205 68,594
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 48.50% 47.19%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,283,300 925,600
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,141,700 740,400
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 24,153 11,749
COMMODITY PRICES
General Inflation (%)(11) 4.00 4.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 2.53 2.61
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 108.29 113.40
Natural Gas Price ($/MMBtu)(17) 7.224 7.549
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,589 1,916
Tracking Account Payment 1,188 503
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 123,635 83,961
Interest Income (19) 921 863
------ ------
Total Operating Revenues 158,388 98,931
OPERATING EXPENSES ($000)(20)
Fuel Expense 58,159 39,414
Labor 4,288 2,230
Deposits to Major Maintenance Reserve (21) 1,800 405
Corps of Engineers 111 55
Subcontractor 514 267
Lateral Pipeline O&M 46 24
Back Up Power 717 519
Balance of Plant Parts 747 378
Equipment and Materials 562 285
Water Treatment Chemicals 316 160
SCR Chemicals 247 125
Supply/Waste Water Pumping Costs 329 167
Electrical Transmission O&M 26 13
Insurance 1,542 802
Administrative & General 2,057 1,069
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 75,958 48,000
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 82,430 50,931
</TABLE>
B-73
<PAGE>
Exhibit B-5
Batesville Project
Projected Operating Results
Sensitivity D - Increased Inflation (4%)
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.44 1.46 1.69 2.65 2.72 2.82
AVERAGE DEBT COVERAGE (27) 1.67
MINIMUM SENIOR DEBT COVERAGE 1.35
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,696 9,479 10,333 11,263 12,278 13,383
Major Overhaul Expenses (29) $28,176 0 13,556 0 20,619 0
Major Maintenance Reserve Balance (30) $2,048 11,660 9,195 21,056 14,084 28,382
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.95 2.91
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 1,800 405
Major Overhaul Expenses (29) 25,407 0
Major Maintenance Reserve Balance (30) 6,620 7,240
</TABLE>
B-74
<PAGE>
Footnotes to Exhibit B-5
The footnotes to Exhibit B-5 are the same as the footnotes for Exhibit B-1,
except:
11. General inflation and the GDP-IPD are assumed to escalate at a rate of 4.0
percent per year, rather than 2.6 percent per year, as assumed in the Base
Case.
17. The price of natural gas is assumed to escalate a 0.5 percent above
inflation, or 4.5 percent per year in this case.
19. Based on a reinvestment rate of 6.0 percent per year, as estimated by the
Initial Purchasers based on a general inflation rate of 4.0 percent per
year.
21. Deposits as estimated by the Partnership based on a general inflation rate
of 4.0 percent per year.
29. Major turbine overhaul expenses as estimated by the Partnership, adjusted
to reflect a general inflation rate of 4.0 percent per year.
30. Balance includes interest income based on a reinvestment rate of 6.0
percent per year, as estimated by the Initial Purchasers.
B-75
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00 6.00 6.00 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.19 1.22 1.26 1.31 1.35 1.41
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.17 1.24 1.31 1.39 1.47 1.56
Market Electricity Rates (16) $36.88 39.21 41.69 44.67 47.86 50.93
Natural Gas Price ($/MMBtu)(17) $2.609 2.778 2.959 3.151 3.356 3.574
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment $344 600 639 676 715 752
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $1,046 1,816 1,925 2,026 2,133 2,232
Tracking Account Payment $22 38 40 42 45 47
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $622 1,418 1,335 1,333 1,330 1,459
------ ------ ------ ------ ------ ------
Total Operating Revenues $33,227 57,265 57,423 57,629 57,841 61,936
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $995 1,807 1,916 2,031 2,152 2,282
Deposits to Major Maintenance Reserve (21) $4,500 6,650 6,650 6,650 6,650 6,650
Corps of Engineers $64 111 111 111 111 111
Subcontractor $119 217 230 243 258 274
Lateral Pipeline O&M $11 20 21 22 23 25
Back Up Power $170 309 327 347 368 390
Balance of Plant Parts $239 414 441 460 488 508
Equipment and Materials $179 311 329 349 364 381
Water Treatment Chemicals $101 175 186 195 206 215
SCR Chemicals $80 135 144 152 160 166
Supply/Waste Water Pumping Costs $104 180 194 201 213 223
Electrical Transmission O&M $6 11 11 12 13 14
Insurance $358 650 689 730 774 821
Administrative & General $477 867 919 974 1,032 1,094
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $7,632 12,256 14,473 14,788 15,130 15,478
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $25,595 45,009 42,950 42,841 42,711 46,458
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 30,493 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.45 1.50 1.56
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.65 1.75 1.86
Market Electricity Rates (16) 54.19 57.43 60.85
Natural Gas Price ($/MMBtu)(17) 3.807 4.054 4.317
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment 790 837 887
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,335 2,462 2,596
Tracking Account Payment 49 52 55
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 1,469 1,438 1,418
------ ------ ------
Total Operating Revenues 62,202 61,398 61,661
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,418 2,564 2,717
Deposits to Major Maintenance Reserve (21) 6,650 6,650 6,972
Corps of Engineers 111 111 111
Subcontractor 290 307 326
Lateral Pipeline O&M 26 28 29
Back Up Power 414 439 465
Balance of Plant Parts 532 563 590
Equipment and Materials 402 421 445
Water Treatment Chemicals 225 237 250
SCR Chemicals 177 185 197
Supply/Waste Water Pumping Costs 233 245 261
Electrical Transmission O&M 14 15 16
Insurance 870 922 977
Administrative & General 1,160 1,230 1,303
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 15,853 16,255 17,003
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 46,349 45,143 44,658
</TABLE>
B-76
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.74 1.38 1.37 1.37 1.37 1.36
AVERAGE DEBT COVERAGE (27) 1.78
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $4,500 6,650 6,650 6,650 6,650 6,650
Major Overhaul Expenses (29) $0 6,451 0 3,320 14,310 0
Major Maintenance Reserve Balance (30) $4,500 5,082 12,164 16,528 10,273 17,796
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.36 1.35 1.35
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 6,650 6,650 6,972
Major Overhaul Expenses (29) 3,954 4,192 0
Major Maintenance Reserve Balance (30) 22,005 26,333 35,543
</TABLE>
B-77
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,790 28,434
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00 6.00 6.00 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $1.62 1.68 1.75 1.81 1.88 1.94
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.97 2.09 2.22 2.35 2.49 2.64
Market Electricity Rates (16) $64.86 69.12 74.39 80.04 85.39 91.10
Natural Gas Price ($/MMBtu)(17) $4.598 4.897 5.215 5.554 5.915 6.300
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005
Tracking Account Payment $936 989 1,044 1,102 1,159 1,219
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $2,729 2,868 3,014 3,166 3,315 3,471
Tracking Account Payment $59 62 65 69 72 76
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $1,398 1,382 1,390 1,344 1,157 1,007
------ ------ ------ ------ ------ ------
Total Operating Revenues $61,910 62,171 62,461 62,705 57,579 53,985
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,880 3,053 3,236 3,431 3,637 3,855
Deposits to Major Maintenance Reserve (21) $7,721 10,250 10,250 10,750 10,750 8,506
Corps of Engineers $111 111 111 111 111 111
Subcontractor $345 366 388 411 436 462
Lateral Pipeline O&M $31 33 35 37 39 42
Back Up Power $493 523 554 587 622 659
Balance of Plant Parts $624 652 688 723 755 790
Equipment and Materials $467 492 517 541 567 597
Water Treatment Chemicals $263 277 291 305 320 335
SCR Chemicals $204 215 225 240 249 262
Supply/Waste Water Pumping Costs $272 286 300 318 331 347
Electrical Transmission O&M $17 18 19 21 22 23
Insurance $1,036 1,098 1,164 1,234 1,308 1,387
Administrative & General $1,382 1,464 1,552 1,645 1,744 1,849
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $18,198 21,197 21,696 25,265 25,758 24,203
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $43,712 40,974 40,765 37,440 31,821 29,782
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.02% 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,637,300 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,318,700 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,898 27,362 26,974
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 2.02 2.10 2.18
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 2.80 2.97 3.14
Market Electricity Rates (16) 98.65 106.78 114.17
Natural Gas Price ($/MMBtu)(17) 6.709 7.145 7.610
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 4,061 4,113 4,157
Tracking Account Payment 1,274 1,331 1,397
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 3,610 3,752 3,921
Tracking Account Payment 80 83 87
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 1,004 970 957
------ ------ ------
Total Operating Revenues 54,236 54,456 54,726
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 4,086 4,331 4,591
Deposits to Major Maintenance Reserve (21) 9,427 9,750 10,250
Corps of Engineers 111 111 111
Subcontractor 490 519 550
Lateral Pipeline O&M 44 47 50
Back Up Power 699 740 785
Balance of Plant Parts 823 854 895
Equipment and Materials 621 644 673
Water Treatment Chemicals 348 362 378
SCR Chemicals 273 283 295
Supply/Waste Water Pumping Costs 360 376 394
Electrical Transmission O&M 24 26 28
Insurance 1,470 1,558 1,651
Administrative & General 1,960 2,077 2,202
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 25,591 26,422 27,546
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 28,645 28,034 27,180
</TABLE>
B-78
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.34 1.27 1.27 1.26 1.24 1.27
AVERAGE DEBT COVERAGE (27) 1.78
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $7,721 10,250 10,250 10,750 10,750 8,506
Major Overhaul Expenses (29) $28,402 15,186 0 10,176 34,652 0
Major Maintenance Reserve Balance (30) $17,883 14,467 25,947 28,726 7,266 16,390
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.24 1.24 1.24
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 9,427 9,750 10,250
Major Overhaul Expenses (29) 8,862 0 7,507
Major Maintenance Reserve Balance (30) 18,348 29,658 34,922
</TABLE>
B-79
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 52.04% 50.26% 49.41%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,450,000 2,366,000 2,326,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,225,000 1,183,000 1,163,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,586 26,445 26,304 25,916 25,028 24,604
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00 6.00 6.00 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $2.26 2.35 2.44 2.54 2.64 2.75
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $3.33 3.53 3.75 0.00 0.00 0.00
Market Electricity Rates (16) $122.06 129.23 136.83 148.24 157.26 166.05
Natural Gas Price ($/MMBtu)(17) $8.104 8.631 9.192 9.790 10.426 11.104
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,508 4,472 4,536
Tracking Account Payment $1,467 1,554 1,646 1,727 1,776 1,860
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $4,097 4,320 4,554 0 0 0
Tracking Account Payment $92 97 103 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 181,594 186,039 193,116
Interest Income (19) $906 953 716 1,153 1,104 1,046
------ ------ ------ ------ ------ ------
Total Operating Revenues $54,990 55,456 55,652 217,037 221,446 228,612
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 84,570 86,979 91,067
Labor $4,866 5,158 5,468 5,796 6,144 6,512
Deposits to Major Maintenance Reserve (21) $10,250 10,500 14,000 17,309 19,240 21,386
Corps of Engineers $111 111 111 111 111 111
Subcontractor $584 619 656 695 737 781
Lateral Pipeline O&M $53 56 59 63 66 70
Back Up Power $832 882 935 991 1,051 1,113
Balance of Plant Parts $935 986 1,037 1,084 1,111 1,158
Equipment and Materials $701 743 783 816 834 872
Water Treatment Chemicals $395 416 439 459 469 489
SCR Chemicals $309 326 343 356 366 380
Supply/Waste Water Pumping Costs $411 431 455 474 486 506
Electrical Transmission O&M $29 31 33 35 37 39
Insurance $1,751 1,856 1,967 2,085 2,210 2,343
Administrative & General $2,334 2,474 2,623 2,780 2,947 3,123
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $28,147 29,084 33,572 122,416 127,676 134,677
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $26,843 26,372 22,080 94,621 93,770 93,935
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 48.50% 47.19%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,283,300 925,600
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,141,700 740,400
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 24,153 11,749
COMMODITY PRICES
General Inflation (%)(11) 6.00 6.00
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 2.86 2.98
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 177.70 189.66
Natural Gas Price ($/MMBtu)(17) 11.825 12.594
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,589 1,916
Tracking Account Payment 1,944 839
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 202,880 140,424
Interest Income (19) 1,205 1,129
------ ------
Total Operating Revenues 238,673 155,996
OPERATING EXPENSES ($000)(20)
Fuel Expense 95,209 65,758
Labor 6,903 3,659
Deposits to Major Maintenance Reserve (21) 6,750 3,375
Corps of Engineers 111 55
Subcontractor 828 439
Lateral Pipeline O&M 74 39
Back Up Power 1,180 870
Balance of Plant Parts 1,202 621
Equipment and Materials 908 466
Water Treatment Chemicals 509 262
SCR Chemicals 397 205
Supply/Waste Water Pumping Costs 527 272
Electrical Transmission O&M 41 22
Insurance 2,483 1,316
Administrative & General 3,311 1,755
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 124,930 81,201
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 113,743 74,795
</TABLE>
B-80
<PAGE>
Exhibit B-6
Batesville Project
Projected Operating Results
Sensitivity E - Increased Inflation (6%)
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.27 1.31 1.32 3.55 3.68 3.87
AVERAGE DEBT COVERAGE (27) 1.78
MINIMUM SENIOR DEBT COVERAGE 1.24
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $10,250 10,500 14,000 17,309 19,240 21,386
Major Overhaul Expenses (29) $41,241 0 20,612 0 32,570 0
Major Maintenance Reserve Balance (30) $6,899 17,985 12,902 31,308 20,639 43,779
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 4.07 3.81
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 6,750 3,375
Major Overhaul Expenses (29) 41,691 0
Major Maintenance Reserve Balance (30) 12,559 16,468
</TABLE>
B-81
<PAGE>
Footnotes to Exhibit B-6
The footnotes to Exhibit B-6 are the same as the footnotes for Exhibit B-1,
except:
11. General inflation and the GDP-IPD are assumed to escalate at a rate of 6.0
percent per year, rather than 2.6 percent per year, as assumed in the Base
Case.
17. The price of natural gas is assumed to escalate a 0.5 percent above
inflation, or 6.5 percent per year in this case.
19. Based on a reinvestment rate of 8.0 percent per year, as estimated by the
Initial Purchasers based on a general inflation rate of 6.0 percent per
year.
21. Deposits as estimated by the Partnership based on a general inflation rate
of 6.0 percent per year.
29. Major turbine overhaul expenses as estimated by the Partnership, adjusted
to reflect a general inflation rate of 6.0 percent per year.
30. Balance includes interest income based on a reinvestment rate of 8.0
percent per year, as estimated by the Initial Purchasers.
B-82
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.28 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $34.55 35.56 36.59 37.95 39.36 40.54
Natural Gas Price ($/MMBtu)(17) $2.469 2.557 2.650 2.745 2.844 2.946
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment $326 552 572 589 606 620
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $980 1,647 1,690 1,722 1,754 1,777
Tracking Account Payment $20 35 36 37 38 39
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $32,922 56,545 56,646 56,762 56,877 60,825
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $231 387 396 407 413 421
Equipment and Materials $173 293 302 304 311 315
Water Treatment Chemicals $98 164 168 171 175 177
SCR Chemicals $77 126 131 134 138 136
Supply/Waste Water Pumping Costs $102 171 176 179 182 184
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $11,534 9,800 11,832 11,958 12,089 12,209
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $21,388 46,745 44,814 44,804 44,788 48,616
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 30,493 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.40 1.44 1.49
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.28 1.31 1.34
Market Electricity Rates (16) 41.75 42.82 43.92
Natural Gas Price ($/MMBtu)(17) 3.052 3.162 3.276
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment 633 653 673
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,799 1,836 1,874
Tracking Account Payment 40 41 42
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 60,981 60,069 60,211
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 424 434 441
Equipment and Materials 320 327 334
Water Treatment Chemicals 179 183 187
SCR Chemicals 138 142 145
Supply/Waste Water Pumping Costs 186 189 193
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 12,335 12,476 13,067
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 48,646 47,593 47,144
</TABLE>
B-83
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.45 1.43 1.43 1.43 1.43 1.42
AVERAGE DEBT COVERAGE (27) 1.60
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 8,565 13,561
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.42 1.42 1.43
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 3,126 0
Major Maintenance Reserve Balance (30) 15,785 18,052 24,020
</TABLE>
B-84
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.81% 57.10%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 2,721,700 2,688,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,360,800 1,344,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,790 28,434
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $1.53 1.58 1.63 1.68 1.73 1.78
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.42 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $45.31 46.74 48.69 50.71 52.36 54.07
Natural Gas Price ($/MMBtu)(17) $3.394 3.516 3.643 3.774 3.910 4.050
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,649 3,730 3,809 3,885 3,946 4,005
Tracking Account Payment $691 710 729 749 766 784
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,906 1,940 1,973 2,006 2,033 2,060
Tracking Account Payment $43 44 46 47 48 49
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $60,332 60,458 60,596 60,695 55,471 51,756
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $450 459 463 471 478 484
Equipment and Materials $339 345 350 355 359 367
Water Treatment Chemicals $190 193 196 200 202 205
SCR Chemicals $148 151 154 157 159 161
Supply/Waste Water Pumping Costs $195 202 204 207 208 214
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $13,583 14,135 14,710 17,863 18,458 16,580
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $46,749 46,323 45,886 42,832 37,013 35,176
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.02% 54.95% 54.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,637,300 2,586,700 2,550,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,318,700 1,293,300 1,275,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,898 27,362 26,974
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 1.84 1.90 1.95
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.61 1.65 1.70
Market Electricity Rates (16) 56.68 59.38 61.45
Natural Gas Price ($/MMBtu)(17) 4.196 4.347 4.504
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 4,061 4,113 4,157
Tracking Account Payment 797 810 827
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 2,074 2,087 2,111
Tracking Account Payment 50 51 52
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 51,839 51,894 51,972
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 487 493 497
Equipment and Materials 368 369 375
Water Treatment Chemicals 207 208 210
SCR Chemicals 162 163 164
Supply/Waste Water Pumping Costs 214 217 218
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 16,970 17,408 17,944
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 34,869 34,486 34,028
</TABLE>
B-85
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.43 1.43 1.43 1.43 1.43 1.49
AVERAGE DEBT COVERAGE (27) 1.60
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $19,843 10,269 0 6,447 21,249 0
Major Maintenance Reserve Balance (30) $10,846 6,923 13,484 14,423 1,109 6,170
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.50 1.53 1.55
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 5,091 0 4,040
Major Maintenance Reserve Balance (30) 6,793 12,945 15,828
</TABLE>
B-86
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.39% 53.11% 52.82% 52.04% 50.26% 49.41%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,513,300 2,500,000 2,486,700 2,450,000 2,366,000 2,326,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,256,700 1,250,000 1,243,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,225,000 1,183,000 1,163,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,586 26,445 26,304 25,916 25,028 24,604
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $2.02 2.08 2.14 2.21 2.28 2.35
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $1.74 1.79 1.83 0.00 0.00 0.00
Market Electricity Rates (16) $63.59 65.17 66.79 70.04 71.91 73.50
Natural Gas Price ($/MMBtu)(17) $4.666 4.834 5.008 5.188 5.375 5.568
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $4,222 4,325 4,426 4,508 4,472 4,536
Tracking Account Payment $844 870 897 915 916 933
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $2,134 2,178 2,223 0 0 0
Tracking Account Payment $53 54 56 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 85,799 85,070 85,481
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $52,046 52,250 52,272 120,023 119,227 119,681
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 44,818 44,839 45,668
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $501 514 522 529 525 530
Equipment and Materials $377 386 395 397 394 398
Water Treatment Chemicals $213 217 221 224 222 224
SCR Chemicals $166 169 172 173 174 174
Supply/Waste Water Pumping Costs $222 225 231 232 231 234
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $18,460 19,048 19,935 65,627 66,514 68,026
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $33,586 33,202 32,337 54,396 52,713 51,655
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 48.50% 47.19%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,283,300 925,600
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,141,700 740,400
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 24,153 11,749
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 2.43 2.50
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 76.13 78.65
Natural Gas Price ($/MMBtu)(17) 5.769 5.976
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,589 1,916
Tracking Account Payment 948 398
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 86,918 58,232
Interest Income (19) 780 730
------ ------
Total Operating Revenues 121,291 72,964
OPERATING EXPENSES ($000)(20)
Fuel Expense 46,445 31,205
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 534 267
Equipment and Materials 401 200
Water Treatment Chemicals 225 112
SCR Chemicals 175 88
Supply/Waste Water Pumping Costs 233 117
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 59,686 37,869
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 61,605 35,095
</TABLE>
B-87
<PAGE>
Exhibit B-7
Batesville Project
Projected Operating Results
Sensitivity F - Increased Gas Escalation
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.59 1.62 1.93 2.05 2.08 2.13
AVERAGE DEBT COVERAGE (27) 1.60
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $21,486 0 10,061 0 14,894 0
Major Maintenance Reserve Balance (30) $1,890 9,172 7,332 16,030 10,935 21,122
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.21 2.32
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 17,861 0
Major Maintenance Reserve Balance (30) 4,948 5,366
</TABLE>
B-88
<PAGE>
Footnotes to Exhibit B-7
The footnotes to Exhibit B-7 are the same as the footnotes for Exhibit B-1,
except:
17. Assumed to be escalated annually at a rate which is 1.0 percent above
inflation, increased from C.C. Pace's Base Case assumption of 0.5 percent
above inflation.
B-89
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 61.15% 57.98% 57.98% 57.36% 56.74% 55.72%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,679,300 2,729,300 2,729,300 2,700,300 2,671,300 2,623,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 839,700 1,364,700 1,364,700 1,350,200 1,335,700 1,311,500
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 17,764 28,871 28,871 28,564 28,257 27,746
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $32.82 34.11 35.44 36.82 38.25 39.51
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,679 2,784 2,866 2,916 2,965 3,016
Tracking Account Payment $296 495 511 521 531 538
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $898 1,498 1,537 1,560 1,584 1,596
Tracking Account Payment $18 31 32 33 33 34
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $32,655 56,059 56,143 56,227 56,308 60,215
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $212 352 360 369 373 378
Equipment and Materials $159 266 274 275 280 283
Water Treatment Chemicals $89 149 153 155 158 159
SCR Chemicals $71 115 119 122 124 122
Supply/Waste Water Pumping Costs $93 156 160 162 164 165
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $11,477 9,697 11,725 11,846 11,969 12,083
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $21,178 46,362 44,418 44,381 44,339 48,132
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 54.69% 54.68% 54.68%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,574,700 2,574,300 2,574,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,287,300 1,287,200 1,287,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,235 27,231 27,228
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.39 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.27 1.31 1.34
Market Electricity Rates (16) 40.80 41.90 43.02
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,038 3,115 3,218
Tracking Account Payment 544 561 578
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,607 1,649 1,691
Tracking Account Payment 34 35 36
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 60,331 59,430 59,581
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 378 390 398
Equipment and Materials 286 293 301
Water Treatment Chemicals 160 164 168
SCR Chemicals 124 127 131
Supply/Waste Water Pumping Costs 166 170 174
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 12,202 12,345 12,939
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 48,129 47,085 46,642
</TABLE>
B-90
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.44 1.42 1.42 1.42 1.42 1.41
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 0 12,074
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 20,333 13,902
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.41 1.41 1.41
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 0 3,207
Major Maintenance Reserve Balance (30) 16,145 21,558 24,512
</TABLE>
B-91
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.76% 52.84% 52.85% 52.86% 51.72% 50.57%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,530,700 2,487,300 2,488,000 2,488,700 2,434,700 2,380,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,265,300 1,243,700 1,244,000 1,244,300 1,217,300 1,190,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,769 26,311 26,318 26,325 25,754 25,183
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 58.54 51.69
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 1.76
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $44.50 46.02 47.99 50.03 51.72 53.47
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 31,777 28,055
Energy $3,265 3,308 3,409 3,509 3,530 3,547
Tracking Account Payment $586 594 613 632 637 643
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,706 1,720 1,765 1,812 1,819 1,824
Tracking Account Payment $37 37 38 39 40 40
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 0 0
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $59,637 59,693 59,864 60,001 54,704 50,912
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $402 407 414 426 427 429
Equipment and Materials $304 306 313 321 321 325
Water Treatment Chemicals $170 171 176 180 181 182
SCR Chemicals $133 134 138 142 142 143
Supply/Waste Water Pumping Costs $175 179 183 187 186 189
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $13,445 13,982 14,567 17,729 18,309 16,417
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $46,192 45,711 45,297 42,272 36,395 34,495
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 49.83% 49.08% 48.66%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,345,700 2,310,700 2,290,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,172,800 1,155,300 1,145,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 24,812 24,442 24,231
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 51.69 51.69
Energy Rate ($/MWh)(13) 1.82 1.88 1.93
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.61 1.65 1.69
Market Electricity Rates (16) 55.93 58.48 60.22
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 28,055 28,055
Energy 3,612 3,674 3,734
Tracking Account Payment 653 663 678
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,844 1,864 1,896
Tracking Account Payment 41 41 42
Transmission (18) 0 0 0
Market 0 0 0
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 51,007 51,076 51,176
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 433 440 447
Equipment and Materials 327 329 337
Water Treatment Chemicals 184 186 189
SCR Chemicals 144 146 148
Supply/Waste Water Pumping Costs 190 194 196
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 16,810 17,253 17,797
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 34,197 33,823 33,379
</TABLE>
B-92
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.42 1.41 1.41 1.42 1.41 1.47
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $0 20,359 10,536 0 6,615 0
Major Maintenance Reserve Balance (30) $31,208 18,314 14,965 22,432 24,193 30,524
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 1.47 1.50 1.52
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 22,369 0 5,360
Major Maintenance Reserve Balance (30) 15,209 21,823 23,874
</TABLE>
B-93
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 48.23% 48.36% 48.49% 46.41% 44.95% 44.47%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,270,700 2,276,700 2,282,700 2,184,700 2,116,000 2,093,300
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,135,300 1,138,300 1,141,300 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 1,092,300 1,058,000 1,046,700
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 24,019 24,083 24,146 23,109 22,383 22,143
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $51.69 51.69 51.69 51.69 51.69 51.69
Energy Rate ($/MWh)(13) $1.98 2.04 2.10 2.17 2.23 2.31
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $1.74 1.78 1.83 0.00 0.00 0.00
Market Electricity Rates (16) $62.02 63.60 65.22 68.79 71.23 72.97
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $28,055 28,055 28,055 28,055 28,055 28,055
Energy $3,815 3,939 4,063 4,020 3,999 4,082
Tracking Account Payment $692 716 740 730 729 744
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 0 0 0
Energy $1,928 1,984 2,041 0 0 0
Tracking Account Payment $43 45 46 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 75,139 75,361 76,378
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $51,271 51,506 51,560 108,690 108,859 109,935
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 35,755 35,705 36,419
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $453 468 479 472 470 477
Equipment and Materials $341 352 363 354 352 358
Water Treatment Chemicals $192 198 203 200 198 201
SCR Chemicals $150 154 158 154 156 157
Supply/Waste Water Pumping Costs $201 205 212 206 206 210
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $18,318 18,914 19,809 56,395 57,216 58,620
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $32,953 32,592 31,751 52,295 51,643 51,315
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 43.56% 43.02%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 2,050,700 843,900
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 1,025,300 675,100
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 21,692 10,712
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 51.69 43.07
Energy Rate ($/MWh)(13) 2.38 2.45
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 74.96 77.03
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 28,055 11,688
Energy 4,122 1,747
Tracking Account Payment 751 319
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 76,856 52,003
Interest Income (19) 780 730
------ ------
Total Operating Revenues 110,564 66,487
OPERATING EXPENSES ($000)(20)
Fuel Expense 36,780 24,969
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 480 243
Equipment and Materials 360 182
Water Treatment Chemicals 202 103
SCR Chemicals 157 81
Supply/Waste Water Pumping Costs 209 106
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 49,861 31,564
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 60,703 34,923
</TABLE>
B-94
<PAGE>
Exhibit B-8
Batesville Project
Projected Operating Results
Sensitivity G - Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.56 1.59 1.90 1.97 2.04 2.11
AVERAGE DEBT COVERAGE (27) 1.57
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $0 4,253 0 23,206 0 10,866
Major Maintenance Reserve Balance (30) $31,864 36,542 46,269 33,903 44,685 45,863
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 2.17 2.31
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 0 16,086
Major Maintenance Reserve Balance (30) 48,910 34,451
</TABLE>
B-95
<PAGE>
Footnotes to Exhibit B-8
The footnotes to Exhibit B-8 are the same as the footnotes for Exhibit B-1,
except:
4. Based on market prices equal to C.C. Pace's Downside Case.
16. Assumed to be equal to C.C. Pace's Downside Case.
B-96
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 61.15% 57.98% 57.98% 57.36% 56.74% 55.72%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,679,300 2,729,300 2,729,300 2,700,300 2,671,300 2,623,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 839,700 1,364,700 1,364,700 1,350,200 1,335,700 1,311,500
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 17,764 28,871 28,871 28,564 28,257 27,746
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $32.82 34.11 35.44 36.82 38.25 39.51
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,679 2,784 2,866 2,916 2,965 3,016
Tracking Account Payment $296 495 511 521 531 538
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $898 1,498 1,537 1,560 1,584 1,596
Tracking Account Payment $18 31 32 33 33 34
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $32,655 56,059 56,143 56,227 56,308 60,215
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $212 352 360 369 373 378
Equipment and Materials $159 266 274 275 280 283
Water Treatment Chemicals $89 149 153 155 158 159
SCR Chemicals $71 115 119 122 124 122
Supply/Waste Water Pumping Costs $93 156 160 162 164 165
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $11,477 9,697 11,725 11,846 11,969 12,083
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $21,178 46,362 44,418 44,381 44,339 48,132
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 54.69% 54.68% 54.68%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,574,700 2,574,300 2,574,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,287,300 1,287,200 1,287,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,235 27,231 27,228
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.39 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.27 1.31 1.34
Market Electricity Rates (16) 40.80 41.90 43.02
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,038 3,115 3,218
Tracking Account Payment 544 561 578
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,607 1,649 1,691
Tracking Account Payment 34 35 36
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 60,331 59,430 59,581
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 378 390 398
Equipment and Materials 286 293 301
Water Treatment Chemicals 160 164 168
SCR Chemicals 124 127 131
Supply/Waste Water Pumping Costs 166 170 174
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 12,202 12,345 12,939
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 48,129 47,085 46,642
</TABLE>
B-97
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.44 1.42 1.42 1.42 1.42 1.41
AVERAGE DEBT COVERAGE (27) 2.39
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 0 12,074
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 20,333 13,902
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.41 1.41 1.41
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 0 3,207
Major Maintenance Reserve Balance (30) 16,145 21,558 24,512
</TABLE>
B-98
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 53.76% 52.84% 52.85% 52.86% 52.01% 51.17%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,530,700 2,487,300 2,488,000 2,488,700 1,020,300 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,265,300 1,243,700 1,244,000 1,244,300 1,224,300 1,204,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 1,428,400 2,408,700
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 26,769 26,311 26,318 26,325 25,902 25,479
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 24.39 0.00
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $42.51 41.94 45.90 50.03 51.65 53.32
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 13,240 0
Energy $3,265 3,308 3,409 3,509 1,479 0
Tracking Account Payment $586 594 613 632 267 0
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,706 1,720 1,765 1,812 1,829 1,846
Tracking Account Payment $37 37 38 39 40 41
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 73,777 128,432
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $59,637 59,693 59,864 60,001 107,534 147,122
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 36,625 63,674
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $402 407 414 426 430 434
Equipment and Materials $304 306 313 321 323 329
Water Treatment Chemicals $170 171 176 180 182 184
SCR Chemicals $133 134 138 142 143 145
Supply/Waste Water Pumping Costs $175 179 183 187 187 191
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $13,445 13,982 14,567 17,729 54,942 80,106
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $46,192 45,711 45,297 42,272 52,592 67,016
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 50.68% 50.20% 49.64%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,193,000 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 2,386,000 3,545,000 3,505,500
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 25,239 24,999 24,721
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 0.00 0.00 0.00
Energy Rate ($/MWh)(13) 0.00 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 0.00 0.00
Energy Rate ($/MWh)(15) 1.61 0.00 0.00
Market Electricity Rates (16) 55.58 57.92 59.68
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 0 0 0
Energy 0 0 0
Tracking Account Payment 0 0 0
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 0 0
Energy 1,876 0 0
Tracking Account Payment 41 0 0
Transmission (18) 0 0 0
Market 132,614 205,326 209,208
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 151,333 205,953 209,827
OPERATING EXPENSES ($000)(20)
Fuel Expense 65,029 99,612 101,555
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 440 450 456
Equipment and Materials 333 337 344
Water Treatment Chemicals 187 190 193
SCR Chemicals 147 149 151
Supply/Waste Water Pumping Costs 193 199 200
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 81,861 116,895 119,379
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 69,472 89,058 90,448
</TABLE>
B-99
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.42 1.41 1.41 1.42 2.01 2.85
AVERAGE DEBT COVERAGE (27) 2.39
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $0 20,359 10,536 0 6,615 0
Major Maintenance Reserve Balance (30) $31,208 18,314 14,965 22,432 24,193 30,524
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 2.97 3.93 4.07
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 22,369 0 5,360
Major Maintenance Reserve Balance (30) 15,209 21,823 23,874
</TABLE>
B-100
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 49.08% 49.18% 49.27% 47.70% 46.42% 45.67%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0 0 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 3,466,000 3,472,500 3,479,000 3,368,000 3,278,000 3,225,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 24,442 24,488 24,534 23,751 23,116 22,743
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $0.00 0.00 0.00 0.00 0.00 0.00
Energy Rate ($/MWh)(13) $0.00 0.00 0.00 0.00 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $0.00 0.00 0.00 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $0.00 0.00 0.00 0.00 0.00 0.00
Market Electricity Rates (16) $61.49 63.10 64.76 67.87 70.06 72.09
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $0 0 0 0 0 0
Energy $0 0 0 0 0 0
Tracking Account Payment $0 0 0 0 0 0
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $0 0 0 0 0 0
Energy $0 0 0 0 0 0
Tracking Account Payment $0 0 0 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $213,124 219,115 225,300 228,586 229,657 232,490
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $213,710 219,731 225,763 229,332 230,372 233,167
OPERATING EXPENSES ($000)(20)
Fuel Expense $103,525 106,935 110,454 110,246 110,626 112,210
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $461 476 487 485 485 490
Equipment and Materials $347 358 369 364 364 368
Water Treatment Chemicals $195 201 207 205 205 207
SCR Chemicals $153 156 160 158 161 161
Supply/Waste Water Pumping Costs $204 208 216 212 213 216
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $121,866 125,871 130,287 130,924 132,183 134,450
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $91,844 93,860 95,476 98,408 98,189 98,717
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 44.76% 44.16%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 3,161,000 1,559,000
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 22,291 10,994
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 0.00 0.00
Energy Rate ($/MWh)(13) 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 74.03 75.89
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 234,009 118,313
Interest Income (19) 780 730
------ ------
Total Operating Revenues 234,789 119,043
OPERATING EXPENSES ($000)(20)
Fuel Expense 113,394 57,659
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 493 249
Equipment and Materials 370 187
Water Treatment Chemicals 208 105
SCR Chemicals 161 83
Supply/Waste Water Pumping Costs 215 109
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 126,514 64,272
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 108,275 54,771
</TABLE>
B-101
<PAGE>
Exhibit B-9
Batesville Project
Projected Operating Results
Sensitivity H - No PPA Renewal & Reduced Market Prices
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 4.34 4.35 5.70 3.69 3.85 4.06
AVERAGE DEBT COVERAGE (27) 2.39
MINIMUM SENIOR DEBT COVERAGE 1.41
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $0 4,253 22,618 0 10,591 0
Major Maintenance Reserve Balance (30) $31,864 36,542 23,651 33,247 33,402 44,825
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 3.88 3.06
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 15,678 0
Major Maintenance Reserve Balance (30) 32,137 33,303
</TABLE>
B-102
<PAGE>
Footnotes to Exhibit B-9
The footnotes to Exhibit B-9 are the same as the footnotes for Exhibit B-1,
except:
12. Virginia Power assumed to renew the Virginia Power Purchase Agreement
through May 31, 2013.
13. Virginia Power assumed to renew the Virginia Power Purchase Agreement
through May 31, 2013.
14. Aquila/UtiliCorp assumed to renew the Aquila/UtiliCorp Power Purchase
Agreement through December 31, 2015.
15. Aquila/UtiliCorp assumed to renew the Aquila/UtiliCorp Power Purchase
Agreement through December 31, 2015.
16. Assumed to be equal to C.C. Pace's Downside Case.
B-103
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 66.71% 63.73% 63.73% 63.29% 62.85% 62.04%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,832,000 3,000,000 3,000,000 2,979,300 2,958,700 2,920,700
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 916,000 1,500,000 1,500,000 1,489,700 1,479,300 1,460,300
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 19,379 31,734 31,734 31,515 31,297 30,895
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $57.30 57.30 57.30 57.30 57.30 63.62
Energy Rate ($/MWh)(13) $1.18 1.20 1.24 1.27 1.31 1.36
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $58.33 58.33 58.33 58.33 58.33 59.51
Energy Rate ($/MWh)(15) $1.09 1.12 1.15 1.18 1.21 1.24
Market Electricity Rates (16) $34.55 35.56 36.59 37.95 39.36 40.54
Natural Gas Price ($/MMBtu)(17) $2.445 2.521 2.599 2.679 2.762 2.848
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $18,143 31,102 31,102 31,102 31,102 34,535
Energy $1,832 3,060 3,150 3,218 3,284 3,359
Tracking Account Payment $322 544 561 575 588 599
Transmission (18) $1,322 2,267 2,267 2,267 2,267 2,267
Aquila/UtiliCorp
Capacity $9,235 15,832 15,832 15,832 15,832 16,152
Energy $980 1,647 1,690 1,722 1,754 1,777
Tracking Account Payment $20 34 35 36 37 37
Transmission (18) $661 1,133 1,133 1,133 1,133 1,133
Market $0 0 0 0 0 0
Interest Income (19) $403 917 864 863 861 944
------ ------ ------ ------ ------ ------
Total Operating Revenues $32,919 56,536 56,634 56,747 56,858 60,803
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 0 0
Labor $963 1,693 1,737 1,782 1,829 1,876
Deposits to Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Corps of Engineers $64 111 111 111 111 111
Subcontractor $115 203 208 214 219 225
Lateral Pipeline O&M $10 18 19 19 20 20
Back Up Power $158 279 286 294 302 309
Balance of Plant Parts $231 387 396 407 413 421
Equipment and Materials $173 293 302 304 311 315
Water Treatment Chemicals $98 164 168 171 175 177
SCR Chemicals $77 126 131 134 138 136
Supply/Waste Water Pumping Costs $102 171 176 179 182 184
Electrical Transmission O&M $6 10 10 11 11 11
Insurance $346 609 625 641 658 675
Administrative & General $462 812 833 855 877 900
Property Taxes (22) $0 0 1,900 1,900 1,900 1,900
Panola Partnership / Inducement A Payments $175 306 312 318 325 331
Trustee & Rating Agency Fees $54 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $11,534 9,800 11,832 11,958 12,089 12,209
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $21,385 46,736 44,802 44,789 44,769 48,594
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 61.23% 60.91% 60.58%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,882,700 2,867,300 2,852,000
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,441,300 1,433,700 1,426,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 0 0 0
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 30,493 30,331 30,168
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 68.14 68.14 68.14
Energy Rate ($/MWh)(13) 1.39 1.43 1.47
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 59.51 59.51
Energy Rate ($/MWh)(15) 1.27 1.31 1.34
Market Electricity Rates (16) 41.75 42.82 43.92
Natural Gas Price ($/MMBtu)(17) 2.936 3.027 3.121
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 36,988 36,988 36,988
Energy 3,402 3,469 3,565
Tracking Account Payment 609 625 641
Transmission (18) 678 0 0
Aquila/UtiliCorp
Capacity 16,152 16,152 16,152
Energy 1,799 1,836 1,874
Tracking Account Payment 38 39 40
Transmission (18) 339 0 0
Market 0 0 0
Interest Income (19) 951 930 918
------ ------ ------
Total Operating Revenues 60,956 60,039 60,178
OPERATING EXPENSES ($000)(20)
Fuel Expense 0 0 0
Labor 1,925 1,975 2,026
Deposits to Major Maintenance Reserve (21) 4,525 4,525 4,975
Corps of Engineers 111 111 111
Subcontractor 231 237 243
Lateral Pipeline O&M 21 21 22
Back Up Power 317 325 333
Balance of Plant Parts 424 434 441
Equipment and Materials 320 327 334
Water Treatment Chemicals 179 183 187
SCR Chemicals 138 142 145
Supply/Waste Water Pumping Costs 186 189 193
Electrical Transmission O&M 12 12 12
Insurance 692 710 729
Administrative & General 923 947 972
Property Taxes (22) 1,900 1,900 1,900
Panola Partnership / Inducement A Payments 338 345 351
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 12,335 12,476 13,067
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 48,621 47,563 47,111
</TABLE>
B-104
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2000(1) 2001 2002 2003 2004 2005
- ------------------------ -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $150,000 150,000 141,750 134,850 127,500 119,700
Principal $0 8,250 6,900 7,350 7,800 11,400
Interest $6,269 10,598 10,031 9,529 8,994 8,371
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 0
Interest $8,378 14,362 14,362 14,362 14,362 14,362
Letter-of-Credit Fees $54 92 92 92 92 75
------ ------ ------ ------ ------ ------
Total Debt Service $14,700 33,302 31,385 31,333 31,248 34,208
TRANSFERS FROM DSRA (25) $0 971 22 38 0 0
ANNUAL DEBT SERVICE COVERAGE (26) 1.45 1.43 1.43 1.43 1.43 1.42
AVERAGE DEBT COVERAGE (27) 2.66
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $4,128 (971) (22) (38) 1,521 117
Debt Service Reserve Account Balance (28) $16,679 15,708 15,686 15,648 17,168 17,285
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $8,500 4,525 4,525 4,525 4,525 4,525
Major Overhaul Expenses (29) $0 5,850 0 2,821 11,768 0
Major Maintenance Reserve Balance (30) $8,500 7,643 12,588 14,984 8,565 13,561
<CAPTION>
Year Ending December 31, 2006 2007 2008
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 108,300 95,850 83,250
Principal 12,450 12,600 13,050
Interest 7,536 6,641 5,730
Series B Bonds
Balance Outstanding 176,000 176,000 176,000
Principal 0 0 0
Interest 14,362 14,362 14,362
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 34,411 33,667 33,206
TRANSFERS FROM DSRA (25) 371 226 242
ANNUAL DEBT SERVICE COVERAGE (26) 1.42 1.42 1.43
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (371) (226) (242)
Debt Service Reserve Account Balance (28) 16,914 16,688 16,445
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 4,525 4,525 4,975
Major Overhaul Expenses (29) 3,047 3,126 0
Major Maintenance Reserve Balance (30) 15,785 18,052 24,020
</TABLE>
B-105
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 60.08% 59.58% 59.05% 58.53% 57.88% 57.23%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 2,828,300 2,804,700 2,780,000 2,755,300 1,135,300 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,414,200 1,402,300 1,390,000 1,377,700 1,362,300 1,347,000
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 0 0 0 0 1,589,400 2,694,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 29,918 29,668 29,407 29,146 28,822 28,497
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $68.14 68.14 68.14 68.14 24.39 0.00
Energy Rate ($/MWh)(13) $1.52 1.57 1.62 1.66 1.71 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $59.51 59.51 59.51 59.51 59.51 59.51
Energy Rate ($/MWh)(15) $1.38 1.41 1.45 1.49 1.53 1.57
Market Electricity Rates (16) $45.31 46.74 48.69 50.71 52.35 54.04
Natural Gas Price ($/MMBtu)(17) $3.218 3.318 3.421 3.527 3.636 3.749
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $36,988 36,988 36,988 36,988 13,240 0
Energy $3,649 3,730 3,809 3,885 1,646 0
Tracking Account Payment $655 670 685 700 297 0
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $16,152 16,152 16,152 16,152 16,152 16,152
Energy $1,906 1,940 1,973 2,006 2,035 2,065
Tracking Account Payment $41 42 43 44 45 45
Transmission (18) $0 0 0 0 0 0
Market $0 0 0 0 83,205 145,584
Interest Income (19) $904 894 900 869 749 651
------ ------ ------ ------ ------ ------
Total Operating Revenues $60,294 60,416 60,549 60,643 117,369 164,497
OPERATING EXPENSES ($000)(20)
Fuel Expense $0 0 0 0 40,753 71,216
Labor $2,079 2,133 2,189 2,246 2,304 2,364
Deposits to Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Corps of Engineers $111 111 111 111 111 111
Subcontractor $249 256 262 269 276 283
Lateral Pipeline O&M $22 23 24 24 25 26
Back Up Power $343 351 361 370 379 389
Balance of Plant Parts $450 459 463 471 478 485
Equipment and Materials $339 345 350 355 360 368
Water Treatment Chemicals $190 193 196 200 203 206
SCR Chemicals $148 151 154 157 159 162
Supply/Waste Water Pumping Costs $195 202 204 207 208 214
Electrical Transmission O&M $12 13 13 13 14 14
Insurance $748 767 787 808 829 850
Administrative & General $997 1,023 1,050 1,077 1,105 1,134
Property Taxes (22) $1,900 1,900 1,900 4,438 4,386 4,489
Panola Partnership / Inducement A Payments $359 366 373 380 388 396
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $13,583 14,135 14,710 17,863 59,213 87,800
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $46,711 46,281 45,839 42,780 58,156 76,697
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00%
Capacity Factor (4) 56.36% 55.48% 54.88%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20%
Energy Sales (MWh) 1,326,500 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061
Market Energy Sales 2,653,000 3,918,000 3,875,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052
Fuel Consumption (BBtu) 28,063 27,630 27,327
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 0.00 0.00 0.00
Energy Rate ($/MWh)(13) 0.00 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 59.51 0.00 0.00
Energy Rate ($/MWh)(15) 1.61 0.00 0.00
Market Electricity Rates (16) 56.48 59.01 61.00
Natural Gas Price ($/MMBtu)(17) 3.865 3.985 4.108
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 0 0 0
Energy 0 0 0
Tracking Account Payment 0 0 0
Transmission (18) 0 0 0
Aquila/UtiliCorp
Capacity 16,152 0 0
Energy 2,086 0 0
Tracking Account Payment 46 0 0
Transmission (18) 0 0 0
Market 149,841 231,201 236,375
Interest Income (19) 650 627 619
------ ------ ------
Total Operating Revenues 168,775 231,828 236,994
OPERATING EXPENSES ($000)(20)
Fuel Expense 72,306 110,093 112,260
Labor 2,425 2,488 2,553
Deposits to Major Maintenance Reserve (21) 5,375 5,778 6,211
Corps of Engineers 111 111 111
Subcontractor 291 298 306
Lateral Pipeline O&M 26 27 28
Back Up Power 399 409 421
Balance of Plant Parts 489 498 504
Equipment and Materials 370 372 380
Water Treatment Chemicals 208 210 213
SCR Chemicals 163 165 167
Supply/Waste Water Pumping Costs 215 219 221
Electrical Transmission O&M 15 15 15
Insurance 872 895 918
Administrative & General 1,163 1,193 1,224
Property Taxes (22) 4,358 4,239 4,180
Panola Partnership / Inducement A Payments 404 412 420
Trustee & Rating Agency Fees 93 93 93
------ ------ ------
Total Operating Expenses 89,283 127,515 130,225
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 79,492 104,313 106,769
</TABLE>
B-106
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2009 2010 2011 2012 2013 2014
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $70,200 56,700 42,600 27,300 12,000 0
Principal $13,500 14,100 15,300 15,300 12,000 0
Interest $4,787 3,809 2,778 1,682 645 0
Series B Bonds
Balance Outstanding $176,000 176,000 176,000 176,000 176,000 176,000
Principal $0 0 0 0 0 9,328
Interest $14,362 14,362 14,362 14,362 14,362 14,171
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $32,713 32,335 32,503 31,407 27,070 23,563
TRANSFERS FROM DSRA (25) $184 0 548 2,198 1,766 29
ANNUAL DEBT SERVICE COVERAGE (26) 1.43 1.43 1.43 1.43 2.21 3.26
AVERAGE DEBT COVERAGE (27) 2.66
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account ($184) 95 (548) (2,198) (1,766) (29)
Debt Service Reserve Account Balance (28) $16,262 16,357 15,809 13,611 11,845 11,816
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $5,348 5,749 6,180 6,644 7,142 5,000
Major Overhaul Expenses (29) $19,843 10,269 0 6,447 21,249 0
Major Maintenance Reserve Balance (30) $10,846 6,923 13,484 14,423 1,109 6,170
<CAPTION>
Year Ending December 31, 2015 2016 2017
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0 0
Principal 0 0 0
Interest 0 0 0
Series B Bonds
Balance Outstanding 166,672 156,640 146,608
Principal 10,032 10,032 10,560
Interest 13,396 12,577 11,748
Letter-of-Credit Fees 64 64 64
------ ------ ------
Total Debt Service 23,492 22,673 22,372
TRANSFERS FROM DSRA (25) 409 145 607
ANNUAL DEBT SERVICE COVERAGE (26) 3.40 4.61 4.80
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account (409) (145) (607)
Debt Service Reserve Account Balance (28) 11,407 11,262 10,655
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 5,375 5,778 6,211
Major Overhaul Expenses (29) 5,091 0 4,040
Major Maintenance Reserve Balance (30) 6,793 12,945 15,828
</TABLE>
B-107
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100 806,100 806,100 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00% 92.00% 92.00% 92.00% 92.00%
Capacity Factor (4) 54.27% 54.13% 54.00% 53.01% 51.51% 50.73%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400 537,400 537,400 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000 473,000 473,000 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800 69,800 69,800 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0 0 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124 7,124 7,124 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700 268,700 268,700 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500 236,500 236,500 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500 30,500 30,500 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400 4,400 4,400 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20% 97.20% 97.20% 97.20% 97.20%
Energy Sales (MWh) 0 0 0 0 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061 7,061 7,061 7,061 7,061
Market Energy Sales 3,832,000 3,822,500 3,813,000 3,743,000 3,637,000 3,582,000
Heat Rate (Btu/kWh)(10) 7,052 7,052 7,052 7,052 7,052 7,052
Fuel Consumption (BBtu) 27,023 26,956 26,889 26,396 25,648 25,260
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60 2.60 2.60 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) $0.00 0.00 0.00 0.00 0.00 0.00
Energy Rate ($/MWh)(13) $0.00 0.00 0.00 0.00 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) $0.00 0.00 0.00 0.00 0.00 0.00
Energy Rate ($/MWh)(15) $0.00 0.00 0.00 0.00 0.00 0.00
Market Electricity Rates (16) $63.04 64.57 66.13 69.39 70.99 72.53
Natural Gas Price ($/MMBtu)(17) $4.236 4.367 4.502 4.642 4.786 4.934
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity $0 0 0 0 0 0
Energy $0 0 0 0 0 0
Tracking Account Payment $0 0 0 0 0 0
Transmission (18) $0 0 0 0 0 0
Aquila/UtiliCorp
Capacity $0 0 0 0 0 0
Energy $0 0 0 0 0 0
Tracking Account Payment $0 0 0 0 0 0
Transmission (18) $0 0 0 0 0 0
Market $241,569 246,819 252,154 259,727 258,191 259,802
Interest Income (19) $586 616 463 746 715 677
------ ------ ------ ------ ------ ------
Total Operating Revenues $242,155 247,435 252,617 260,473 258,906 260,479
OPERATING EXPENSES ($000)(20)
Fuel Expense $114,457 117,713 121,058 122,521 122,742 124,632
Labor $2,619 2,688 2,757 2,829 2,903 2,978
Deposits to Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Corps of Engineers $111 111 111 111 111 111
Subcontractor $314 322 331 339 348 357
Lateral Pipeline O&M $28 29 30 31 31 32
Back Up Power $432 442 454 465 478 490
Balance of Plant Parts $510 524 534 539 538 544
Equipment and Materials $383 394 404 404 404 408
Water Treatment Chemicals $216 221 226 228 227 230
SCR Chemicals $169 172 175 176 178 179
Supply/Waste Water Pumping Costs $226 229 236 236 236 240
Electrical Transmission O&M $16 16 17 17 17 18
Insurance $942 967 992 1,018 1,044 1,071
Administrative & General $1,256 1,289 1,322 1,357 1,392 1,428
Property Taxes (22) $4,065 3,965 4,124 4,244 4,331 4,161
Panola Partnership / Inducement A Payments $428 437 446 455 464 473
Trustee & Rating Agency Fees $93 93 93 93 93 93
------ ------ ------ ------ ------ ------
Total Operating Expenses $132,942 136,790 141,027 143,358 144,454 147,031
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) $109,213 110,645 111,590 117,115 114,452 113,448
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
PERFORMANCE
Plant Output (kW)(2) 806,100 806,100
Availability Factor (%)(3) 92.00% 92.00%
Capacity Factor (4) 49.64% 48.06%
Sales to Virginia Power
Annual Average Capacity (kW) 537,400 537,400
Summer Cond. Standard Capacity (kW)(5) 473,000 473,000
Summer Cond. Supplemental Capacity (kW)(5) 69,800 69,800
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(7) 7,124 7,124
Sales to Aquila/UtiliCorp
Annual Average Capacity (kW) 268,700 268,700
Standard Capacity (kW)(5) 236,500 236,500
Supplemental Capacity (kW)(5) 30,500 30,500
Surplus Supplemental Capacity (kW)(8) 4,400 4,400
Contract Availability (%)(6) 97.20% 97.20%
Energy Sales (MWh) 0 0
Contract Heat Rate (Btu/kWh)(9) 7,061 7,061
Market Energy Sales 3,505,000 1,697,000
Heat Rate (Btu/kWh)(10) 7,052 7,052
Fuel Consumption (BBtu) 24,717 11,967
COMMODITY PRICES
General Inflation (%)(11) 2.60 2.60
Virginia Power Electricity Rates
Average Capacity Rate ($/kW-yr)(12) 0.00 0.00
Energy Rate ($/MWh)(13) 0.00 0.00
Aquila/UtiliCorp Electricity Rates
Average Capacity Rate ($/kW-yr)(14) 0.00 0.00
Energy Rate ($/MWh)(15) 0.00 0.00
Market Electricity Rates (16) 75.27 77.89
Natural Gas Price ($/MMBtu)(17) 5.087 5.245
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Virginia Power
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Aquila/UtiliCorp
Capacity 0 0
Energy 0 0
Tracking Account Payment 0 0
Transmission (18) 0 0
Market 263,821 132,179
Interest Income (19) 780 730
------ ------
Total Operating Revenues 264,601 132,909
OPERATING EXPENSES ($000)(20)
Fuel Expense 125,734 62,763
Labor 3,056 1,567
Deposits to Major Maintenance Reserve (21) 525 282
Corps of Engineers 111 55
Subcontractor 366 188
Lateral Pipeline O&M 33 17
Back Up Power 503 359
Balance of Plant Parts 547 272
Equipment and Materials 410 204
Water Treatment Chemicals 231 115
SCR Chemicals 179 90
Supply/Waste Water Pumping Costs 238 119
Electrical Transmission O&M 18 9
Insurance 1,099 564
Administrative & General 1,465 752
Property Taxes (22) 3,921 1,795
Panola Partnership / Inducement A Payments 483 246
Trustee & Rating Agency Fees 93 46
------ ------
Total Operating Expenses 139,012 69,443
CASH AVAILABLE
FOR DEBT SERVICE ($000)(23) 125,589 63,466
</TABLE>
B-108
<PAGE>
Exhibit B-10
Batesville Project
Projected Operating Results
Sensitivity I - No PPA Renewal
<TABLE>
<CAPTION>
Year Ending December 31, 2018 2019 2020 2021 2022 2023
- ------------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding $0 0 0 0 0 0
Principal $0 0 0 0 0 0
Interest $0 0 0 0 0 0
Series B Bonds
Balance Outstanding $136,048 125,840 113,696 106,128 87,648 68,816
Principal $10,208 12,144 7,568 18,480 18,832 19,008
Interest $10,893 10,021 9,123 8,283 6,768 5,228
Letter-of-Credit Fees $64 64 64 64 64 64
------ ------ ------ ------ ------ ------
Total Debt Service $21,165 22,229 16,755 26,827 25,664 24,300
TRANSFERS FROM DSRA (25) $0 2,783 0 578 680 0
ANNUAL DEBT SERVICE COVERAGE (26) 5.16 5.10 6.66 4.39 4.49 4.67
AVERAGE DEBT COVERAGE (27) 2.66
MINIMUM SENIOR DEBT COVERAGE 1.42
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account $552 (2,783) 5,147 (578) (680) 1,864
Debt Service Reserve Account Balance (28) $11,206 8,423 13,570 12,992 12,312 14,176
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) $6,677 7,178 7,717 8,295 8,917 9,586
Major Overhaul Expenses (29) $21,486 0 10,061 0 14,894 17,409
Major Maintenance Reserve Balance (30) $1,890 9,172 7,332 16,030 10,935 3,713
<CAPTION>
Year Ending December 31, 2024 2025(1)
- ------------------------ ------ --------
<S> <C> <C>
ANNUAL DEBT SERVICE (24)
Series A Bonds
Balance Outstanding 0 0
Principal 0 0
Interest 0 0
Series B Bonds
Balance Outstanding 49,808 25,520
Principal 24,288 25,520
Interest 3,569 1,041
Letter-of-Credit Fees 64 32
------ ------
Total Debt Service 27,921 26,593
TRANSFERS FROM DSRA (25) 0 26,561
ANNUAL DEBT SERVICE COVERAGE (26) 4.50 3.39
AVERAGE DEBT COVERAGE (27)
MINIMUM SENIOR DEBT COVERAGE
DEBT SERVICE RESERVE ACCOUNT
Payments into Debt Service Reserve Account 12,385 (26,561)
Debt Service Reserve Account Balance (28) 26,561 0
MAJOR MAINTENANCE RESERVE
Payments into Major Maintenance Reserve (21) 525 282
Major Overhaul Expenses (29) 0 0
Major Maintenance Reserve Balance (30) 4,442 4,846
</TABLE>
B-109
<PAGE>
Footnotes to Exhibit B-10
The footnotes to Exhibit B-8 are the same as the footnotes for Exhibit B-1,
except:
12. Virginia Power assumed to renew the Virginia Power Purchase Agreement
through May 31, 2013.
13. Virginia Power assumed to renew the Virginia Power Purchase Agreement
through May 31, 2013.
14. Aquila/UtiliCorp assumed to renew the Aquila/UtiliCorp Power Purchase
Agreement through December 31, 2015.
15. Aquila/UtiliCorp assumed to renew the Aquila/UtiliCorp Power Purchase
Agreement through December 31, 2015.
B-110
<PAGE>
ANNEX C
================================================================================
CC Pace
CONSULTING, LLC
SOUTHEAST POWER MARKET ASSESSMENT AND
MARKET CLEARING PRICE FORECAST
FINAL REPORT
FOR
LS POWER, L.L.C.
May 13, 1999
PREPARED BY:
C.C. PACE CONSULTING, L.L.C.
Corporate Offices
4401 Fair Lakes Court
Suite 400
Fairfax, VA 22033
Phone (703) 818-9100
Fax (703) 818-9108
================================================================================
<PAGE>
CC Pace
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
I. EXECUTIVE SUMMARY......................................................C-1
RESULTS AND CONCLUSIONS................................................C-1
Project Results..................................................C-4
Base Case........................................................C-4
Downside Case....................................................C-5
APPROACH...............................................................C-6
CEMAS............................................................C-7
ASSUMPTIONS............................................................C-7
DOWNSIDE CASE..........................................................C-9
II. MARKET CLEARING PRICE APPROACH........................................C-10
APPROACH..............................................................C-10
REVENUE REQUIREMENT MODULE............................................C-12
UNIT FUEL PRICING MODULE..............................................C-13
HOURLY LOAD MODULE....................................................C-13
BIDDING ANALYSIS MODULE...............................................C-13
Equilibrium Pricing of Expansion Capacity.......................C-14
MARKET CLEARING PRICE MODULE..........................................C-16
DETERMINATION OF COMPETITIVE MARKET EXPANSION PLAN....................C-16
OUTLINE OF REPORT.....................................................C-17
III. SOUTHEAST MARKET PRICING RESULTS......................................C-18
CEMAS SIMULATED MARKET PRICING RATES..................................C-18
SYSTEM MARKET PRICING AND REVENUES - BASE CASE........................C-18
LS POWER UNIT RESULTS - BASE CASE.....................................C-20
SYSTEM RESULTS DOWNSIDE CASE..........................................C-21
LS POWER UNIT RESULTS - DOWNSIDE CASE.................................C-22
IV. MARKET AREA DEFINITION AND TRANSMISSION...............................C-24
TRANSMISSION..........................................................C-26
V. ELECTRICITY DEMAND IN THE SOUTHEAST MARKET............................C-28
EXISTING DEMAND PROFILE...............................................C-28
C.C. PACE'S LOAD FORECASTING METHODOLOGY..............................C-30
FORECAST RESULTS......................................................C-32
HOURLY LOAD FORECASTS.................................................C-34
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VI. SOUTHEAST POWER GENERATION RESOURCES..................................C-36
GENERATION PROFILE....................................................C-36
GENERATING UNIT COST PROFILE..........................................C-37
C.C. PACE MARKET STUDY RESOURCE ADDITION ASSUMPTIONS..................C-40
DETERMINATION OF COMPETITIVE MARKET EXPANSION PLANT...................C-42
VII. FUEL PRICING..........................................................C-45
HISTORICAL FUEL PRICING...............................................C-45
COAL..................................................................C-50
C.C. Pace Coal Price Forecast.........................................C-52
FUEL OIL..............................................................C-55
C.C. Pace Fuel Oil Price Forecast.....................................C-56
Distillate Oil........................................................C-56
Residual Oil..........................................................C-58
URANIUM...............................................................C-58
NATURAL GAS...........................................................C-58
C.C. Pace Natural Gas Price Forecast..................................C-59
FUEL PRICE FORECASTING METHODOLOGY....................................C-62
ATTACHMENT I: REGIONAL MARKET DEFINITION AND TRANSMISSION CAPABILITY
ASSUMPTIONS & SUPPORTING ANALYSIS
ATTACHMENT II: DEMAND ASSUMPTIONS & SUPPORTING ANALYSIS
ATTACHMENT III: EXISTING AND PLANNED UNIT COST ASSUMPTIONS & SUPPORTING ANALYSIS
ATTACHMENT IV: FUEL PRICING ASSUMPTIONS & SUPPORTING ANALYSIS
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================================================================================
This Report was produced by C.C. Pace Consulting L.L.C. This Report is meant to
be read as a whole and in conjunction with this disclaimer. Any use of this
Report other than as a whole and in conjunction with this disclaimer is
forbidden. Any use of this Report outside of its stated purpose without the
written consent of C.C. Pace Consulting L.L.C. is forbidden. Except for its
stated purpose, this Report may not be copied or distributed in whole or in part
without C.C. Pace Consulting L.L.C.'s prior express written permission.
This Report, information, and statements herein are based in whole or in part on
information obtained from various sources. While C.C. Pace Consulting L.L.C.'s
believes such information to be accurate, it makes no assurances as to the
accuracy of any such information or any conclusions based thereon. C.C. Pace
Consulting L.L.C. assumes no responsibility for the results of any actions taken
on the basis of this Report.
================================================================================
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I. EXECUTIVE SUMMARY
- ------------------------------------------------------------------------------
C.C. Pace Consulting, L.L.C. (C.C. Pace) has prepared this independent
assessment of the Southeast United States electricity market (covering the
states of Arkansas, Northern Florida, East Texas, Louisiana, Mississippi,
Tennessee, Alabama, and Georgia) and the economic competitiveness of the
Batesville, Mississippi power project (Project or Batesville) under construction
by LSP Energy Partnership (The Partnership). The market study provides an
assessment of the long-term market opportunities, including capacity and energy
prices expected to be received by generators in the region for the period 2000
to 2025.
This report includes a prediction of market clearing prices and dispatch
profiles for the Project for the "Base" and "Downside" cases, and a description
of the key assumptions and the methodology used in developing this assessment.
To perform the analysis, C.C. Pace utilized its Capacity & Energy Market
Analysis System (CEMAS). CEMAS is an integrated resource planning tool designed
to simulate the deregulated power generation market and to project market
clearing prices for both capacity and energy under different market structures
and scenarios.
RESULTS AND CONCLUSIONS
The following represents conclusions and key findings of C.C. Pace's southeast
market assessment and market clearing price forecast. They are:
i. Compared to other power market regions, the southeastern power market is
highly competitive. The market's competitiveness is evidenced by the
region's large volume of power transactions. The market region represents
such a large amount of transactions that the region has become a market
standard for power deliveries referenced by the New York Mercantile
Exchange and Chicago Board of Trade futures contracts.
ii. C.C. Pace anticipates that given the rapid pace of this wholesale energy
market's development, a competitive and deregulated environment for retail
customers' energy requirements will be implemented on a near- to mid-term
basis (i.e., before the expiration of the power sales agreements that the
Partnership has entered into with Virginia Power and Aquila/UtiliCorp).
The development of this kind of capacity and energy market will enhance
the Partnership's ability to make power sales and should provide
additional marketing flexibility to the Partnership if the Virginia Power
and Aquila/UtiliCorp power purchase agreements expire.
iii. The technical capability of the Project to start up and shut down quickly
should allow the Partnership's power purchasers, at times when the
Partnership's power purchasers control
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the dispatch of the Project, and the Partnership's, at times when the
Partnership controls the operation of the Project, to select operating
hours in which revenues and profitability can be maximized.
iv. The market for power in the southeast is characterized by:
a) Sustained energy demand growth expected to continue at a
steady annual average pace of 1.51% to 2.24% over the next 20
years. This sustained growth rate is higher than virtually any
region in the United States and makes the southeastern market
both the largest and the fastest growing demand center;
b) Ready access to competitively priced gas supply from a
diversified range of sources through an extensive interstate
gas pipeline transmission system;
c) Natural gas-based generation currently determining market
prices for electricity 30% of the time, rising to 70% over the
next 20 years;
d) A well-developed electrical transmission system capable of
transferring high volumes of electricity throughout the
southeast and covering over ten states and approximately 20%
of the electricity demand in the United States.
v. The most significant factors affecting the pricing of electricity in the
southeastern power market are:
a) Fuel costs;
b) The efficiency and replacement rate of existing generating
assets and capital costs of replacing existing generating
assets;
c) The cost and efficiency of incremental capacity additions
which are undertaken to meet future energy requirements and
maintain system reliability; and,
d) Increases in annual peak demand and energy requirements.
vi. C.C. Pace's Base Case market price forecasts are between $29.95 per
megawatt hour (MWh) and $33.75/MWh (measured in 1998 real dollars) for the
period from 2000 to 2025. C.C. Pace expects that due to incremental demand
and the large amount of capacity additions necessary to meet market
demand, the southeastern power market will realize an approximate 0.5%
real price increase in electricity prices over the period from 2000 to
2025 which is almost directly reflective of the real price escalation of
natural gas. Exhibit I - 1 to the C.C. Pace report summarizes the
southeastern system's market price results between 2000 and 2025 for the
Base Case.
vii. C.C. Pace's Downside Case market price forecast (i.e., a conservative case
in which there is a 95% probability that market prices will be equal to or
greater than the Downside Case result obtained) is between $27.25/MWh and
$32.20/MWh (measured in 1998 real dollars) for the period from 2000 to
2025.
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viii. The Project represents a low cost, highly competitive, and much needed
resource for the growing southeastern market equaling only a small
fraction of the capacity required in the southeastern power market (only
1.85% of the total required expansion capacity) by the year 2020.
ix. The Project has many strong competitive advantages such as:
a) location which provides low cost access to gas and water;
b) direct access to multiple power markets via bi-directional
transmission links into both the TVA and Entergy power
systems;
c) state of the art generation technology which is the most
efficient in the market; and
d) close proximity to fuel production regions lowering fuel
supply and transportation costs.
These competitive advantages create an operational profile which suggest
that the Project will be a low cost and profitable resource in the
southeastern power market.
x. Virginia Power and Aquila/UtiliCorp, the two initial long-term power
purchasers, have entered into mutually acceptably priced power purchase
agreements with the Project. Both power purchasers are active in the
wholesale power market and are regionally well-positioned to operate in
the southeastern power market.
xi. The power purchase agreements are of high strategic value to both Virginia
Power and Aquila/Utilicorp, complementing their current utility and
non-utility operations and market positions. Specifically, neither entity
owns or operates any significant amount of generating capacity in the
southeastern power market and, with the Project's capacity, they are able
to trade firm capacity and energy in the southeastern market, doubling
each company's marketing area and allowing them to serve virtually any
customer across ten to twelve states.
xii. The extension options under the Power Purchase Agreements are
approximately 40% lower than the Projected Market Price and current
utility total cost of generation indicating a high likelihood of
extension.
xiii. Based on the timely construction of pipeline laterals and interconnection
facilities and the Project's maximum hourly fuel demand from the Tennessee
Gas and ANR gas pipelines, market priced natural gas supplies and
interstate transportation will be available in sufficient quantities and
on acceptable terms and conditions to support merchant plant generation
requirements from years 13 to 25 of the Project's operation.
xiv. Southeastern market utilities expect consistent and relatively high
(compared to the national average) summer peak demand and energy
requirements to increase at an average annual rate of 2.16% and 1.57% over
the next 10 years, respectively.
xv. To provide full access to both TVA and Entergy power markets, the
Partnership has arranged for the upgrade of certain transmission
facilities. Under the agreements with TVA
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and Entergy, the Partnership will be granted transmission upgrade credits
up to the value of the transmission upgrade costs for the transmission of
energy across the TVA and Entergy systems. C.C. Pace estimates that
beginning in the first year of the Project's operation and continuing
until the total transmission upgrade cost is repaid to the Partnership,
the Partnership will accumulate additional revenues equal to a minimum of
approximately $3.4 million per year related to these transmission upgrades
credits.
Exhibit I - 1: Annual System Market Clearing Price - Base and Downside Case
(1998 Real Dollars)
- --------------------------------------------------------------------------------
====================================================================
Downside
Case
Base Case Market
Market Clearing
Clearing Price Price Price Price
Year $/MWh Escalation $/MWh Escalation
--------------------------------------------------------------------
2000 29.95 27.25
--------------------------------------------------------------------
2002 31.20 4.19% 28.99 6.40%
--------------------------------------------------------------------
2004 31.79 1.88% 29.48 1.68%
--------------------------------------------------------------------
2006 31.66 -0.42% 29.55 0.22%
--------------------------------------------------------------------
2008 31.41 -0.79% 29.38 -0.57%
--------------------------------------------------------------------
2010 31.75 1.10% 29.84 1.57%
--------------------------------------------------------------------
2012 32.49 2.33% 30.60 2.55%
--------------------------------------------------------------------
2014 32.78 0.89% 30.89 0.94%
--------------------------------------------------------------------
2016 33.39 1.87% 31.52 2.06%
--------------------------------------------------------------------
2018 33.76 1.10% 31.71 0.59%
--------------------------------------------------------------------
2020 33.94 0.52% 32.22 1.63%
--------------------------------------------------------------------
2021 34.06 0.37% 32.12 -0.32%
--------------------------------------------------------------------
2022 33.57 -1.45% 32.01 -0.34%
--------------------------------------------------------------------
2023 33.59 0.08% 32.12 0.35%
--------------------------------------------------------------------
2024 33.63 0.12% 32.00 -0.40%
--------------------------------------------------------------------
2025 33.78 0.43% 32.20 0.64%
====================================================================
- --------------------------------------------------------------------------------
Project Results
Base Case
To provide projections of Project dispatch, operating profile, and market
revenues, C.C. Pace explicitly modeled the Project as a resource in the
Southeast market. Specifically, the Project's heat rate efficiency, delivered
fuel costs, and variable operating costs were input in the model to allow the
simulation and unit dispatch when system marginal costs were equal to or higher
than Project variable costs. Based on this modeling approach, Exhibit I - 2
provides a summary of key Batesville unit operational results for the Base Case.
As shown in Exhibit I - 2, the Batesville unit is projected to be economically
dispatched at an annual capacity factor of approximately 51%-69%. Average
market-based revenues for the Batesville unit are projected to be between
$32.82/MWh in year 2000 and rise in real dollars to $39.33 by the year 2025.
Thus, the Batesville unit will achieve revenues above variable operational costs
(fuel and variable O&M) of between $15.36/MWh in the year 2001 and $19.66/MWh by
the year 2025. Lastly, due to the Project's transmission advantage,
- --------------------------------------------------------------------------------
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it is able to exceed average market prices slightly by selling in the highest
priced market to optimize revenues.
Exhibit I - 2: Batesville Unit Annual Operational Summary (1998 Real Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==================================================================================================================
Average
Market
Fuel Price
Generation Capacity Cost Variable Fixed Revenue Coverage Cover Received Price
Year GWh Factor $1000 O&M $1000 Cost $1000 $1000 $1000 $/MWh $/MWh Escalation
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*2000 2,748 41.83% 45,173 2,748 -- 90,187 42,266 15.38 32.82
2002 4,500 68.50% 74,969 4,500 -- 148,591 69,122 15.36 33.02 0.61%
2004 4,438 67.55% 74,666 4,438 -- 149,730 70,627 15.92 33.74 2.18%
2006 4,324 65.81% 73,465 4,324 -- 147,003 69,214 16.01 34.00 0.77%
2008 4,278 65.11% 73,414 4,278 -- 145,377 67,684 15.82 33.98 -0.05%
2010 4,207 64.04% 72,934 4,207 -- 144,532 67,391 16.02 34.35 1.09%
2012 4,133 62.90% 72,350 4,133 -- 146,296 69,813 16.89 35.40 3.05%
2014 4,032 61.37% 71,294 4,032 -- 144,588 69,262 17.18 35.86 1.31%
2016 3,880 59.05% 69,290 3,880 -- 145,125 71,955 18.55 37.41 4.31%
2018 3,770 57.38% 67,994 3,770 -- 143,467 71,703 19.02 38.06 1.74%
2020 3,730 56.77% 67,960 3,730 -- 141,610 69,920 18.75 37.97 -0.24%
2021 3,675 55.94% 67,277 3,675 -- 142,654 71,702 19.51 38.81 2.24%
2022 3,549 54.01% 65,271 3,549 -- 137,826 69,006 19.45 38.84 0.06%
2023 3,489 53.10% 64,484 3,489 -- 134,984 67,012 19.21 38.69 -0.38%
2024 3,425 52.14% 63,635 3,425 -- 133,788 66,727 19.48 39.06 0.94%
2025 3,332 50.72% 62,216 3,332 -- 131,048 65,500 19.66 39.33 0.69%
==================================================================================================================
</TABLE>
* 2000 represents only a partial operational year with an on-line date of June
2000.
- --------------------------------------------------------------------------------
Downside Case
Exhibit I - 3 outlines the operational results of the Batesville unit associated
with C.C. Pace's Downside Case and the difference relative to the Base Case. The
Downside Case represents an unlikely scenario of the impact on the Project's
revenues and dispatch based on the compound effects of (i) a significant
improvement of expansion capacity capital costs (i.e., $50/kW cost reduction for
combustion turbines and $64/kW cost reduction for combined cycle installed
costs), and (ii) system capacity exceeds requirements by 2,400 MW or
approximately three times the size of the Project's installed capacity. As shown
in Exhibit I - 3, given system overcapacity, the Project is forecast to be
dispatched at an annual capacity factor between 46% and 62%, a decrease of
between 4% and 7% as compared to the Base Case. Average revenues for the
Batesville unit are projected to be between $31.18/MWh in the year 2000
increasing in real dollars to $38.52/MWh in 2025. Overall, during the forecast
period, average annual revenues earned by the Project were slightly less than in
the Base Case, the reduction ranging from $14.0 million to $18.6 million.
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Exhibit I - 3: C.C. Pace Downside Case Results and Base Case Differential
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Avg.
Fuel Variable Fixed Market
Generation Capacity Cost O&M Cost Revenue Coverage Cover Clearing Price
Year GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh Price $/MWh Escalation
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 2,519 38.34% 41,415 2,519 -- 78,546 34,612 13.74 31.18
2002 4,094 62.31% 68,200 4,094 -- 130,935 58,641 14.32 31.98 2.58%
2004 4,007 60.99% 67,397 4,007 -- 131,373 59,969 14.97 32.79 2.51%
2006 3,862 58.79% 65,612 3,862 -- 128,358 58,883 15.24 33.23 1.36%
2008 3,861 58.77% 66,255 3,861 -- 128,500 58,384 15.12 33.28 0.15%
2010 3,731 56.79% 64,673 3,731 -- 126,177 57,772 15.48 33.82 1.61%
2012 3,733 56.82% 65,348 3,733 -- 130,396 61,315 16.42 34.93 3.29%
2014 3,571 54.36% 63,153 3,571 -- 126,655 59,931 16.78 35.46 1.53%
2016 3,466 52.76% 61,896 3,466 -- 127,691 62,328 17.98 36.84 3.87%
2018 3,406 51.84% 61,433 3,406 -- 126,422 61,583 18.08 37.12 0.77%
2020 3,424 52.12% 62,379 3,424 -- 126,956 61,152 17.86 37.08 -0.11%
2021 3,277 49.87% 59,968 3,277 -- 124,894 61,649 18.81 38.12 2.80%
2022 3,174 48.32% 58,379 3,174 -- 122,122 60,568 19.08 38.47 0.94%
2023 3,140 47.79% 58,025 3,140 -- 120,593 59,429 18.93 38.41 -0.16%
2024 3,076 46.82% 57,143 3,076 -- 118,317 58,098 18.89 38.46 0.13%
2025 3,038 46.24% 56,705 3,038 -- 117,021 57,279 18.86 38.52 0.16%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Difference from Base Case
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Avg.
Fuel Variable Fixed Market
Generation Capacity Cost O&M Cost Revenue Coverage Cover Clearing Price
Year GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh Price $/MWh Escalation
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 -229 -3.48% -3,758 -229 -- -11,640 -7,654 -1.64 -1.64
2002 -406 -6.18% -6,769 -406 -- -17,657 -10,481 -1.04 -1.04 1.97%
2004 -431 -6.56% -7,269 -431 -- -18,357 -10,657 -0.95 -0.95 0.33%
2006 -461 -7.02% -7,853 -461 -- -18,645 -10,331 -0.76 -0.77 0.59%
2008 -417 -6.34% -7,159 -417 -- -16,876 -9,300 -0.70 -0.70 0.20%
2010 -476 -7.25% -8,261 -476 -- -18,355 -9,618 -0.53 -0.54 0.52%
2012 -399 -6.08% -7,002 -399 -- -15,900 -8,498 -0.47 -0.47 0.24%
2014 -460 -7.01% -8,141 -460 -- -17,933 -9,332 -0.40 -0.40 0.23%
2016 -413 -6.29% -7,394 -413 -- -17,434 -9,627 -0.57 -0.57 -0.44%
2018 -364 -5.54% -6,561 -364 -- -17,045 -10,120 -0.94 -0.94 -0.97%
2020 -306 -4.66% -5,581 -306 -- -14,655 -8,768 -0.89 -0.89 0.14%
2021 -399 -6.07% -7,309 -399 -- -17,761 -10,053 -0.70 -0.70 0.56%
2022 -374 -5.70% -6,892 -374 -- -15,704 -8,437 -0.36 -0.37 0.88%
2023 -349 -5.31% -6,459 -349 -- -14,391 -7,583 -0.28 -0.28 0.22%
2024 -349 -5.32% -6,492 -349 -- -15,470 -8,629 -0.59 -0.59 -0.81%
2025 -295 -4.48% -5,511 -295 -- -14,027 -8,221 -0.80 -0.80 -0.53%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
APPROACH
C.C. Pace conducted a detailed analysis of the Southeast market clearing prices.
This analysis provides in-depth insight into the Southeast power market
fundamentals and the emerging competitive market. The analysis was built around
C.C. Pace's competitive market vision of an "one-price" market for both capacity
and energy. C.C. Pace used CEMAS to provide a dynamic analysis of future trends
in market clearing prices, capital recovery, and seasonal and hourly market
pricing.
The fundamentals and functional background of the CEMAS model and methodology
are described below.
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CEMAS
C.C. Pace has developed and tested an analytical approach to forecasting
electricity prices in a deregulated electric power market. The approach centers
on the concept of replacement power equilibrium pricing.
C.C. Pace's modeling approach determines the market pricing necessary to provide
incremental expansion unit revenues to meet their all-in generation costs. When
this pricing level is attained, the system is considered to be in equilibrium,
since incremental generators will cover all of their generation costs while
receiving a fair rate of return on equity. Achieving this cost recovery target
establishes a condition in which demand can be met while providing the economic
incentives necessary for generators to invest capital to serve current and
future load.
C.C. Pace's approach incorporates five market analysis tools with the capability
to simulate hourly operations of an electric system, forecast unit dispatch, and
project market clearing prices for both capacity and energy. CEMAS consists of
five interrelated modules which are described in greater detail in Section II:
1. Revenue Requirement Module
2. Unit Fuel Pricing Module
3. Bidding Analysis Module
4. Hourly Load Module
5. Market Clearing Price Module
CEMAS was designed based on C.C. Pace's experience in deregulated or competitive
markets in which the clearing prices of generation are a function of the
underlying generation cost structure, fuel pricing, transmission capacity,
supply availability, demand fluctuations, and the bidding strategies of
participants.
The CEMAS model was calibrated against historical data for 1994-1996. In
addition, C.C. Pace derived the current all-in price of generation (i.e., prices
that include variable and fixed capital-related costs) through analysis of the
current electricity rates of the region's utilities. The model's projected
market prices in the year 2000 were consistent with the derived current market
prices.
ASSUMPTIONS
The key Base Case assumptions underlying the Southeastern Market Study are
detailed in Sections IV, V, VI, and VII. These assumptions span the areas of
load growth, fuel pricing, expansion unit cost and performance, transmission
transfer capability and pricing, market area definition and the financing
structure of existing and expansion units. These base case assumptions were
developed by C.C. Pace in order to bracket the most probable need for new
capacity and market pricing available to
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the Project. Exhibit I - 4 summarizes the major assumption variables of C.C.
Pace's Base Case forecast.
Exhibit I - 4: Key Assumptions - Base Case
- --------------------------------------------------------------------------------
================================================================================
Base Case
- --------------------------------------------------------------------------------
Load Growth
- --------------------------------------------------------------------------------
Energy Demand 1.51% to 2.24% per year
- --------------------------------------------------------------------------------
Peak Demand 1.51% to 2.24% per year
- --------------------------------------------------------------------------------
Expansion Unit Costs
- --------------------------------------------------------------------------------
CT - Installed Costs $300/kW
- --------------------------------------------------------------------------------
CC - Installed Costs $500/kW
- --------------------------------------------------------------------------------
CT - Efficiency (linear improvement) 10,100 Btu/kWh (2000)
9,350 Btu/kWh (2020)
- --------------------------------------------------------------------------------
CC - Efficiency (linear improvement) 6,860 Btu/kWh (2000)
6,360 Btu/kWh (2020)
- --------------------------------------------------------------------------------
Natural Gas Henry Hub Price - 1998 $2.20/MMBtu
- --------------------------------------------------------------------------------
Existing Unit Costs
- --------------------------------------------------------------------------------
Fixed Capital Costs Current Book Value
- --------------------------------------------------------------------------------
Fixed & Variable O&M Current Derived Cost / 0% real escalation
- --------------------------------------------------------------------------------
Fuel Cost Escalation Rates
- --------------------------------------------------------------------------------
Natural Gas 0.5% per year real
- --------------------------------------------------------------------------------
Fuel Oil (No.6 and No. 2) 0.0% per year real
- --------------------------------------------------------------------------------
Coal -1.0% per year real
- --------------------------------------------------------------------------------
Uranium 0.0% per year real
- --------------------------------------------------------------------------------
Transfer Capacity and Pricing
- --------------------------------------------------------------------------------
SPP-SE to/from TVA 4,800 MW / $1.75/MWh
- --------------------------------------------------------------------------------
SPP-SE to/from Southern 2,000MW / $1.82/MWh
- --------------------------------------------------------------------------------
TVA to/from Southern 3,000 MW / $2.15/MWh
- --------------------------------------------------------------------------------
Nuclear and Coal Plant Performance 85% Capacity Factor
- --------------------------------------------------------------------------------
Demand Side Management
- --------------------------------------------------------------------------------
Annual Interruptible Demand 5,697 - 6,293 MW
- --------------------------------------------------------------------------------
Macroeconomic
- --------------------------------------------------------------------------------
Interest Rate 8.5%
- --------------------------------------------------------------------------------
Return on Equity 14%
- --------------------------------------------------------------------------------
Percent Equity 30%
================================================================================
- --------------------------------------------------------------------------------
C.C. Pace believes that the assumptions presented above are conservative
estimates of the future range of variables which yield a highly probable Base
Case market price estimate. The following summarizes major assumptions:
Load Growth
o Assumed no export of energy to the capacity short Midwest or
Mid-Atlantic regions.
o Included the full impact of demand-side management on peak demand.
Expansion Units
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o Expansion unit capital costs are consistent with current market
prices and assumed no real price increases.
o Assumed heat rates are approximately 5 to 7% better than any
combustion turbines or combined cycle technology currently
commercially available.
o Expansion plan did not incorporate the probable requirement for
retirement and replacement of 17,000 MW of nuclear capacity in the
latter study period.
Existing Utility Capacity
o Initial cost recovery is based on current book value which is
significantly below current auction value of the units.
o Operating capacity factor is assumed to be approximately 5-10%
higher than current average achievable unit capacity factors.
Downside Case
The key assumptions for the Downside Case are the same as those for the Base
Case with the exception of (i) $50/kW cost reduction for combustion turbines and
$64/kW cost reduction for combined cycle installed costs, (ii) system generation
capacity exceeds generation requirements by 2,400 MW, and (iii) + 5% heat rate
efficiency improvement. This case was developed by C.C. Pace to represent a
scenario which would have a 95% probability of occurrence.
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- --------------------------------------------------------------------------------
II. MARKET CLEARING PRICE APPROACH
- --------------------------------------------------------------------------------
C.C. Pace's market clearing price forecast of the Southeast United States
electricity market consists of multiple, interrelated analytical processes. C.C.
Pace employed utility grade computer simulation models to evaluate the existing
supply and demand relationships in the region, match future utility operations
to forecasts of demand, and predict the electricity prices resulting from
industry deregulation.
This section provides necessary background material including the fundamentals
of C.C. Pace's Capacity and Energy Market Analysis System (CEMAS).
APPROACH
C.C. Pace conducted a detailed analysis of Southeast market clearing prices.
This analysis provides in-depth insight into the fundamentals of Southeast
market and the emerging competitive market. The analysis was based on C.C.
Pace's competitive market vision of an "one-price" market for both capacity and
energy. A description of C.C. Pace's approach to this analysis is described
below.
C.C. Pace's approach incorporates five market analysis tools that provide the
capability to project market clearing prices for both capacity and energy. As we
illustrate in Exhibit II - 1, C.C. Pace's Capacity & Energy Market Analysis
System (CEMAS) consists of five modules. These modules are:
1. Revenue Requirement Module: This module compares fixed and variable
costs for all generating units with all-in revenues generated from a
given bidding strategy. It then reports information regarding over
or under-recovery (stranded costs) to the Bid Analysis Module.
2. Unit Fuel Pricing Module: This module calculates fuel prices for
each unit and transfers the data to the Revenue Requirement Module.
These fuel pricing calculations take into account escalation
schedules, transportation costs, fuel quality, and fuel procurement
and contractual constraints.
3. Bidding Analysis Module: Based on the fixed and variable costs of
generating units and over and under-recovery data generated by the
Revenue Requirement Module, this module generates bids for each unit
on the system and transfers those bids to the Market Clearing Price
Module for production simulation.
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4. Hourly Load Module: The Hourly Load Module aggregates actual utility
hourly loads as reported to the FERC to create an integrated system
hourly load profile. This module uses forecasts of peak and energy
demand to develop the base system load profile over the study
period. The results of the Hourly Load Module are drawn upon by the
Market Clearing Price Module to simulate daily system demand.
5. Market Clearing Price Module: This module performs a detailed
operations and dispatch simulation based on bid prices generated by
the Bidding Analysis Module and the hourly load data generated by
the Hourly Load Module. For each hour in the study period, the
module dispatches generating units according to their bid prices and
availabilities. The Market Clearing Price Module uses a utility
grade dispatch model (PROSYM) to model the hourly system constraints
of a regional power pool, optimizing least cost generation choices
to match demand fluctuations. The module then produces hourly market
clearing prices, which are passed to the Revenue Requirement Module
to evaluate system operations and market price stability. Based on
this analysis, CEMAS will either produce a new iteration of
optimized bids or, if the market is deemed stable, summarize market
clearing prices for each study period.
Exhibit II - 1: C.C. Pace CEMAS Methodology
- --------------------------------------------------------------------------------
[FLOW CHART OMITTED]
- --------------------------------------------------------------------------------
CEMAS was designed based on C.C. Pace's market experience, which shows that
clearing prices of competitive generation markets are a function of the
underlying generation cost structure, supply availability and demand
fluctuations, the bidding strategies that participants adopt and the incremental
cost of expansion units. C.C. Pace has sought with CEMAS to integrate these
components into a system capable of accurately projecting market clearing prices
in a competitive market.
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The following sections review in greater detail the individual modules of the
CEMAS analytical system--their purposes, inputs, and relationship to the whole
modeling system.
REVENUE REQUIREMENT MODULE
The Revenue Requirement Module is the foundation input and calculation module of
CEMAS. It maintains data characterizing each generating unit in the market area
(both existing and planned) and is used to:
o Organize and store historical unit information regarding capacity,
generation, O&M, and capital costs.
o Provide an interface mechanism with the Bidding Analysis Module to
provide data for bid construction.
o Create an analysis mechanism for run results from the Market Pricing
Module by matching unit revenues derived from bidding strategies to
actual fixed cost recovery requirements. This evaluation is
essential in benchmarking bidding strategies and capacity and energy
market pricing, as well as determining potential stranded costs on
either a unit or system basis.
o Provide a cost competitiveness evaluation tool for comparison of the
relative cost and capacity mix for various utilities in the
interconnected region.
C.C. Pace also uses the Revenue Requirement Module as a tool to perform
sensitivity analyses of unit fixed cost structures. Specifically, the Revenue
Requirement Module permits the adjustment of return on equity for each unit,
interest rates, fixed O&M, debt term, unit book value (lowering or
"writing-off"), and consolidation or disaggregation of units to simulate various
market conditions and deregulation scenarios. All these capabilities permit the
flexibility to model virtually any utility system or project the impact of
multiple restructuring scenarios on market prices.
The detailed unit characterization data maintained by the Revenue Requirement
Module includes information on utility system, in-service date, nameplate
capacity, fuel type, fuel pricing, fixed O&M cost, variable O&M cost, heat rate,
historical generation, current book value, annual depreciation expense, annual
interest expense, and annual return-on-equity requirement. C.C. Pace gathered
such information from Forms EIA-411, EIA-412, FERC Form 1, and Rural Utilities
Service Form 12a.
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UNIT FUEL PRICING MODULE
The purpose of the Unit Fuel Pricing Module is to provide the Revenue
Requirement Module with detail on each unit's fuel price and account for
plant-specific fuel procurement and contracting practices, pricing differences,
transportation costs, and fuel quality variances. The Unit Fuel Pricing Module:
o Organizes and stores historical unit fuel prices;
o Analyzes seasonal and annual fuel pricing trends for individual
units and entire systems; and
o Provides input to the Revenue Requirement Module and Market Clearing
Price Module.
The Fuel Pricing Module calculates the average fuel costs for each fuel type
(i.e., coal, uranium, natural gas, No. 6 and No. 2 fuel oil), and develops fuel
disaggregation factors for each unit. The Unit Fuel Pricing Module adopts this
process to project annual fuel costs given a market area price for a type of
fuel. This market area fuel price is then adjusted each year by the study's
assumed long-range fuel pricing forecast escalators as detailed in Section VII.
At this stage, unit-specific fuel prices are then entered into the Revenue
Requirement Module to calculate variable operating costs and other variables
necessary for bidding analysis.
HOURLY LOAD MODULE
Load characterization defines how many supply resources are needed, as well as
how these resources will be used on a daily, weekly, and seasonal basis.
Consequently, hourly demand is an important determinant of the escalation of
system costs. CEMAS characterizes this important variable by modeling all market
pricing scenarios with an hourly load module that replicates the actual 8,760
hours of demand occurring in a utility system each year. In this way, modeling
results reflect not only the cost to serve a certain level of demand, but also
show how hourly changes impact the use of different types of generation units.
As we further detail in Section V, the Hourly Load Module aggregates actual
utility hourly loads as reported to the FERC to create an integrated system
hourly load profile. It then uses utility adjusted forecasts of peak and energy
demand to escalate the base system load profile over the study period. The
results are drawn upon by the Market Clearing Price Module to simulate daily
system demand.
BIDDING ANALYSIS MODULE
Given the fundamental change in the electricity market from a regulated cost of
service to a more market driven mechanism, it is expected (and it has been
demonstrated in other competitive
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markets such as Chile, Norway, the United Kingdom, New Zealand, and Australia)
that a bidding process will be developed as the basis of determining which
generators will be used in a given hour. To account for the change from
cost-driven dispatch to market-driven dispatch, C.C. Pace has developed a
Bidding Analysis Module to assist in formulating generators' bids. The Bidding
Analysis Module assesses generators' variable and fixed costs requirements,
system demand, relative competitiveness, and experience from the results of the
previous day's bidding to:
o Generate bids based on each generator's place in the dispatch queue;
o Maximize revenues where total fixed and variable cost recovery can
not be achieved due to market forces;
o Maximize upside revenue potential during periods of peak demand or
unit outages;
o Replicate the activities and consequent pricing of existing
competitive markets; and
o Provide analysis tools for bidding strategies of generators in
competitive markets.
Equilibrium Pricing of Expansion Capacity
While at anytime, given the actual supply/demand balance in the market,
generators can adopt various bidding strategies to increase their market
revenues, Exhibit II - 2 presents the basis of market price equilibrium in a
competitive market. Specifically, the cost of new capacity will ultimately set a
market price cap under pricing equilibrium. For example, if market prices are
above the cost of new capacity additions, market entrants will build new units
until they drive the market price down to minimum return levels. Conversely, if
market prices are below the cost of expansion units, no units will be built
unless prices rise to support their construction.
Given the foregoing, Exhibit II - 2 provides a theoretical market pricing
formula consisting of new CC and CT units. Exhibit II - 2 details the all-in
cost (i.e. fixed and variable) of expansion units operating at various capacity
factors. For example, at 35% capacity factor the all-in cost of a CC and CT unit
would be $41.53/MWh and $39.67/MWh, respectively. Assuming all generators
receive the incremental market price when dispatched and a market price cap of
the on-line peak capacity at approximately $126/MWh, Exhibit 1 shows the minimum
bidding level of units to reach their fixed cost recovery.
With these assumptions, Exhibit II - 2 shows that except at dispatch of 10% or
lower, all generators can bid to their variable cost and still achieve their
minimum revenue requirement. Further, Exhibit II - 2 also shows that between
40%-45% capacity a break-even point exists where CC capacity becomes the most
economic capacity.
Lastly, in the column labeled "Average Market Price $/MWh" is the theoretical
pricing curve cap or equilibrium point. Specifically, when pricing levels rise
above those levels, new capacity installations are signaled until the market
price comes to rest back at the equilibrium point. For example, if the market
price is $35.00/MWh for an average of 70% of the year, a new CC can be
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built and dispatched at that level for only $28.66/MWh. Therefore, a developer
would see a profit opportunity there and would seek to build capacity to reduce
this market pricing.
Exhibit II - 2: Equilibrium Market Prices Based on Expansion Unit Costs
- --------------------------------------------------------------------------------
Dispatch CC CT Incremental Average Percent Return
Factor/System All-In All-In Market Price Market Price Over Revenue
Load Factor $/MWh $/MWh $/MWh $/MWh Requirement
- --------------------------------------------------------------------------------
5 195.98 126.35 126.35 126.35 -1%
10 105.88 75.79 25.23 76.53 1%
15 75.85 58.94 25.23 59.43 1%
20 60.83 50.51 25.23 50.88 1%
25 51.82 45.45 25.23 45.75 1%
30 45.82 42.08 25.23 42.33 1%
35 41.53 39.67 25.23 39.88 1%
40 38.31 37.87 25.23 38.05 0%
45 35.81 36.46 15.78 35.79 0%
50 33.80 35.34 15.78 33.79 0%
55 32.17 34.42 15.78 32.15 0%
60 30.80 33.65 15.78 30.79 0%
65 29.65 33.01 15.78 29.63 0%
70 28.66 32.45 15.78 28.64 0%
75 27.80 31.97 15.78 27.79 0%
80 27.05 31.55 15.78 27.04 0%
85 26.38 31.18 15.78 26.37 0%
90 25.79 30.85 15.78 25.79 0%
95 25.27 30.55 15.78 25.26 0%
100 24.79 30.28 15.78 24.79 0%
- --------------------------------------------------------------------------------
---------------------------------------------------------------------------
Assumptions:
---------------------------------------------------------------------------
Unit Type CC CT
Heat Rate Btu/kWh 6,600 9,700
Variable O&M $/MWh 1.00 3.50
Fuel Cost for Year $/MMBtu 2.24 2.24
Fixed Cost $ 28,817,000 10,247,000
Capacity MW 360 230
Variable Cost $/MWh 15.78 25.23
Fixed Cost @100% Load Factor $/MWh 9.01 5.06
---------------------------------------------------------------------------
Based on the results of this analysis, prices defined by the costs of building
and operating new CT and CC generators place a theoretical cap on power prices.
Consequently, C.C. Pace's analysis model is driven to alter bidding strategies
and capacity additions to achieve a market pricing level approximately +/- 5%
from this equilibrium. Specifically, C.C. Pace assumed that peaking capacity
(units operating for 5% or less capacity factor) would bid their all-in costs.
All other generating units would bid their variable costs.
The Market Clearing Price Module, given these input bid prices for each unit,
matches supply resources to demand to derive revenue results through dispatch
optimization of these bid prices. These revenue results are fed back into the
Revenue Requirement Module. Fixed cost recovery analysis is performed at this
stage with the results being transferred back into the Bidding Analysis
Module for further iterations if the market price does not come with 5% of
expansion capacity recovery targets.
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MARKET CLEARING PRICE MODULE
The Market Clearing Price Module uses a utility grade dispatch model (PROSYM) to
model hourly system constraints of a regional power pool, optimizing least cost
generation choices to match demand fluctuations. The Market Clearing Price
Module matches the outputs of the Bidding Analysis Module, Revenue Requirement
Module, and the Hourly Load Module to determine market prices for each forecast
period.
PROSYM is a chronological hybrid electric utility production simulation modeling
system developed by The Simulation Group and used extensively by utilities and
public utility commissions. It is designed to perform planning studies, and as
result of its chronological structure, PROSYM accomplishes detailed hour-by-hour
investigation of electric utility operations. It utilizes the Monte Carlo method
(i.e., a random number generator is used to determine unit availability during
the simulation period) of outage distribution along with chronological
constraints to simulate the system's operation. Given a sufficient number of
iterations, the Monte Carlo method is typically more accurate than probabilistic
dispatch.
Because PROSYM is a chronological model, it permits highly detailed description
of the modeling environment. This capability adds increased modeling control
over variable inputs and results in more accurate simulation of utility
operation in a given market area, such as the Southeastern region under
consideration in this study. Additionally, PROSYM has the capability to simulate
a market structure where units compete on an optimized total cost basis (one bid
price to recover both capital and energy costs) rather than traditional marginal
cost optimization. This capability allows C.C. Pace to simulate alternative
market structures, such as the competitive generation market resulting from
electricity industry restructuring.
Once information on bids is entered into PROSYM, the model optimizes resource
utilization. Market clearing prices are tracked hourly providing each operating
generator with the same market clearing price for the given hour of operation.
Hourly revenues are tracked to provide annual revenues per unit based on market
clearing prices.
DETERMINATION OF COMPETITIVE MARKET EXPANSION PLAN
The C.C. Pace market study does not add expansion units to meet a fixed target
reserve margin as is the current planning method for regulated utilities. A
competitive market structure dictates, by definition, that participants will
build expansion units only if they expect to receive a sufficient return on
their investment. Therefore, in the analysis expansion units are added only when
the market price can support them.
To determine the competitive market expansion plan, C.C. Pace followed three
rules or steps to arrive at the optimal expansion plan. These rules or steps are
as follows:
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1. Use of the existing units and planned utility unit additions as the
minimum expansion plan as a starting point.
2. The addition of expansion units in each year up to such point that
the whole class of units (i.e., combined cycle or combustion
turbines) receive full recovery. This was done to the point that the
next unit added to the system would not be able to recover its
costs.
3. Unit additions were optimized for each sub-system (i.e., SPP-SE,
TVA, and Southern) and each year of the study period to yield the
largest number of combined cycle units and combustion turbine units
possible while still maintaining full recovery of these units.
OUTLINE OF REPORT
The remainder of this report is organized into five additional sections:
o Section III, Southeast Market Pricing Results, provides detailed
market clearing price results.
o Section IV, Market Area Definition and Transmission, provides
support for the selection of the market area and the transmission
transfer capability and pricing assumptions.
o Section V, Electricity Demand in the Southeast Market, provides
demand growth expectations for the market area.
o Section VI, Southeast Power Generation Resources, reviews existing
generation resources and details expansion unit assumptions.
o Section VII, Fuel Pricing, provides fuel pricing and escalation
expectations.
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- --------------------------------------------------------------------------------
III. SOUTHEAST MARKET PRICING RESULTS
- --------------------------------------------------------------------------------
C.C. Pace conducted an assessment and forecast of market clearing prices in the
Southeast power market for the period 2000 through 2025. New market pricing
tools are required for the emerging competitive marketplace where generators
have no guaranteed customers through regulated franchise areas. Accordingly,
C.C. Pace's analysis utilized our proprietary Capacity & Energy Market Analysis
System (CEMAS) forecasting system. As detailed in the previous sections, CEMAS
was developed to provide the capability to project market clearing prices for
both capacity and energy in a competitive market.
C.C. Pace's market price forecast results for the proposed Project for the Base
and Downside cases are presented below.
CEMAS SIMULATED MARKET PRICING RATES
C.C. Pace's Base Case market price forecast was founded on our expected
assumptions for a competitive market. These assumptions are detailed in
subsequent sections regarding fuel pricing, demand, expansion capacity and
existing unit fixed costs. The Base Case represents a system optimization of
these factors given a competitive market structure. Specifically, given the cost
structure of generating units, demand, fuel pricing, and other key factors, the
CEMAS model simulated the Southeast system and optimized unit dispatch and
bidding to identify the market pricing and price distribution to allow the
system to recover variable costs of generation units (except those fixed costs
that are determined above market or "stranded").
SYSTEM MARKET PRICING AND REVENUES - BASE CASE
Exhibit III - 1 below summarizes the Southeastern system's (TVA, Southern, and
SPP-SE) operational results between 2000-2025. As shown in Exhibit III - 1,
market clearing prices are projected to increase in real dollars over the study
period by approximately 0.5%, annually, or almost directly correlated to the
anticipated increase in natural gas prices. Total system stranded costs
(represented by negative coverage) range from approximately $1.28 billion in
2000 to full recovery by the year 2002. These stranded costs represent an
average of 4.3% of total system costs in the initial study years.
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- --------------------------------------------------------------------------------
Exhibit III - 1: Annual System Summary - Base Case (1998 Real Dollars)
<TABLE>
<CAPTION>
====================================================================================================================================
Avg.
Market
Clearing
Capacity Generation Capacity Fuel Cost Variable O&M Fixed Cost Revenue Coverage Cover Price Price
Year MW GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh $/MWh Escalation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 100,297 518,343 59.00% 6,463,498 568,451 9,157,427 15,523,496 -665,879 -1.28 29.95
2002 102,427 538,655 60.38% 6,672,923 589,483 9,305,890 16,808,358 240,062 0.45 31.20 4.19%
2004 105,607 558,590 60.03% 6,956,957 613,786 9,514,373 17,758,292 673,176 1.21 31.79 1.88%
2006 111,147 579,927 59.56% 7,085,728 637,187 9,881,445 18,358,555 754,195 1.30 31.66 -0.42%
2008 115,997 600,519 59.10% 7,330,797 658,640 10,217,950 18,860,175 652,788 1.09 31.41 -0.79%
2010 120,027 621,359 59.10% 7,647,450 681,101 10,504,616 19,729,198 896,030 1.44 31.75 1.10%
2012 123,727 641,693 59.21% 7,940,551 698,971 10,790,175 20,850,537 1,420,840 2.21 32.49 2.33%
2014 127,527 662,527 59.31% 8,225,445 718,235 11,066,650 21,718,146 1,707,816 2.58 32.78 0.89%
2016 131,227 683,001 59.41% 8,584,518 738,210 11,352,209 22,807,030 2,132,094 3.12 33.39 1.87%
2018 135,487 704,505 59.36% 8,925,967 761,729 11,649,059 23,784,767 2,448,011 3.47 33.76 1.10%
2020 139,517 725,730 59.38% 9,275,428 780,967 11,935,722 24,628,449 2,636,333 3.63 33.94 0.52%
2021 141,677 736,290 59.33% 9,451,574 787,627 12,112,504 25,080,431 2,728,726 3.71 34.06 0.37%
2022 144,197 747,754 59.20% 9,622,510 792,862 12,318,748 25,101,179 2,367,059 3.17 33.57 -1.45%
2023 145,997 758,500 59.31% 9,813,549 801,077 12,466,069 25,481,685 2,400,990 3.17 33.59 0.08%
2024 148,157 770,106 59.34% 10,029,254 809,617 12,642,853 25,901,491 2,419,767 3.14 33.63 0.12%
2025 149,957 781,121 59.46% 10,241,047 817,908 12,790,175 26,383,905 2,534,775 3.25 33.78 0.43%
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Specifically, Exhibit III - 2 summarizes annual capacity additions by region and
technology. As shown by Exhibit III - 2, the Southeast region will require over
40,000 MW of capacity additions by the year 2020 and over 51,000 MW by the year
2025, under Base Case demand assumptions. Additionally, Exhibit III - 2
indicates that gas-fired combined cycle capacity is a preferred generation
technology by a margin of nearly 4:1. Importantly, these capacity addition
requirements do not assume any existing capacity retirement. Section VI
describes in detail the underlying methodology used to develop C.C. Pace's
competitive capacity expansion plan used in the market price forecast.
Exhibit III - 2: Expansion Capacity Additions by Year - Base Case
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================================================================
Year 2000 2004 2008 2012 2016 2020 2021 2022 2023 2024 2025
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SE CC 750 1,110 5,070 6,870 7,950 8,310 10,470 12,270 12,990 14,430 15,150
SE CT -- 460 2,530 3,680 3,680 3,910 3,910 3,910 3,910 3,910 3,910
- -----------------------------------------------------------------------------------------------------------
SOCO CC 300 660 2,820 5,700 7,860 9,660 9,660 9,660 10,020 10,380 10,740
SOCO CT 215 1,825 3,665 4,125 5,275 7,115 7,115 7,115 7,115 7,115 7,115
- -----------------------------------------------------------------------------------------------------------
TVA CC 360 2,880 3,240 4,680 7,560 11,160 11,160 11,880 12,600 12,960 13,680
TVA CT -- -- -- -- 230 690 690 690 690 690 690
- -----------------------------------------------------------------------------------------------------------
Total CC 1,410 4,650 11,130 17,250 23,370 29,130 31,290 33,810 35,610 37,770 39,570
Total CT 215 2,285 6,195 7,805 9,185 11,715 11,715 11,715 11,715 11,715 11,715
Total 1,625 6,935 17,325 25,055 32,555 40,845 43,005 45,525 47,325 49,485 51,285
===========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
A key factor behind system market prices is the amount of time each fuel (i.e.,
natural gas, coal and oil) comprises the marginally dispatched unit.
Accordingly, C.C. Pace calculated the "time on the margin" of specific fuels to
measure a fundamental driver to future market pricing.
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Specifically, this analysis measures the fuel-based technology which is the last
dispatched in each hour. Knowledge of the "fuel on the margin" indicates the
general level of fuel price linkage or risk of the market. Exhibit III - 3 shows
the percentage of "fuel on the margin" over the course of the study.
Exhibit III - 3: Percent Hours on the Margin by Fuel Type
- --------------------------------------------------------------------------------
================================================================================
2000 2010 2014 2016 2018 2020 2025
- --------------------------------------------------------------------------------
Nuclear -- -- -- -- -- -- --
Hydro -- -- -- -- -- -- --
Coal 42.6 11.8 6.3 4.1 2.8 2.1 0.7
Gas Steam 25.1 14.2 11.5 10.7 12.9 12.5 11.8
Existing CT 22.9 14.1 13.1 13.6 13.0 12.0 11.9
Exp CC 3.8 40.7 49.3 52 51.0 53.0 52.0
LSP Unit 0.9 2.7 2.8 2.5 2.4 2.4 6.4
Exp CT 0.6 14.8 15.5 15.7 16.4 17.2 16.4
Other Purchases 4.1 1.7 1.5 1.4 1.5 0.8 0.8
- --------------------------------------------------------------------------------
Total 100% 100% 100% 100% 100% 100% 100%
================================================================================
- --------------------------------------------------------------------------------
As shown in Exhibit III - 4, coal is initially the marginal fuel for the highest
percentage of time, roughly 42%. This time on the margin generally occurs during
the off-peak periods of the year. However, as system demand increases and more
gas-fired capacity is added to the system, natural gas becomes the dominant fuel
on the margin. Based on this analysis, C.C. Pace concludes that as demand grows,
the market risk to the Project will decrease substantially. Further, by the time
of expiration of the initial power sales contracts, gas-fired capacity will
comprise 2/3 of the margin. Therefore, the risk that market prices will be lower
than Project costs is remote. Further, since market prices in the future will be
based on natural gas, increases in gas prices should generally translate into
higher electricity prices.
LS POWER UNIT RESULTS - BASE CASE
Exhibit III - 4 provides a summary of key Project operational results for the
Base Case. As shown in Exhibit III - 4, the Project is projected to be
economically dispatched at an annual capacity factor of approximately 51%-69%.
Average market-based revenues are projected to be between $32.82/MWh in the year
2000 and rise in real dollars to $39.33 in the year 2025. As a result of this
real price increase, the Project will achieve revenues above variable
operational costs (fuel and variable O&M) of between $15.36/MWh in the year 2001
and $19.66/MWh by the year 2025. Total revenue ranges from $131 million to $150
million over the study period.
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Exhibit III - 4: LS Power Unit Annual Operational Summary -(1998 Real Dollars)^
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=================================================================================================================================
Average
Market
Price
Generation Capacity Fuel Cost Variable O&M Fixed Cost Revenue Coverage Cover Received Price
Year GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh $/MWh Escalation
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*2000 2,748 41.83% 45,173 2,748 -- 90,187 42,266 15.38 32.82
2002 4,500 68.50% 74,969 4,500 -- 148,591 69,122 15.36 33.02 0.61%
2004 4,438 67.55% 74,666 4,438 -- 149,730 70,627 15.92 33.74 2.18%
2006 4,324 65.81% 73,465 4,324 -- 147,003 69,214 16.01 34.00 0.77%
2008 4,278 65.11% 73,414 4,278 -- 145,377 67,684 15.82 33.98 -0.05%
2010 4,207 64.04% 72,934 4,207 -- 144,532 67,391 16.02 34.35 1.09%
2012 4,133 62.90% 72,350 4,133 -- 146,296 69,813 16.89 35.40 3.05%
2014 4,032 61.37% 71,294 4,032 -- 144,588 69,262 17.18 35.86 1.31%
2016 3,880 59.05% 69,290 3,880 -- 145,125 71,955 18.55 37.41 4.31%
2018 3,770 57.38% 67,994 3,770 -- 143,467 71,703 19.02 38.06 1.74%
2020 3,730 56.77% 67,960 3,730 -- 141,610 69,920 18.75 37.97 -0.24%
2021 3,675 55.94% 67,277 3,675 -- 142,654 71,702 19.51 38.81 2.24%
2022 3,549 54.01% 65,271 3,549 -- 137,826 69,006 19.45 38.84 0.06%
2023 3,489 53.10% 64,484 3,489 -- 134,984 67,012 19.21 38.69 -0.38%
2024 3,425 52.14% 63,635 3,425 -- 133,788 66,727 19.48 39.06 0.94%
2025 3,332 50.72% 62,216 3,332 -- 131,048 65,500 19.66 39.33 0.69%
=================================================================================================================================
</TABLE>
^ No fixed costs for the Batesville unit were assumed by C.C. Pace.
* 2000 represents only a partial operational year with an on-line date of
June 2000.
- --------------------------------------------------------------------------------
To provide these forecasts of Project dispatch, operating profile, and market
revenues, C.C. Pace explicitly modeled the Project as a resource in the
Southeast market. Specifically, the Project's heat rate efficiency, delivered
fuel costs, and variable operating costs were input in the model to allow the
simulation to dispatch the unit when system marginal costs were equal to or
higher than Project variable costs. The LS Power unit specifications modeled are
provided in Section VI.
SYSTEM RESULTS DOWNSIDE CASE
C.C. Pace's Downside Case market price forecast (i.e., a conservative case in
which C.C. Pace believes there is a 95% probability that market prices will be
equal to or greater than these results) is between $27.25/MWh and $32.20/MWh
(1998 real dollars) for the period 2000 to 2025. The Downside Case price
forecasts are only 5-10% lower than the Base Case results, thereby highlighting
the overall conservatism of the Base Case.
Exhibit III - 5 summarizes the Southeastern system's market clearing price
results between 2000-2025 for the Base and Downside Cases.
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Exhibit III - 5: Annual System Market Clearing Price - Base and Downside Case
(1998 Real Dollars)
- --------------------------------------------------------------------------------
================================================================================
Downside Case
Base Case Market Market
Clearing Price Clearing Price
Year $/MWh Price Escalation $/MWh Price Escalation
- --------------------------------------------------------------------------------
2000 29.95 27.25
- --------------------------------------------------------------------------------
2002 31.20 4.19% 28.99 6.40%
- --------------------------------------------------------------------------------
2004 31.79 1.88% 29.48 1.68%
- --------------------------------------------------------------------------------
2006 31.66 -0.42% 29.55 0.22%
- --------------------------------------------------------------------------------
2008 31.41 -0.79% 29.38 -0.57%
- --------------------------------------------------------------------------------
2010 31.75 1.10% 29.84 1.57%
- --------------------------------------------------------------------------------
2012 32.49 2.33% 30.60 2.55%
- --------------------------------------------------------------------------------
2014 32.78 0.89% 30.89 0.94%
- --------------------------------------------------------------------------------
2016 33.39 1.87% 31.52 2.06%
- --------------------------------------------------------------------------------
2018 33.76 1.10% 31.71 0.59%
- --------------------------------------------------------------------------------
2020 33.94 0.52% 32.22 1.63%
- --------------------------------------------------------------------------------
2021 34.06 0.37% 32.12 -0.32%
- --------------------------------------------------------------------------------
2022 33.57 -1.45% 32.01 -0.34%
- --------------------------------------------------------------------------------
2023 33.59 0.08% 32.12 0.35%
- --------------------------------------------------------------------------------
2024 33.63 0.12% 32.00 -0.40%
- --------------------------------------------------------------------------------
2025 33.78 0.43% 32.20 0.64%
================================================================================
- --------------------------------------------------------------------------------
BATESVILLE UNIT RESULTS - DOWNSIDE CASE
Exhibit III 6 outlines the operational results of the LS Power unit associated
with C.C. Pace's Downside Case and the difference relative to the Base Case. The
Downside Case represents an unlikely scenario of the impact on the Project's
revenues and dispatch given that there is a significant improvement of expansion
capacity capital costs (i.e., $50/kW cost reduction for combustion turbines and
$64/kW cost reduction for combined cycle installed costs) and system capacity
exceeds requirements by 2,400 MW or approximately three times the size of the
Project's installed capacity. As shown in Exhibit III 6, given this overcapacity
the Project is projected to be dispatched at an annual capacity factor between
46% and 62%, a decrease of between 4-7% as compared to the Base Case. Average
revenues for the unit are projected to be between $31.18/MWh in the year 2000
increasing in real dollars to $38.52/MWh in 2025. Overall, during the forecast
period, average annual revenues earned by the Project were slightly less than in
the Base Case, the reduction ranging from $14.0 million to $18.6 million, or
approximately 13% less, as compared to the base case.
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Exhibit III - 6: Batesville Downside Case Results and Base Case Differential
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Avg. Market
Generation Capacity Fuel Cost O&M Fixed Cost Revenue Coverage Cover Clearing Price Price
Year GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh $/MWh Escalation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 2,519 38.34% 41,415 2,519 -- 78,546 34,612 13.74 31.18
2002 4,094 62.31% 68,200 4,094 -- 130,935 58,641 14.32 31.98 2.58%
2004 4,007 60.99% 67,397 4,007 -- 131,373 59,969 14.97 32.79 2.51%
2006 3,862 58.79% 65,612 3,862 -- 128,358 58,883 15.24 33.23 1.36%
2008 3,861 58.77% 66,255 3,861 -- 128,500 58,384 15.12 33.28 0.15%
2010 3,731 56.79% 64,673 3,731 -- 126,177 57,772 15.48 33.82 1.61%
2012 3,733 56.82% 65,348 3,733 -- 130,396 61,315 16.42 34.93 3.29%
2014 3,571 54.36% 63,153 3,571 -- 126,655 59,931 16.78 35.46 1.53%
2016 3,466 52.76% 61,896 3,466 -- 127,691 62,328 17.98 36.84 3.87%
2018 3,406 51.84% 61,433 3,406 -- 126,422 61,583 18.08 37.12 0.77%
2020 3,424 52.12% 62,379 3,424 -- 126,956 61,152 17.86 37.08 -0.11%
2021 3,277 49.87% 59,968 3,277 -- 124,894 61,649 18.81 38.12 2.80%
2022 3,174 48.32% 58,379 3,174 -- 122,122 60,568 19.08 38.47 0.94%
2023 3,140 47.79% 58,025 3,140 -- 120,593 59,429 18.93 38.41 -0.16%
2024 3,076 46.82% 57,143 3,076 -- 118,317 58,098 18.89 38.46 0.13%
2025 3,038 46.24% 56,705 3,038 -- 117,021 57,279 18.86 38.52 0.16%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Difference from Base Case
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Avg. Market
Generation Capacity Fuel Cost O&M Fixed Cost Revenue Coverage Cover Clearing Price Price
Year GWh Factor $1000 $1000 $1000 $1000 $1000 $/MWh $/MWh Escalation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 -229 -3.48% -3,758 -229 -- -11,640 -7,654 -1.64 -1.64
2002 -406 -6.18% -6,769 -406 -- -17,657 -10,481 -1.04 -1.04 1.97%
2004 -431 -6.56% -7,269 -431 -- -18,357 -10,657 -0.95 -0.95 0.33%
2006 -461 -7.02% -7,853 -461 -- -18,645 -10,331 -0.76 -0.77 0.59%
2008 -417 -6.34% -7,159 -417 -- -16,876 -9,300 -0.70 -0.70 0.20%
2010 -476 -7.25% -8,261 -476 -- -18,355 -9,618 -0.53 -0.54 0.52%
2012 -399 -6.08% -7,002 -399 -- -15,900 -8,498 -0.47 -0.47 0.24%
2014 -460 -7.01% -8,141 -460 -- -17,933 -9,332 -0.40 -0.40 0.23%
2016 -413 -6.29% -7,394 -413 -- -17,434 -9,627 -0.57 -0.57 -0.44%
2018 -364 -5.54% -6,561 -364 -- -17,045 -10,120 -0.94 -0.94 -0.97%
2020 -306 -4.66% -5,581 -306 -- -14,655 -8,768 -0.89 -0.89 0.14%
2021 -399 -6.07% -7,309 -399 -- -17,761 -10,053 -0.70 -0.70 0.56%
2022 -374 -5.70% -6,892 -374 -- -15,704 -8,437 -0.36 -0.37 0.88%
2023 -349 -5.31% -6,459 -349 -- -14,391 -7,583 -0.28 -0.28 0.22%
2024 -349 -5.32% -6,492 -349 -- -15,470 -8,629 -0.59 -0.59 -0.81%
2025 -295 -4.48% -5,511 -295 -- -14,027 -8,221 -0.80 -0.80 -0.53%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
IV. MARKET AREA DEFINITION AND TRANSMISSION
- --------------------------------------------------------------------------------
C.C. Pace defined the relevant market area for the Southeast market by
assessing: a) the location of the Project, b) the transmission interconnections
and capabilities which the Project would have access over the course of the
study period, and c) areas where market prices and demand growth have indicated
a need for additional resources. As a result of this analysis, C.C. Pace has
defined the market area for the Southeast Market Study to consist of the
following utility systems:
o The major utilities in the NERC Southwest Power Pool Southeast
sub-region (SPP-SE)(1) - Entergy-Arkansas, Entergy-Louisiana,
Entergy-Mississippi, Entergy-New Orleans, Entergy-Gulf States,
Central Louisiana Electric Company, Southwestern Electric Power, and
Cajun Electric;
o The utilities in the NERC Southern sub-region - Alabama Power,
Mississippi Power, Georgia Power, Gulf Power, Savannah Electric,
Municipal Electric Authority of Georgia, and Oglethorpe Power;
o The Tennessee Valley Authority;
o The South Mississippi Electric Power Association, and
o Alabama Electric Cooperative.
These utility systems were chosen as the first tier (i.e., directly
interconnected or within one wheel) utility systems to the Project. Second tier
utility systems (indirectly connected utilities such as Duke Power and utilities
to the North and Northwest) were not modeled due to the increased cost of
transmission access limiting the net price of electricity (i.e., minus
transmission costs) available to the Project.
Exhibit IV - 1 displays a map of the major first tier utility systems' service
areas to provide an understanding of the size and breadth of this market area.
Exhibit IV - 2 provides a written description of the service areas of these
utilities. Overall, this market area assessment shows that the proposed Project
is ideally located to serve one of the largest interconnected regions in the
U.S. The Project would have direct access, through the use of integrated
transmission systems operated by TVA and Entergy, to over 87,000 MW of peak
demand if the Project existed today. By the year 2000, the peak demand level for
this region is expected to be over 94,000 MW.
- --------
(1) In late 1998, the Entergy Operating Companies switched membership to the
SERC region of NERC from SPP. This change does not affect the assumptions nor
the results of C.C. Pace's market clearing price forecast.
- --------------------------------------------------------------------------------
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Exhibit IV - 1: Map of Major First Tier Utility Companies
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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Exhibit IV - 2: Description of First Tier Utilities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=========================================================================================================================
Utility Estimated Areas Served
1997 Peak Demand
=========================================================================================================================
<S> <C> <C>
Georgia Power 13,153 Shares the majority of the State of Georgia with
Oglethorpe Power Cooperative members, and the Municipal
Electric Authority of Georgia members
- -------------------------------------------------------------------------------------------------------------------------
Alabama Power 9,778 Shares the southern 2/3 of the State of Alabama with
Alabama Electric Cooperative members and municipals
- -------------------------------------------------------------------------------------------------------------------------
Mississippi Power 2,209 Southeastern Mississippi
- -------------------------------------------------------------------------------------------------------------------------
Savannah Electric & Power Company 802 Savannah, Georgia area
- -------------------------------------------------------------------------------------------------------------------------
Gulf Power 2,040 Western half of the Florida Panhandle
- -------------------------------------------------------------------------------------------------------------------------
Alabama Electric Cooperative 1,395 Wholesale Generating Cooperative selling power to member
cooperatives throughout the Southern 2/3 of Alabama
- -------------------------------------------------------------------------------------------------------------------------
South Mississippi Electric Power Association 979 Wholesale Generating Cooperative selling power to member
cooperatives in Southeastern Mississippi
- -------------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority 26,661 Nearly all of Tennessee, Northern Alabama, Northeastern
Mississippi and some of Southern Kentucky are served by
cooperatives buying power from TVA
- -------------------------------------------------------------------------------------------------------------------------
Cajun Electric Power Cooperative, Inc. 1,491 Wholesale Generating Cooperative selling power to member
cooperatives in Louisiana
- -------------------------------------------------------------------------------------------------------------------------
Central Louisiana Elec. Power Co., Inc. 1,560 Central Louisiana
- -------------------------------------------------------------------------------------------------------------------------
Southwestern Electric Power Co. 4,157 Far Northeast Texas and Western Arkansas
- -------------------------------------------------------------------------------------------------------------------------
Entergy - Arkansas, Inc. 6,131 Southeastern 2/3 of Arkansas
- -------------------------------------------------------------------------------------------------------------------------
Entergy - Gulf States, Inc. 6,517 Southern Louisiana, small portion of East Texas
- -------------------------------------------------------------------------------------------------------------------------
Entergy - Louisiana, Inc. 5,261 Northern Louisiana
- -------------------------------------------------------------------------------------------------------------------------
Entergy - Mississippi, Inc. 2,658 The Western half of Mississippi
- -------------------------------------------------------------------------------------------------------------------------
Entergy - New Orleans, Inc. 1,192 The city of New Orleans
=========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
TRANSMISSION
The Southeast electric market modeled by C.C. Pace is an actively traded and
dynamic market for wholesale power transactions. Significant long-term capacity
transfers take place between and within the North American Electric Reliability
Council's sub-regions of Tennessee Valley Authority (TVA), Southern, and
Southwest Power Pool-Southeast (SPP-SE). On a daily non-firm basis, economy
energy markets are highly active, with lower cost utilities selling excess power
supplies at or near their marginal cost of production to utilities with higher
incremental costs. Exhibits I-1 through I-3 in Attachment I provide historical
net sales/purchases among and between sub-regions in the Southeast power market
for both capacity and energy.
Southeast market area power tends to flow South and East, starting with TVA's
low-cost generation resources in the northern market area, flowing into the
Southern sub-region. The Southern Company (which dominates the Southern
sub-region) actively trades with TVA to its North and with their utility
neighbors to the Northeast (i.e., SCE&G, SCPS, Duke, etc.). The Southern Company
also trades heavily with Florida utilities, selling not only their
"coal-by-wire" contract capacity its FPC and FP&L, but also unit shares and
economy energy sales with Florida utilities. The SPP-SE sub-region both
purchases and sells electricity with TVA and the Southern sub-regions. These
sales depend on demand conditions and the relationship of gas prices to coal
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(i.e., when gas prices are high/low SPP-SE utilities buy/sell economy power
from/to TVA and Southern).
C.C. Pace modeled this situation with three distinct, yet interconnected utility
regions as shown in Exhibit IV - 3. Transfer capability between regions was
generally based on utility reports of interconnection ratings. However, the
transfer capacity was adjusted from these reports in order to maintain the
calibration of C.C. Pace's dispatch model to historical inter-utility transfers
(various operational and power quality constraints may prevent the utilities
from using certain connections simultaneously).
Exhibit IV - 3: Regional Modeling Definition and Transmission Assumptions
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Transmission pricing was based on current pricing, adjusted for the expected
changes in rates over time. C.C. Pace assumed that transmission rates would
range from $1.75/MWh - $2.15/MWh for utilities interconnected with TVA and
Entergy (see Exhibit IV - 3).
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- --------------------------------------------------------------------------------
V. ELECTRICITY DEMAND IN THE SOUTHEAST MARKET
- --------------------------------------------------------------------------------
The electricity market prices in a given market are highly dependent on
electricity demand. To ensure this variable was accurately modeled, C.C. Pace
developed an independent demand forecast for the three major utility regions in
the Southeast (i.e., SPP-SE, Southern and TVA sub-region). This forecast was
prepared based on the current and projected economic conditions for each of
these sub-regions.
This section presents the following: 1) the published forecasts of utilities in
the Southeast market; 2) the region's existing demand profile; 3) C.C. Pace's
approach and methodology to load forecasting, and 4) key input assumptions used
in the market study.
EXISTING DEMAND PROFILE
For each utility's respective demand forecast, C.C. Pace reviewed published data
from the Regional Electricity Supply & Demand Projections (EIA-411) report
submitted by the NERC sub-regions to the U.S. Energy Information Administration
(EIA). The EIA-411 report provides historical and projected peak and energy
demands shown in Exhibit IV-1 for the combined sub-regions of SPP-SE,
SERC-Southern, and SERC-TVA.
Exhibit V - 1 indicates that Southeast market utilities expect summer peak
demand and energy to increase at an average rate of 2.16% and 1.57% per year
over the next 10 years, respectively. Specifically, peak demand is projected to
grow from 87,387 MW to 96,763 MW between 1996 and 2000. Thereafter, peak demand
is expected to rise to approximately 108,200 MW by the year 2006. Net energy is
expected to escalate from a base of approximately 477,045 GWh in 1997 to nearly
553,028 GWh by the year 2006.
Importantly, given this level of load growth (approximately 11,000 MW of peak
demand growth), the proposed Project would represent less than one-tenth of the
total increase in the Southeast's market peak demand requirements. Therefore,
there is little doubt that the Project's capacity and energy will be necessary
to meet future system energy and reliability requirements.
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Exhibit V - 1: Southeast Demand and Energy Requirements Forecast^
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Peak Demand Summer (MW) 87,387 90,686 92,867 94,709 96,763 98,683 100,466 102,307 104,148 106,250 108,200
Peak Demand Winter (MW) 80,995 78,194 80,374 81,926 83,421 85,137 86,848 88,509 90,268 92,095 92,663
Net Energy for Load (MWh) 473,337 477,045 486,016 491,744 501,873 510,658 517,713 525,811 533,107 544,615 553,028
- ------------------------------------------------------------------------------------------------------------------------------------
System Load Factor 61.83% 60.05% 59.74% 59.27% 59.21% 59.07% 58.83% 58.67% 58.43% 58.51% 58.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Summer Change (MW) 3,299 2,181 1,842 2,054 1,920 1,783 1,841 1,841 2,102 1,950
Winter Change (MW) (2,801) 2,180 1,552 1,495 1,716 1,711 1,661 1,759 1,827 568
Energy Change (MWh) 3,708 8,971 5,728 10,129 8,785 7,055 8,098 7,296 11,508 8,413
- ------------------------------------------------------------------------------------------------------------------------------------
Summer Change (%) 3.78% 2.41% 1.98% 2.17% 1.98% 1.81% 1.83% 1.80% 2.02% 1.84%
Winter Change (%) -3.46% 2.79% 1.93% 1.82% 2.06% 2.01% 1.91% 1.99% 2.02% 0.62%
Energy Change (%) 0.78% 1.88% 1.18% 2.06% 1.75% 1.38% 1.56% 1.39% 2.16% 1.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Summer Peak Growth 2.16%
Winter Peak Growth 1.35%
Energy Growth 1.57%
====================================================================================================================================
</TABLE>
^ Source: EIA-411
- --------------------------------------------------------------------------------
Also shown in Exhibit V - 1, the Southeast market has a relatively high current
load factor of over 61%. However, in the future, utilities are expecting this
load factor to decrease by over 3% to approximately 58%(1). This decreasing load
factor will have the impact of increasing the amount of capacity needed to meet
reserve and reliability requirements. However, to be conservative, C.C. Pace's
market study assumes that the customer mix, load shape, and consequently this
high load factor will be maintained throughout the study period, thereby
slightly decreasing the need for incremental expansion capacity.
As is shown in Exhibit V - 2 and Exhibit V - 3, direct load management and
interruptible demand account for 5,400 MW to 6,400 MW of the Southeast utilities
"resources" to meet or reduce peak demand requirements. Despite the inclusion of
direct load management and interruptible demand, Exhibit V - 2 and Exhibit V - 3
indicate the following:
o Regional expansion requirements are approximately 7,000 MW over the
next 10 years.
o Even with a net increase of 14,000 MW of capacity and the inclusion
of 5,200 MW of interruptible demand to reduce peak demand, system
reserve margin is expected to drop below 10%, far below the NERC
standard of 15% reserve margin.
o Consequently, utility forecasts heavily underscore the need for the
proposed Project.
- --------
(1) Utility forecasts do not contain any description or explanation of the
forecast results. However, C.C. Pace believes that one reason for the decrease
in load factor could be a relative increase in the residential or commercial
demand relative to higher load factor industrial customers.
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Exhibit V - 2: Market Demand and Reserve Margin - Summer
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Internal Demand 90,480 92,549 94,339 96,371 98,262 99,992 101,779 103,587 105,649 107,577
Standby Demand 206 318 370 392 421 474 528 561 601 623
Total Internal Demand 90,686 92,867 94,709 96,763 98,683 100,466 102,307 104,148 106,250 108,200
Direct Ctrl Load Mgt 210 194 188 182 182 182 182 182 182 182
Interruptible Demand 5,697 5,874 6,058 6,292 6,293 6,181 6,188 6,052 5,929 5,255
Net Internal Demand 84,779 86,799 88,463 90,289 92,208 94,103 95,937 97,914 100,139 102,763
Total Owned Capacity 98,675 98,886 100,605 101,133 101,372 102,746 102,572 103,498 104,246 105,221
Inoperable Capacity 1,343 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289
Net Operable Capacity 97,332 97,597 99,316 99,844 100,083 101,457 101,283 102,209 102,957 103,932
IPPs 1,019 1,615 2,318 3,146 4,567 5,259 6,001 6,752 7,561 8,462
Capacity Purchases 3,277 3,741 3,152 3,145 2,797 2,944 2,916 3,166 3,419 3,450
Full Respons Purchases 1,061 921 929 786 486 493 500 508 515 515
Capacity Sales 4,329 4,352 3,672 3,508 3,113 3,193 3,109 3,138 3,160 3,160
Full Respons Sales 1,782 1,782 1,782 1,705 1,705 1,705 1,705 1,705 1,705 1,705
Adjustments -- -- -- -- -- -- -- -- -- --
Planned Capacity Res 97,299 98,601 101,114 102,627 104,334 106,467 107,091 108,989 110,777 112,684
- -----------------------------------------------------------------------------------------------------------------------------------
Reserve Margin (MW) 12,520 11,802 12,651 12,338 12,126 12,364 11,154 11,075 10,638 9,921
Reserve Margin (%) 12.87% 11.97% 12.51% 12.02% 11.62% 11.61% 10.42% 10.16% 9.60% 8.80%
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Exhibit V - 3: Market Demand and Reserve Margin - Winter
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Internal Demand 78,013 80,117 81,584 83,029 84,717 86,397 88,011 89,723 91,523 92,062
Standby Demand 181 257 342 392 420 451 498 545 572 601
Total Internal Demand 78,194 80,374 81,926 83,421 85,137 86,848 88,509 90,268 92,095 92,663
Direct Ctrl Load Mgt 117 101 94 89 89 88 89 89 88 89
Interruptible Demand 5,477 5,807 5,764 5,708 5,716 5,613 5,645 5,523 5,430 5,221
Net Internal Demand 72,600 74,466 76,068 77,624 79,332 81,147 82,775 84,656 86,577 87,353
Total Owned Capacity 99,486 101,053 100,778 101,531 102,067 103,140 104,175 104,848 105,849 106,389
Inoperable Capacity 1,386 1,325 1,329 1,289 1,289 1,289 1,289 1,289 1,289 1,289
Net Operable Capacity 98,100 99,728 99,449 100,242 100,778 101,851 102,886 103,559 104,560 105,100
IPPs 519 519 519 1,459 1,959 2,709 3,459 4,209 4,959 4,959
Capacity Purchases 2,441 2,418 2,514 2,491 2,467 2,399 2,564 2,760 2,824 2,905
Full Respons Purchases 903 911 920 928 898 906 913 921 929 929
Capacity Sales 3,998 3,964 3,992 3,235 3,090 3,113 3,093 3,109 3,138 3,138
Full Respons Sales 1,782 1,782 1,782 1,705 1,705 1,705 1,705 1,705 1,705 1,705
Adjustments -- -- -- -- -- -- -- -- -- --
Planned Capacity Res 97,062 98,701 98,490 100,957 102,114 103,846 105,816 107,419 109,205 109,826
- -----------------------------------------------------------------------------------------------------------------------------------
Reserve Margin (MW) 24,462 24,235 22,422 23,333 22,782 22,699 23,041 22,763 22,628 22,473
Reserve Margin (%) 25.20% 24.55% 22.77% 23.11% 22.31% 21.86% 21.77% 21.19% 20.72% 20.46%
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
C.C. PACE'S LOAD FORECASTING METHODOLOGY
C.C. Pace performed an independent forecast of demand growth in the Southeast
market. To benchmark utility forecasts, C.C. Pace's independent forecast was
conducted according to the methodology illustrated in Exhibit V - 4. This
methodology has two primary components. The first is the use of econometric
models to forecast annual peak demand and energy levels based on changes in
population, employment, income, and other factors. The second component of the
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methodology is the translation of historical hourly demand levels and forecasted
peak demands to create predicted hourly load profiles.
Typically, the most accurate means of projecting future demand is not done
solely by analyzing past trends in peak and energy demand, but by analyzing the
underlying factors which drive the consumption of electricity. This approach is
often referred to as a "bottom-up" analytical approach. As shown in Exhibit V -
4, the foundation of C.C. Pace's load forecasting methodology is a bottom-up
analytical approach.
Exhibit V - 4: C.C. Pace Load Forecasting Methodology
- --------------------------------------------------------------------------------
[FLOW CHART OMITTED]
- --------------------------------------------------------------------------------
C.C. Pace generated its demand forecast based on the historical relationships
between regional demand and multiple historic economic indicators (i.e.,
population, employment and income) between 1989-1995. To generate this demand
forecast, C.C. Pace:
o Forecasted demand based on the historical trend of the logarithms of
population, employment and income.
o Forecasted demand based on a forecast of these same indicators
generated by the Bureau of Economic Affairs (BEA). The BEA generally
projected a slow economic growth that would lower demand growth in
half from historic trends.
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o Averaged these two forecasts to generate a conservative base case of
electricity demand growth.
Other issues considered with respect to C.C. Pace's independent forecast
include:
o Normal weather conditions are assumed. No factors were included to
simulate extreme weather conditions.
o The forecast incorporated all demand and energy reductions from
utility dispatchable and non-dispatchable DSM programs as published
in Utility Demand forecasts. C.C. Pace believes that this is a
conservative assumption in that many DSM programs are extremely
aggressive in future years and will most likely fall short of goals.
o The economic outlook for this twenty-year forecast attempts to
describe the short-term outlook for the current business cycle, as
well as the long-term trend behavior for the economy. It is
important to note that identification of the long-term trend in
economic/demographic conditions represents the primary focus of this
forecast.
FORECAST RESULTS
C.C. Pace developed an independent demand forecast for the three major utility
regions in the Southeast (i.e., SPP-SE, Southern, and TVA sub-regions). C.C.
Pace prepared a demand forecast based on current and projected economic
conditions for each of these sub-regions. Please refer to Attachment II,
Exhibits II-1 through II-6, which detail C.C. Pace's supporting data and demand
forecasts.
Based on the results of C.C. Pace's independent forecast, regional electricity
peak demand growth will slow from its historical growth rate of approximately
3.25% per year to between 1.51% to 2.24% annually over the next 20 years. C.C.
Pace forecasts a slightly lower annual escalation rate than currently filed
utility forecasts. Specifically, regional utility forecasts project 2.16% annual
demand growth from 1996-2006, while C.C. Pace projects a 2.01% demand growth
over the same time period. While C.C. Pace growth rate projections are slightly
lower than utility forecasts, the starting point of peak and energy demand are
slightly higher. Therefore, the overall level of C.C. Pace's forecast is
slightly higher than current utility forecasts. However, as shown in Exhibit V -
5 and Exhibit V - 6, C.C. Pace's forecasts are well below historical demand
growth trends. Consequently, utility forecasts were determined to be highly
unrealistic.
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Exhibit V - 5: C.C. Pace vs. Utility Energy Demand Forecast
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
Exhibit V - 6: C.C. Pace vs. Utility Peak Demand Forecast
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
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C.C. Pace's regression analysis indicated an extremely strong correlation
between electricity demand and the economic indicators. Specifically, Exhibit
II-2 in Attachment II summarizes C.C. Pace's regression analyses which produced
R(2) factors of 0.975, 0.987, and 0.964 for SPP-SE, Southern, and TVA,
respectively. Therefore, regression results show that over 98% of all changes in
economic indicators correlate to changes in electricity demand. C.C. Pace's
regression formulas yield only a total of 579 MW/year or 5,075 GWh average error
for the entire Southeast market's historic electricity demand.
Unless significant changes occur in the historic correlation of economic drivers
and electricity demand or the projected growth rates of these economic drivers
fall short, it is highly probable that utility forecasts are conservative and
underestimated. These conservative forecasts may be explained by two factors:
o The utilities' optimistic estimates of the effects of current and
future demand side management and conservation programs on total
system demand.
o The utilities' propensity to down play the generation opportunities
for independent power producers.
HOURLY LOAD FORECASTS
The forecast of overall demand growth is not the only element needed to
accurately characterize future demand. The characterization and replication of
daily, weekly, and seasonal load variations significantly impact the usage,
type, and cost of resources required by a utility system. The last step in C.C.
Pace's load forecasting methodology is the projection of hourly demand values.
C.C. Pace's methodology calls for the application of annual growth factors
derived from our peak demand and energy forecasts to the actual 8,760 hours of
demand occurring in a utility system. In this way, our market modeling system
will have the highest level of detail to reflect not only the cost to serve a
certain megawatt of demand, but also how hourly changes impact the use of
different types of generation units. Specifically, hourly system needs and
constraints are particularly critical when analyzing hourly distributions of
market clearing prices.
C.C. Pace uses an Hourly Load Module tool to translate annual peak and energy
demand growth factors into future hourly demand for a given study period. The
translation process is a two step process:
1) The first step involves aggregating actual utility hourly loads as
reported to Federal Energy Regulatory Commission (for each utility
under consideration in this study). This aggregation creates an
integrated hourly system load profile for the Southeastern market
area (this will be referred to as base system hourly load file).
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2) The second step involves applying annual growth factors to the base system
hourly load file (created in step 1), to create an hourly demand file for
each year in the study.
C.C. Pace assumed that the system load shape that exists currently would be
maintained throughout the study. However, system load factor does change
slightly as the result of applying annual peak and energy growth factors. As the
relationship of peak demand and energy change, so will the system load factor
and shape change.
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- --------------------------------------------------------------------------------
VI. SOUTHEAST POWER GENERATION RESOURCES
- --------------------------------------------------------------------------------
Section VI focuses on the following:
o Providing a profile of the existing generation resources of this
market;
o Identifying the fixed capital and operational costs of these
resources; and,
o C.C. Pace's assumptions associated with the type and cost of new
resource additions.
GENERATION PROFILE
The Southeast market area is comprised of a diverse group of resources utilizing
various fuels. However, as shown in Exhibit VI - 1, coal-fired and nuclear
capacity dominate the region's capacity mix comprising over 66% of the installed
capacity. In particular, coal fired capacity is the dominant generation type
totaling over 48% of the installed capacity of the region, or over 46,000 MW.
Exhibit VI - 1: Southeast Market Generation Capacity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
============================================================================================================================
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IPPs 519 1,019 1,615 2,318 3,146 4,567 5,259 6,001 6,752 7,561 8,462
Nuclear 16,718 16,747 16,760 16,872 16,886 16,886 16,886 16,886 16,886 16,886 16,886
Coal 46,868 46,932 46,840 46,933 46,919 46,919 46,919 46,919 46,919 46,919 46,893
ST - Dual Fuel 15,049 15,049 15,049 14,884 14,884 14,825 14,825 14,825 14,825 14,825 14,825
ST - Gas 2,874 2,873 2,873 2,873 2,873 2,873 2,829 2,829 2,829 2,829 2,829
ST - Oil 122 122 122 122 122 122 122 122 122 122 122
Hydro 8,157 8,157 8,192 8,192 8,192 8,192 8,192 8,192 8,192 8,192 8,192
CT 5,548 5,689 5,915 5,915 5,915 6,224 6,365 6,615 6,765 6,765 6,765
CC 486 486 486 486 486 486 486 486 486 711 936
Other -- 52 81 1,760 2,288 2,277 3,554 3,130 3,906 4,429 5,205
- ----------------------------------------------------------------------------------------------------------------------------
Total Capacity 96,341 97,126 97,933 100,355 101,711 103,371 105,437 106,005 107,682 109,239 111,115
============================================================================================================================
</TABLE>
Further, the region has significant hydro resources comprising approximately 8%
of the installed capacity mix, or approximately 8,000 MW of capacity. This
compares to other regions which typically have hydro resources of 5% of total
installed capacity.
Southeast (specifically SPP-SE) steam turbine gas and oil fired capacity
comprise a substantial share of system resources at 16,750 MW or 17% of
installed capacity. The TVA and Southern sub-regions have few of these oil or
gas-fired steam units. The reason for this capacity composition is the SPP-SE's
location near to the gulf coast oil and gas producing regions. This location
provides a significant cost advantage in the transportation and availability of
these fuels.
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Finally, Exhibit VI - 2 depicts the Southeast market's projected generation
requirements by generation type. As is shown in Exhibit VI - 2, the Southeast
market is highly dependent on nuclear and coal resources for its generation
requirements. In 1996, over 83% of the region's requirements were generated by
coal or nuclear resources. Gas or oil-fired capacity provided about 10% of the
region's energy requirements.
Exhibit VI - 2: Southeast Generation Requirements by Capacity Type
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
============================================================================================================================
MWh 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 270,032 287,008 289,164 291,284 299,172 294,675 298,484 305,138 305,253 305,406 303,345
Nuclear 117,168 118,383 117,708 120,616 119,633 120,731 120,774 120,190 118,648 120,334 120,797
Hydro 30,247 28,143 27,566 28,044 28,073 28,126 28,178 28,231 28,283 28,335 28,368
ST - Gas 40,023 36,207 36,939 35,712 37,086 40,515 39,873 39,621 42,668 41,430 41,425
ST - Oil 1,419 185 170 164 209 216 215 227 238 227 209
CT - Oil/Gas 1,978 2,944 4,939 5,504 6,318 5,636 6,190 7,003 8,428 7,520 6,970
CC - Oil/Gas 134 503 386 388 384 1,712 2,044 1,949 2,061 4,687 7,992
IPPs 1,814 501 877 1,133 1,418 8,699 9,985 10,510 11,769 16,396 21,348
Other 443 4,415 3,227 4,336 5,838 5,767 7,617 8,268 12,243 13,926 16,273
- ----------------------------------------------------------------------------------------------------------------------------
Total
Production 463,258 478,289 480,976 487,181 498,131 506,077 513,360 521,137 529,591 538,261 546,727
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Percent of Gen. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 58.29% 60.01% 60.12% 59.79% 60.06% 58.23% 58.14% 58.55% 57.64% 56.74% 55.48%
Nuclear 25.29% 24.75% 24.47% 24.76% 24.02% 23.86% 23.53% 23.06% 22.40% 22.36% 22.09%
Hydro 6.53% 5.88% 5.73% 5.76% 5.64% 5.56% 5.49% 5.42% 5.34% 5.26% 5.19%
ST - Gas 8.64% 7.57% 7.68% 7.33% 7.45% 8.01% 7.77% 7.60% 8.06% 7.70% 7.58%
ST - Oil 0.31% 0.04% 0.04% 0.03% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04%
CT - Oil/Gas 0.43% 0.62% 1.03% 1.13% 1.27% 1.11% 1.21% 1.34% 1.59% 1.40% 1.27%
CC - Oil/Gas 0.03% 0.11% 0.08% 0.08% 0.08% 0.34% 0.40% 0.37% 0.39% 0.87% 1.46%
IPPs 0.39% 0.10% 0.18% 0.23% 0.28% 1.72% 1.95% 2.02% 2.22% 3.05% 3.90%
Other 0.10% 0.92% 0.67% 0.89% 1.17% 1.14% 1.48% 1.59% 2.31% 2.59% 2.98%
- ----------------------------------------------------------------------------------------------------------------------------
Total
Production 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Gas-fired capacity is expected to play an increasing future role in satisfying
capacity and energy needs. With the relatively low price of natural gas
delivered to the region, the increased efficiency of gas turbine and gas
combined cycle technology, and reduced capital costs of gas turbine and gas
combined cycle technology, most utilities in these sub-regions are planning to
only install these technologies in the future. In fact, C.C. Pace's capacity
expansion plan predicts that gas fired generation will be the only generation
type added to meet demand over the study period.
GENERATING UNIT COST PROFILE
C.C. Pace reviewed the cost profile of the existing installed capacity base.
This analysis is particularly important for assessing the need and
competitiveness of resource additions in a given market area. Specifically,
knowledge of the cost magnitude and competitiveness of existing capacity is
essential for a planned project to assess who the competitors will be in the
market and what cost advantages a new unit must have over existing units.
Further, the full costs of generation are particularly important, given C.C.
Pace's CEMAS modeling system. The current wholesale market does not include the
recovery of fixed O&M or
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capital investment when determining market prices. However, C.C. Pace's model of
the future market structure emphasizes these fixed costs as essential to
determining sustainable, all-in capacity and energy prices.
Exhibit VI - 3 provides a comparison of the capital costs for selected utilities
in the Southeast market area. Capital costs are organized by generation
technology (i.e., steam, nuclear, hydro, pumped storage, gas-fired steam
turbine, and gas turbine). Unit original book value data was obtained from FERC
Form 1 for investor owned utilities and EIA-412 for public utilities. The
following are summary observations of these costs:
o The average capital cost of nuclear capacity in the region is
approximately $1,762/kW. Nuclear capacity capital costs range from a
low of $1,659/kW for TVA to a high of $2,088/kW and $2,098/kW for
Entergy-Mississippi and Entergy-Louisiana, respectively. This high
cost of nuclear capacity indicates a potential area of weakness for
the region as a whole and Entergy in particular. These high capital
costs result in a high level of potential stranded costs for these
utilities in a deregulated electric marketplace.
o Overall, the average capital cost of steam turbine capacity in the
region is approximately $316/kW. This capacity has an average heat
rate of 10,248 Btu/kWh and O&M costs of $15.30/kW.
o There is little true peaking capacity among the major utilities
(i.e., only 6.9% of these utilities' capacity is combustion
turbine). This capacity has low capital costs (average $144/kW) but
high variable costs as indicated by an average heat rate of 14,448
Btu/kWh.
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Exhibit VI - 3: Major Southeast Utility Unit Cost Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
================================================================================================================================
Gas Turbine Hydroelectric Nuclear Pump Storage Steam Steam Gas Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Entergy Louisiana, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) 21 -- 1,200 -- 4,171 481 5,873
Plant Cost ($) 2,119,268 -- 2,517,886,191 -- 490,286,777 69,695,996 3,079,988,232
Non-Fuel O&M ($) 65,771 -- 94,663,917 -- 25,759,926 4,556,400 125,046,014
MMBtu Consumed 92,391 -- 94,053,249 -- 122,664,170 4,592,599 221,402,409
Generation (MWh) 3,709 -- 8,926,846 -- 11,198,362 379,899 20,508,816
Plant Cost ($/kW) 102.38 -- 2,098.45 -- 117.54 144.96 524.47
Non-Fuel O&M ($/kW) 3.18 -- 78.89 -- 6.18 9.48 21.29
Heat Rate (btu/kWh) 24,910 -- 10,536 -- 10,954 12,089 10,795
- --------------------------------------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) -- -- -- -- 3,148 -- 3,148
Plant Cost ($) -- -- -- -- 588,041,216 -- 588,041,216
Non-Fuel O&M ($) -- -- -- -- 21,008,302 -- 21,008,302
MMBtu Consumed -- -- -- -- 95,309,173 -- 95,309,173
Generation (MWh) -- -- -- -- 7,997,977 -- 7,997,977
Plant Cost ($/kW) -- -- -- -- 186.79 -- 186.79
Non-Fuel O&M ($/kW) -- -- -- -- 6.67 -- 6.67
Heat Rate (btu/kWh) -- -- -- -- 11,917 -- 11,917
- --------------------------------------------------------------------------------------------------------------------------------
Georgia Power Co.
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) 1,882 654 1,962 424 10,862 -- 15,783
Plant Cost ($) 308,409,336 261,877,850 4,097,191,570 382,672,136 2,831,060,288 -- 7,881,211,180
Non-Fuel O&M ($) 7,373,471 7,146,024 139,628,840 2,409,711 210,538,867 -- 367,096,913
MMBtu Consumed 4,268,732 0 150,972,733 0 492,672,103 -- 647,913,568
Generation (MWh) 320,944 1,916,193 14,238,184 644,528 47,436,174 -- 64,556,023
Plant Cost ($/kW) 163.91 400.62 2,088.05 902.29 260.65 -- 499.34
Non-Fuel O&M ($/kW) 3.92 10.93 71.16 5.68 19.38 -- 23.26
Heat Rate (btu/kWh) 13,301 -- 10,603 -- 10,386 -- 10,036
- --------------------------------------------------------------------------------------------------------------------------------
Mississippi Power Co.
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) 226 -- -- -- 1,887 -- 2,113
Plant Cost ($) 68,706,383 -- -- -- 653,936,538 -- 722,642,921
Non-Fuel O&M ($) 6,232,766 -- -- -- 42,153,343 -- 48,386,109
MMBtu Consumed -- -- -- -- 90,558,823 -- 90,558,823
Generation (MWh) 1,055,765 -- -- -- 9,109,565 -- 10,165,330
Plant Cost ($/kW) 303.94 -- -- -- 346.57 -- 342.01
Non-Fuel O&M ($/kW) 27.57 -- -- -- 22.34 -- 22.90
Heat Rate (btu/kWh) -- -- -- -- 9,941 -- 8,909
- --------------------------------------------------------------------------------------------------------------------------------
TVA
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) 3,957 4,016 10,075 1,739 40,445 481 60,713
Plant Cost ($) 498,027,430 1,049,474,040 16,713,024,660 332,111,635 14,576,980,209 68,236,582 33,237,854,556
Non-Fuel O&M ($) 13,791,637 32,633,695 601,556,274 5,628,315 626,213,116 4,624,698 1,284,447,735
MMBtu Consumed 7,962,055 -- 652,495,175 -- 1,970,051,869 6,312,727 2,636,821,825
Generation (MWh) 528,303 15,888,087 61,771,767 2,342,945 194,669,157 581,443 275,781,702
Plant Cost ($/kW) 125.86 261.32 1,658.86 190.98 360.41 141.86 547.46
Non-Fuel O&M ($/kW) 3.49 8.13 59.71 3.24 15.48 9.61 21.16
Heat Rate (btu/kWh) 15,071 -- 10,563 -- 10,120 10,857 9,561
- --------------------------------------------------------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------------------------------
Capacity (MW) 6,085 4,670 13,237 2,163 60,513 962 87,630
Plant Cost ($) 877,262,417 1,311,351,890 23,328,102,421 714,783,771 19,140,305,028 137,932,578 45,509,738,105
Non-Fuel O&M ($) 27,463,645 39,779,719 835,849,031 8,038,026 925,673,554 9,181,098 1,845,985,073
MMBtu Consumed 12,323,177 -- 897,521,157 -- 2,771,256,138 10,905,326 3,692,005,798
Generation (MWh) 1,908,721 17,804,280 84,936,797 2,987,473 270,411,235 961,342 379,009,848
Plant Cost ($/kW) 144.16 280.82 1,762.33 330.44 316.30 143.41 519.34
Non-Fuel O&M ($/kW) 4.51 8.52 63.14 3.72 15.30 9.55 21.07
Heat Rate (btu/kWh) 14,448 -- 10,567 -- 10,248 11,344 9,741
================================================================================================================================
</TABLE>
In terms of generation costs, Exhibit VI - 4 summarizes regional fixed and
variable generation costs. As shown, TVA is the low cost region at approximately
$30.00/MWh followed by Southern at $34.25/MWh and SPP-SE at $43.89/MWh. For the
entire region, total system costs averaged $35.36/MWh in 1996. Of this
$35.36/MWh, roughly two-thirds was represented by fixed costs or $21.45/MWh.
Attachment III, Exhibits III-1 through III-5 provide a complete summary of
embedded generation costs by capacity type.
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Exhibit VI - 4: Southeast Generation Embedded Cost Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sub- Data 1993 1994 1995 1996 1993 1994 1995 1996
Region $/MWh $/MWh $/MWh $/MWh
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SE Sum of Fuel Total $ 1,867,532,387 1,868,059,363 1,862,044,354 2,092,774,453 16.74 16.05 15.18 17.60
Sum of Variable O&M Total $ 154,788,958 149,459,506 138,567,175 144,891,245 1.39 1.28 1.13 1.22
Sum of Fixed O&M Total $ 664,848,108 643,591,122 594,591,197 618,054,741 5.96 5.53 4.85 5.20
Sum of Fixed Total $ 2,628,021,478 2,630,874,090 2,177,515,045 2,362,347,881 23.55 22.60 17.75 19.87
Total Variable 2,022,321,345 2,017,518,869 2,000,611,529 2,237,665,698 18.12 17.33 16.31 18.82
Total Fixed 3,292,869,586 3,274,465,212 2,772,106,242 2,980,402,622 29.51 28.13 22.60 25.07
Total Costs 5,315,190,931 5,291,984,081 4,772,717,771 5,218,068,320 47.63 45.46 38.92 43.89
Sum of Total Gen 111,592,339 116,414,552 122,643,983 118,900,272
- ------------------------------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Total $ 2,650,887,219 2,469,510,964 2,553,488,940 2,582,567,092 14.36 13.40 13.37 12.85
Sum of Variable O&M Total $ 215,836,060 205,488,878 213,915,846 221,354,195 1.17 1.11 1.12 1.10
Sum of Fixed O&M Total $ 878,920,888 837,986,761 858,858,704 1,153,310,764 4.76 4.55 4.50 5.74
Sum of Fixed Total $ 3,036,946,162 2,920,811,179 2,980,484,957 3,185,602,590 16.45 15.84 15.61 15.86
Total Variable 2,866,723,279 2,674,999,842 2,767,404,786 2,803,921,287 15.53 14.51 14.49 13.96
Total Fixed 3,915,867,050 3,758,797,940 3,839,343,661 4,078,213,354 21.21 20.39 20.11 20.30
Total Costs 6,782,590,329 6,433,797,782 6,606,748,447 6,882,134,641 36.74 34.90 34.60 34.25
Sum of Total Gen 184,594,371 184,357,607 190,946,391 200,916,764
- ------------------------------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Total $ 1,383,242,181 1,450,390,521 1,348,406,720 1,394,624,396 10.49 10.69 9.92 9.09
Sum of Variable O&M Total $ 118,526,097 133,461,829 122,458,535 148,074,903 0.90 0.98 0.90 0.96
Sum of Fixed O&M Total $ 474,104,388 533,847,315 489,834,138 592,299,609 3.59 3.94 3.60 3.86
Sum of Fixed Total $ 2,068,141,925 2,063,827,599 2,072,201,869 2,498,948,727 15.68 15.21 15.24 16.28
Total Variable 1,501,768,278 1,583,852,350 1,470,865,255 1,542,699,299 11.39 11.68 10.82 10.05
Total Fixed 2,542,246,313 2,597,674,914 2,562,036,007 3,091,248,336 19.27 19.15 18.84 20.14
Total Costs 4,044,014,591 4,181,527,264 4,032,901,262 4,633,947,635 30.66 30.83 29.66 30.19
Sum of Total Gen 131,904,978 135,648,800 135,963,145 153,474,504
- ------------------------------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Total $ 5,901,661,787 5,787,960,848 5,763,940,014 6,069,965,941 13.79 13.26 12.82 12.83
Total Sum of Variable O&M Total $ 489,151,115 488,410,213 474,941,556 514,320,343 1.14 1.12 1.06 1.09
Total Sum of Fixed O&M Total $ 2,017,873,384 2,015,425,198 1,943,284,039 2,363,665,114 4.71 4.62 4.32 4.99
Total Sum of Fixed Total $ 7,733,109,565 7,615,512,868 7,230,201,871 8,046,899,198 18.06 17.45 16.08 17.00
Total Variable 6,390,812,902 6,276,371,061 6,238,881,570 6,584,286,284 14.93 14.38 13.88 13.91
Total Fixed 9,750,982,949 9,630,938,066 9,173,485,910 10,149,864,312 22.78 22.07 20.41 21.45
Total Costs 16,141,795,851 15,907,309,127 15,412,367,480 16,734,150,596 37.71 36.45 34.28 35.36
Total Sum of Total Gen 428,091,688 436,420,958 449,553,519 473,291,540
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
C.C. PACE MARKET STUDY RESOURCE ADDITION ASSUMPTIONS
In evaluating potential generation technologies for meeting future demand
requirements in the Southeast region, C.C. Pace assessed each technology's
maturity level, operating history, and duty cycle. The Southeast region's
existing power supply system is comprised of an abundance of base load power
plants (e.g., coal, nuclear and hydro) and limited intermediate and peaking
capabilities.
Based on C.C. Pace's review of available generation technologies and
consultation with equipment manufacturers, three generic types of technologies
were potential candidates for meeting future demand requirements for purposes of
this analysis:
o Pulverized-Coal Plant: designed to operate for meeting system base
load demand.
o Combined Cycle Plant: designed to operate at capacity factors from
55-90% and up to meet intermediate to base load requirements.
o Combustion Turbine Plant: designed to operate at a 3-15% capacity
factor for meeting peak load requirements.
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C.C. Pace developed cost and performance characteristics for each sub-region
independently. Exhibit VI - 5 presents a summary of the cost and performance
characteristics of the three expansion options described above for the SPP-SE
sub-region. For the purposes of this study, information presented for each of
these options represents "typical" configurations, rather than a specific
vendor's cost and performance data. Further, C.C. Pace assumed an increasing
rate of efficiency of CT and CC technology each year. Specifically, CT's were
assumed to increase efficiency from 10,100 to 9,350 Btu/kWh from 2000 to 2020.
CC technology was assumed to improve from 6,860 to 6,360 Btu/kWh from 2000 to
2020.
Additionally, it should be noted that C.C. Pace developed these expansion unit
costs and operational characteristics as predictions of next generation
equipment. Specifically, C.C. Pace's improvements to current "state-of-the-art"
equipment in the Base Case Assumptions. These improvements are expected to be
commercially available from 2005 to 2020.
Exhibit VI - 5: SPP-SE Expansion Unit Characteristics
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Item Unit CT CC Coal
- --------------------------------------------------------------------------------
Assumptions
Capacity MW 230 360 500
Cost $/kW 300 500 1,100
Capacity Factor* % 15% 85% 85%
Annual Maintenance Weeks 2 3 4
Forced Outage % 2.5% 2.5% 5.0%
Fuel Cost $/MMBtu 2.24 2.24 1.37
Fixed O&M $/kW-yr 4.00 12.00 29.00
Variable O&M $/MWh 3.50 0.75 1.50
Heat Rate Btu/kWh 9,700 6,600 9,600
Percent Equity % 30% 30% 30%
Discount Rate % 8.5% 8.5% 8.5%
Return on Equity % 14% 14% 14%
Project Life Years 20 20 20
Installed Cost ($000) 69,000 180,000 550,000
Fixed O&M ($000) 920 4,320 14,500
Amount of Equity ($000) 20,700 54,000 165,000
Amount of Debt ($000) 48,300 126,000 385,000
- --------------------------------------------------------------------------------
Annual Fixed Costs
Total Debt ($000) 5,104 13,315 40,683
Interest ($000) 4,106 10,710 32,725
Principal ($000) 998 2,605 7,958
ROI ($000) 2,898 7,560 23,100
Fixed O&M ($000) 920 4,320 14,500
Taxes ($000) 1,265 3,218 12,375
Total Fixed ($000) 10,187 28,413 90,658
- --------------------------------------------------------------------------------
Cost Summary
Variable Costs $/MWh 25.23 15.53 14.65
Fixed Costs $/MWh 33.71 10.60 24.35
Total Costs $/MWh 58.93 26.13 39.00
- --------------------------------------------------------------------------------
* Capacity factor assumed for expansion planning purposes only
- --------------------------------------------------------------------------------
The only difference between the three sub-regions regarding plant performance
and cost estimates is the delivered price of fuel. To develop expansion unit
fuel price assumptions for
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gas-fired expansion units, C.C. Pace used the fuel price assumptions defined in
Section VII for each state and applied an adjustment based on the weighted
average retail electricity sales for the states in the sub-region. Exhibit V-6
further presents C.C. Pace's calculations of fixed costs for each of the three
expansion options given our base case assumptions. The fixed cost data presented
in this table was used to evaluate market clearing prices in the Revenue
Requirement and Bid Analysis Module presented in Section II and to screen for
the appropriate additions mix to develop a least cost expansion plan. As shown
in the table, annual fixed costs for each of the expansion options include debt
payment (both interest and principal), return on equity, fixed O&M, and taxes.
In conducting our analysis, C.C. Pace assumed a financing structure of 30%
equity and 70% debt, and a 14% return on equity required by developers to
construct these power plants. Attachment III, Exhibits III-7 and III-8 provide
expansion unit characteristics for the Southern and TVA sub-regions.
Through the use of this screening analysis, C.C. Pace arrived at one major
conclusion:
o Because of the high capital costs of the pulverized coal option
(i.e., more than double the gas-fired combined cycle option) these
units were found to be uneconomic compared to the combined cycle
option. Specifically, expansion planning results found that
gas-fired combined cycle units would be the only base load
generation option considered in the CEMAS base case scenarios.
Operational assumptions for the LS Power unit are summarized in Exhibit VI - 6
below:
Exhibit VI - 6: Batesville Unit Specifications
- --------------------------------------------------------------------------------
================================================================================
Name LSP Unit
- --------------------------------------------------------------------------------
On-Line Date June 1, 2000
- --------------------------------------------------------------------------------
Equivalent Force Outage Rate % 2.80%
- --------------------------------------------------------------------------------
Annual Maintenance Requirements % 5.2% per year
- --------------------------------------------------------------------------------
Net Output MW 750
- --------------------------------------------------------------------------------
Variable O&M Expense $/MWh 1.00
- --------------------------------------------------------------------------------
1998 Deliverable Fuel Cost $/MMBtu 2.30 - Mississippi
- --------------------------------------------------------------------------------
Cost Per Start $ $2,500
- --------------------------------------------------------------------------------
Heat Rate Efficiency Btu/kWh 7,050
- --------------------------------------------------------------------------------
Minimum Operating Load MW 175
- --------------------------------------------------------------------------------
Service Area Location TVA
- --------------------------------------------------------------------------------
Interconnected Utilities TVA, SPP-SE
- --------------------------------------------------------------------------------
Transmission Pricing Arrangements TVA- SPP-SE @ $0.00/MWh and
Southern @ $1.82/MWh
================================================================================
DETERMINATION OF COMPETITIVE MARKET EXPANSION PLAN
The C.C. Pace market study does not add expansion units to meet a fixed target
reserve margin as is the current planning method for regulated utilities. A
competitive market structure dictates, by
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definition, that participants will build expansion units only if they expect to
receive a sufficient return on their investment. Therefore, in the analysis
expansion units are added only when the market price can support them.
To determine the competitive market expansion plan, C.C. Pace followed three
rules or steps to arrive at the optimal expansion plan. These rules or steps are
as follows:
1. Use of the existing units and planned utility unit additions as the
minimum expansion plan as a starting point.
2. The addition of expansion units in each year up to such point that
the whole class of units (i.e., combined cycle or combustion
turbines) receive full recovery. This was done to the point that the
next unit added to the system would not be able to recover its
costs.
3. Unit additions were optimized for each sub-system (i.e., SPP-SE,
TVA, and Southern) and each year of the study period to yield the
largest number of combined cycle units and combustion turbine units
possible while still maintaining full recovery of these units.
4. Model determined the optimal cost solution and capacity mix of
combined cycle and combustion turbine technology in each year
modeled.
5. The model did not assume or allow for the retirement of existing
capacity.
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
VII. FUEL PRICING..........................................................C-45
HISTORICAL FUEL PRICING...............................................C-45
COAL..................................................................C-50
C.C. Pace Coal Price Forecast...............................C-52
FUEL OIL..............................................................C-55
C.C. Pace Fuel Oil Price Forecast...........................C-56
Distillate Oil........................................................C-56
Residual Oil..........................................................C-58
URANIUM...............................................................C-58
NATURAL GAS...........................................................C-58
C.C. Pace Natural Gas Price Forecast........................C-59
FUEL PRICE FORECASTING METHODOLOGY....................................C-62
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- --------------------------------------------------------------------------------
VII. FUEL PRICING
- --------------------------------------------------------------------------------
C.C. Pace's fuel pricing analysis focuses on the four fossil fuels most commonly
used to generate power in the Southeast region: natural gas, coal, No. 2 fuel
oil (distillate) and No. 6 fuel oil (residual), and uranium. This section
discusses historical fuel prices and trends and C.C. Pace's fuel price
forecasting methodology, underlying assumptions, and major conclusions.
HISTORICAL FUEL PRICING
C.C. Pace used FERC Form 423 data for plant specific fuel costs to build a
history of each of the utilities' delivered monthly average cost of natural gas,
oil, and coal between 1994 and 1997. This data determines the fuel procurement
variances of each facility throughout the Southeast market. Exhibit VII - 1 and
Exhibit VII - 2 illustrate the average prices regional utilities paid for coal,
No. 2 oil, and natural gas delivered to their power plants.(1)
As shown in Exhibit VII - 1, coal has the lowest and most stable pricing of the
three generation fuels, ranging between an average monthly cost of $1.20 -
$1.50/MMBtu. Natural gas, until the recent market volatility, was the second
lowest priced commodity with an historic average price of $1.75 - $2.10/MMBtu.
However, since 1996, natural gas pricing has been quite volatile, ranging from a
high of nearly $4.50/MMBtu to a low of $1.95/MMBtu. Lastly, delivered No. 2 fuel
oil pricing to the Southeast utilities has typically ranged between a low of
$3.50/MMBtu to a high of $4.25/MMBtu. On average, Southeast utilities pay
approximately $4.00/MMBtu for No. 2 fuel oil.
- --------
(1) No. 6 fuel oil prices are not included due to the low usage of this fuel
resulting in an incomplete price data series.
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Exhibit VII - 1: Average Southeast Monthly Fuel Prices
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
The Southeast market is dominated by coal-fired generation, which currently
comprise 57% of total generation requirements, followed by nuclear at 22% of
generation. Exhibit VII - 3 provides a comparison of generation by fuel type for
January 1994 and July 1997, as well as C.C. Pace's forecasted generation mix for
2006 and 2014 . As shown in Exhibit VII - 3, coal, uranium, fuel oil, and water
generation declined slightly from 1994 through 1997, while natural gas-fired
generation has increased by nearly 10%. Into the future, gas-fired capacity
continues to increase market share, with coal-fired and nuclear generation
decreasing as a result.
Gas-fired generation has increased historically, and will continue to increase,
its relative generation share for the following reasons:
o Utilities rely more on gas-fired steam turbines and combined cycle
facilities to meet incremental demand.
o No significant coal, uranium or hydro facilities have been built in
the system, therefore, increased generation from existing facilities
is very limited.
o Incremental capacity additions have been almost exclusively
gas-fired combustion turbines or combined cycle facilities.
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Exhibit VII - 2: Historical Southeast Market Monthly Fuel Prices
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
COAL GAS OIL
- -----------------------------------------------------------------------------------------------------------------------------------
Total Total Total Cost - Cost -
Generation Cost Cost Generation Cost Cost Generation Cost No.6 No.2
MWh $1,000 c/MMBtu MWh $1,000 c/MMBtu MWh $1,000 c/MMBtu c/MMBtu
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-94 22,124,104 351,086 158.62 2,208,060 61,564 254.18 626,739 15,163 166.91 356.32
- -----------------------------------------------------------------------------------------------------------------------------------
Feb-94 17,679,400 277,098 155.14 1,535,698 50,070 223.74 211,670 5,919 151.52 367.63
- -----------------------------------------------------------------------------------------------------------------------------------
Mar-94 19,774,758 306,040 155.02 2,293,154 67,886 224.16 52,104 1,927 90.25 375.15
- -----------------------------------------------------------------------------------------------------------------------------------
Apr-94 18,763,474 294,711 153.01 3,479,077 82,272 240.20 63,810 2,833 143.86 377.41
- -----------------------------------------------------------------------------------------------------------------------------------
May-94 20,119,280 314,498 125.23 3,421,252 91,514 211.69 283,779 5,724 185.48 376.99
- -----------------------------------------------------------------------------------------------------------------------------------
Jun-94 24,534,784 389,015 162.27 5,208,530 124,334 237.84 489,172 9,705 190.31 379.50
- -----------------------------------------------------------------------------------------------------------------------------------
Jul-94 24,458,550 381,195 125.45 5,701,358 138,933 228.45 90,810 2,953 220.44 375.88
- -----------------------------------------------------------------------------------------------------------------------------------
Aug-94 24,750,010 383,501 152.98 5,778,937 126,842 207.62 38,977 1,761 242.24 378.49
- -----------------------------------------------------------------------------------------------------------------------------------
Sep-94 21,370,005 329,294 119.76 5,092,173 96,367 171.73 48,138 1,773 216.63 387.36
- -----------------------------------------------------------------------------------------------------------------------------------
Oct-94 19,821,039 288,101 117.89 4,150,679 75,463 138.63 31,956 1,127 -- 236.57
- -----------------------------------------------------------------------------------------------------------------------------------
Nov-94 17,526,153 253,209 120.36 3,904,530 77,082 193.91 52,674 1,879 140.05 299.38
- -----------------------------------------------------------------------------------------------------------------------------------
Dec-94 18,426,724 280,924 158.15 3,514,057 73,808 164.24 49,914 2,047 117.19 374.92
===================================================================================================================================
Jan-95 20,689,382 309,762 125.75 3,616,625 75,763 197.58 47,459 1,876 93.95 413.20
- -----------------------------------------------------------------------------------------------------------------------------------
Feb-95 18,326,194 273,692 147.92 3,005,697 56,529 174.62 45,189 1,654 130.82 383.51
- -----------------------------------------------------------------------------------------------------------------------------------
Mar-95 18,783,970 284,939 120.94 3,804,675 68,254 165.38 46,589 2,013 130.82 388.51
- -----------------------------------------------------------------------------------------------------------------------------------
Apr-95 19,315,180 284,214 148.22 3,698,891 71,461 182.72 38,967 1,484 262.64 339.56
- -----------------------------------------------------------------------------------------------------------------------------------
May-95 22,146,968 336,546 148.54 5,142,433 105,219 197.06 48,451 1,882 260.44 327.67
- -----------------------------------------------------------------------------------------------------------------------------------
Jun-95 23,602,858 353,392 147.90 6,165,722 126,572 176.12 48,048 1,792 265.67 353.51
- -----------------------------------------------------------------------------------------------------------------------------------
Jul-95 26,424,921 403,866 147.76 7,165,224 136,030 182.01 81,345 3,032 215.29 344.26
- -----------------------------------------------------------------------------------------------------------------------------------
Aug-95 26,924,544 406,359 146.46 7,730,297 142,571 178.85 221,623 9,378 201.77 361.05
- -----------------------------------------------------------------------------------------------------------------------------------
Sep-95 22,537,466 339,826 146.19 5,352,536 104,026 162.53 36,641 1,512 -- 365.36
- -----------------------------------------------------------------------------------------------------------------------------------
Oct-95 21,112,932 302,669 140.33 4,356,305 91,452 199.44 34,810 1,254 96.05 291.74
- -----------------------------------------------------------------------------------------------------------------------------------
Nov-95 19,928,492 286,562 143.42 3,592,823 78,900 209.44 38,672 1,440 -- 363.59
- -----------------------------------------------------------------------------------------------------------------------------------
Dec-95 22,026,556 320,983 141.64 3,155,712 93,476 233.07 44,483 1,733 94.14 374.76
===================================================================================================================================
Jan-96 22,783,035 330,314 145.63 2,805,626 93,987 297.43 273,002 8,109 141.94 333.51
- -----------------------------------------------------------------------------------------------------------------------------------
Feb-96 19,879,913 286,524 147.73 2,290,225 105,226 426.64 650,978 19,339 213.63 425.86
- -----------------------------------------------------------------------------------------------------------------------------------
Mar-96 20,592,796 301,030 151.76 2,619,842 85,293 328.04 508,033 14,345 230.22 435.56
- -----------------------------------------------------------------------------------------------------------------------------------
Apr-96 19,547,461 278,185 148.50 2,837,316 84,003 335.38 55,344 2,128 252.78 322.13
- -----------------------------------------------------------------------------------------------------------------------------------
May-96 22,925,109 335,791 142.48 4,705,902 128,650 251.16 89,885 4,172 289.83 367.66
- -----------------------------------------------------------------------------------------------------------------------------------
Jun-96 23,890,570 359,235 144.72 5,690,429 156,021 260.72 75,131 2,952 266.39 354.78
- -----------------------------------------------------------------------------------------------------------------------------------
Jul-96 26,659,876 391,638 140.60 6,245,339 190,950 268.65 66,698 2,668 235.40 334.67
- -----------------------------------------------------------------------------------------------------------------------------------
Aug-96 26,284,323 382,918 144.71 5,700,327 158,183 256.15 41,790 1,803 108.68 385.15
- -----------------------------------------------------------------------------------------------------------------------------------
Sep-96 22,701,825 327,668 139.07 4,011,747 92,711 208.68 37,229 1,831 98.22 373.57
- -----------------------------------------------------------------------------------------------------------------------------------
Oct-96 21,155,627 307,670 146.15 3,054,152 69,600 196.16 29,190 1,326 99.66 404.23
- -----------------------------------------------------------------------------------------------------------------------------------
Nov-96 20,374,835 310,331 146.38 2,797,081 87,758 269.35 77,238 3,834 113.41 435.34
- -----------------------------------------------------------------------------------------------------------------------------------
Dec-96 21,353,143 316,790 146.68 2,138,188 96,483 399.46 351,802 11,487 157.69 397.63
===================================================================================================================================
Jan-97 22,733,641 337,064 147.95 2,267,971 94,044 373.13 717,217 22,565 211.38 450.69
- -----------------------------------------------------------------------------------------------------------------------------------
Feb-97 19,024,112 277,458 144.04 1,981,622 72,174 328.27 257,177 8,083 198.00 273.71
- -----------------------------------------------------------------------------------------------------------------------------------
Mar-97 19,982,215 292,249 118.31 2,417,119 55,941 247.38 127,783 4,312 283.00 331.10
- -----------------------------------------------------------------------------------------------------------------------------------
Apr-97 21,282,807 312,097 122.38 2,834,388 66,921 261.35 38,729 1,660 146.13 333.20
- -----------------------------------------------------------------------------------------------------------------------------------
May-97 22,250,297 327,167 148.85 3,815,593 97,014 249.83 75,318 2,797 284.17 340.55
- -----------------------------------------------------------------------------------------------------------------------------------
Jun-97 22,329,324 335,255 148.00 4,982,774 136,941 261.50 121,705 4,336 176.93 365.88
- -----------------------------------------------------------------------------------------------------------------------------------
Jul-97 27,403,597 408,382 142.45 7,354,311 209,383 231.42 233,934 9,875 268.71 401.82
- -----------------------------------------------------------------------------------------------------------------------------------
Aug-97 27,364,654 397,833 137.17 6,110,283 168,951 259.58 278,462 10,311 274.16 415.19
- -----------------------------------------------------------------------------------------------------------------------------------
Sep-97 26,051,087 376,162 144.08 4,977,085 159,161 335.67 421,260 12,083 278.15 408.17
- -----------------------------------------------------------------------------------------------------------------------------------
Oct-97 24,602,391 359,296 140.36 3,460,631 133,490 300.54 465,985 14,551 269.47 380.71
- -----------------------------------------------------------------------------------------------------------------------------------
Nov-97 23,279,358 324,345 145.98 2,214,124 93,089 314.23 645,396 19,370 272.12 318.12
- -----------------------------------------------------------------------------------------------------------------------------------
Dec-97 25,099,662 358,487 134.84 2,511,636 80,968 283.07 482,907 14,158 280.73 389.68
===================================================================================================================================
Jan-98 22,737,415 324,851 135.87 2,100,560 64,933 263.63 460,976 13,909 183.18 389.40
- -----------------------------------------------------------------------------------------------------------------------------------
Feb-98 19,041,341 276,007 136.27 1,642,384 46,403 261.05 413,535 10,839 181.64 377.52
- -----------------------------------------------------------------------------------------------------------------------------------
Mar-98 21,727,077 308,421 145.93 2,666,485 74,293 262.48 854,785 21,175 235.27 341.99
- -----------------------------------------------------------------------------------------------------------------------------------
Apr-98 19,827,438 285,295 139.92 3,158,128 87,361 231.22 488,352 11,809 231.80 327.19
- -----------------------------------------------------------------------------------------------------------------------------------
May-98 23,978,614 349,018 138.05 5,268,293 145,615 245.09 983,037 24,558 217.28 375.51
- -----------------------------------------------------------------------------------------------------------------------------------
Jun-98 26,922,286 394,444 137.91 6,479,957 183,134 242.72 837,948 25,429 210.74 365.09
- -----------------------------------------------------------------------------------------------------------------------------------
Jul-98 29,239,346 422,903 137.94 7,428,063 208,690 246.54 930,532 26,417 216.16 353.13
- -----------------------------------------------------------------------------------------------------------------------------------
Aug-98 27,926,127 405,134 138.83 7,354,783 193,863 243.06 782,895 20,279 199.51 326.53
- -----------------------------------------------------------------------------------------------------------------------------------
Sep-98 25,894,183 370,405 140.21 6,271,442 150,344 245.28 1,110,419 30,863 208.23 321.75
- -----------------------------------------------------------------------------------------------------------------------------------
Oct-98 22,631,872 339,654 132.46 3,829,610 91,513 243.03 87,788 2,772 203.79 298.70
- -----------------------------------------------------------------------------------------------------------------------------------
Nov-98 20,747,953 293,753 137.30 3,068,049 75,151 233.40 276,384 5,998 197.11 298.42
- -----------------------------------------------------------------------------------------------------------------------------------
Dec-98 22,965,644 320,071 133.96 3,164,258 81,914 248.69 626,932 13,363 197.11 307.26
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Overall, C.C. Pace expects the trend in gas-fired generation to maintain its
increasing significance in meeting generation requirements. Specifically, C.C.
Pace's capacity expansion plan shows that all incremental capacity additions in
the region are slated to be gas-fired
- --------------------------------------------------------------------------------
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generation options. Therefore, almost all incremental demand will be served by
gas-fired generation.
- --------------------------------------------------------------------------------
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Exhibit VII - 3: Comparison of Generation by Fuel Type
- --------------------------------------------------------------------------------
January 1994
[PIE CHART OMITTED]
July 1997
[PIE CHART OMITTED]
2006
[PIE CHART OMITTED]
- --------------------------------------------------------------------------------
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----------------------------------------
2014
[PIE CHART OMITTED]
----------------------------------------
COAL
As stated previously, coal prices, as presented in Exhibit VII - 4 and Exhibit
VII - 5, have generally shown the least variability of the fossil fuels used in
the region, varying by only 40 cents per MMBtu during this time period. In terms
of overall pricing levels, the Tennessee Valley Authority's coal costs are
consistently lower than other major Southeast electric utility coal consumers.
TVA has historically purchased coal for approximately 44 cents per MMBtu below
the cost for other regional utilities. The majority of this cost advantage can
be explained by the quality of coal consumed by TVA and its proximity to coal
reserves. For example, TVA's coal averaged higher than 2.1% sulfur content over
this time period, while the other large coal consumers averaged around 1% sulfur
content.
- --------------------------------------------------------------------------------
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Exhibit VII - 4: Historical Average Coal Prices (In Nominal Terms)
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
Exhibit VII - 5 shows SERC versus U.S. historical average coal prices. The
average price differential between the SERC and U.S. average price of coal is
only 15 cents/MMBtu. The pricing differential typically caused by the higher
transportation costs of Southeastern utilities relative to other regions. At the
other end of the spectrum, Alabama Power was once a high cost purchaser of coal;
however, Alabama Power (along with the rest of the Southern Company utilities)
has undergone significant cost cutting efforts and lowered its coal costs over
time to reach parity with the other investor-owned utilities.
Overall, the average price for Southeastern coal follows the national coal
pricing trend, as shown in Exhibit VII - 5.
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Exhibit VII - 5: SERC vs. U.S. Historical Average Coal Prices
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
U.S. coal prices have generally been on a downward trend since the mid-1980s.
Despite this historical trend of declining coal prices, most forecasts have
typically anticipated real coal price increases (see Exhibit VII - 6). However,
in more recent years, forecasters have begun to revise their expectations based
on the continuing trend in national coal prices. As shown Exhibit VII - 6, AGA,
GRI, EIA, and DRI now anticipate real prices to decrease slightly in the future.
Exhibit VII - 6: Comparison of Projected Trends in Real Coal Prices: 1995-2010
- --------------------------------------------------------------------------------
=====================================================================
AGA GRI EIA DRI WEFA
=====================================================================
1994 1.50% -0.50% 1.20% 0.80% 2.30%
1995 0.30% -0.60% 0.80% 0.60% 2.50%
1996 N.A. -0.47% -0.50% -1.26% 0.38%
---------------------------------------------------------------------
Notes: AGA (American Gas Association), GRI (Gas Research Institute), EIA
(Energy Information Administration), DRI (DRI/McGraw Hill), WEFA (WEFA
Group)
- --------------------------------------------------------------------------------
C.C. Pace Coal Price Forecast
C.C. Pace's coal price forecast considered the following to be key elements to
assess the dynamics of the Southeast and the broader U.S. coal market:
- --------------------------------------------------------------------------------
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o Procurement characteristics of utilities (i.e., cost and quality,
spot versus contract);
o Supply sources;
o Regional supply market;
o Commodity pricing trends, and
o Market factors affecting supply
C.C. Pace's assessment of the future price of coal has found that due to
increased productivity and lack of incremental coal demand outside of existing
coal-fired capacity, we expect national coal prices will continue a downward
trend and decline in real terms by 1.50% per year until the year 2015. C.C. Pace
expects a slightly different profile for coal supplies destined for the
Southeast. Specifically, the Southeast obtains a majority of its supply from
Appalachia. C.C. Pace's analysis shows that Appalachia will not experience the
same productivity gains as other supply regions (mainly the Powder River Basin).
Consequently, Southeast spot coal prices will experience only a 1.0% real price
decline.
However, C.C. Pace projects a significant price decline in the average
Southeastern utility cost of coal. This price decline is attributable to the
expected expiration of utility coal contracts which are at a significant premium
over spot coal prices. These expectations are based on the interplay of the
following market factors:
o Increased mining productivity,
o Industry deregulation and the expiration of premium priced coal
contracts,
o Competition from foreign coal imports and alternatives to
traditional domestic coal supplies.
Specifically, Exhibit VII - 7 below summarizes the plant specific coal costs of
"over-market" plants. Exhibit VII - 7 summarizes those facilities which C.C.
Pace has determined purchase coal under fixed contracts at well above
market-based coal prices. As shown, C.C. Pace estimates that approximately 35
million tons of coal is purchased at above market rates of $1.81/MMBtu. C.C.
Pace assumes that from 1998-2005 these over market contracts expire and these
facilities' coal costs will fall to an entirely market derived price. Attachment
IV contains Exhibits IV-1 through IV-5 which detail both "over-market" and
market-based coal price assumptions for each Southeastern coal-fired power
plant.
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Exhibit VII - 7: Southeast Market vs. Over-Market Coal Price Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Total Over-Market Market Based
- -----------------------------------------------------------------------------------------------------------------
Prchsd Prchsd Percent of Prchsd Percent of
Tons Cost Tons Total Cost Tons Total Cost
Plant (000) c/MMBtu (000) Prchsd c/MMBtu (000) Prchsd c/MMBtu
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Southern
- -----------------------------------------------------------------------------------------------------------------
Barry 4,371 176 2,623 60.00% 204 1,749 40.00% 134
- -----------------------------------------------------------------------------------------------------------------
Crist 1,498 216 1,498 100.00% 216 -- 0.00% 141
- -----------------------------------------------------------------------------------------------------------------
Gadsden 253 182 215 85.00% 191 38 15.00% 130
- -----------------------------------------------------------------------------------------------------------------
Gaston 4,123 165 1,360 33.00% 212 2,762 67.00% 142
- -----------------------------------------------------------------------------------------------------------------
Gorgas 3,591 158 1,796 50.00% 180 1,796 50.00% 142
- -----------------------------------------------------------------------------------------------------------------
Greene County 1,470 131 441 30.00% 153 1,029 70.00% 122
- -----------------------------------------------------------------------------------------------------------------
Miller 8,800 166 5,104 58.00% 190 3,696 42.00% 134
- -----------------------------------------------------------------------------------------------------------------
White Bluff 6,010 182 5,108 85.00% 186 901 15.00% 158
- -----------------------------------------------------------------------------------------------------------------
Bowen 8,116 140 852 10.50% 171 7,264 89.50% 136
- -----------------------------------------------------------------------------------------------------------------
Harlee Branch 2,861 155 648 22.65% 175 2,213 77.35% 149
- -----------------------------------------------------------------------------------------------------------------
Scherer 10,349 174 2,160 20.87% 230 8,189 79.13% 159
- -----------------------------------------------------------------------------------------------------------------
Smith 1,104 172 575 52.10% 202 529 47.90% 141
- -----------------------------------------------------------------------------------------------------------------
Wansley 3,408 186 2,215 65.00% 208 1,193 35.00% 145
- -----------------------------------------------------------------------------------------------------------------
Southern Subtotal 55,952 167 24,595 43.96% 196 31,357 56.04% 144
- -----------------------------------------------------------------------------------------------------------------
SWEPCO
- -----------------------------------------------------------------------------------------------------------------
Flint Creek 2,015 143 1,310 65.00% 162 705 35.00% 108
- -----------------------------------------------------------------------------------------------------------------
Welsh 5,785 177 3,760 65.00% 200 2,025 35.00% 135
- -----------------------------------------------------------------------------------------------------------------
SWEPCO Subtotal 7,800 168 5,070 65.00% 190 2,730 35.00% 128
- -----------------------------------------------------------------------------------------------------------------
SOMI
- -----------------------------------------------------------------------------------------------------------------
Morrow 926 205 926 100.00% -- -- 0.00% 134
- -----------------------------------------------------------------------------------------------------------------
TVA
- -----------------------------------------------------------------------------------------------------------------
Allen (TN) 2,095 110 -- 0.00% 132 2,095 100.00% 110
- -----------------------------------------------------------------------------------------------------------------
Bull Run 1,782 109 346 19.39% 115 1,436 80.61% 107
- -----------------------------------------------------------------------------------------------------------------
Colbert 3,224 116 806 25.00% 126 2,418 75.00% 112
- -----------------------------------------------------------------------------------------------------------------
Gallatin 2,574 117 660 25.64% 130 1,914 74.36% 113
- -----------------------------------------------------------------------------------------------------------------
Johnsonville 3,688 116 864 23.43% 123 2,824 76.57% 114
- -----------------------------------------------------------------------------------------------------------------
Shawnee 3,573 125 1,440 40.31% 137 2,133 59.69% 117
- -----------------------------------------------------------------------------------------------------------------
Widows Creek 3,986 114 660 16.56% 134 3,326 83.44% 110
- -----------------------------------------------------------------------------------------------------------------
TVA Subtotal 20,922 116 4,776 22.83% 130 16,146 77.17% 112
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total 85,600 155 35,366 41.32% 181 50,234 58.68% 133
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Also of note, C.C. Pace projects an increase in TVA coal costs (relative to
other utilities) due to environmental constraints. Specifically, C.C. Pace
assumes there will be no price decline in TVA current spot coal purchases.
Further, C.C. Pace expects an overall price increase in coal supplied to the
Paradise power plant due to environmental constraints which will soon apply to
this facility. Specifically, C.C. Pace assumed that current coal procurement
costs will rise by approximately 10-15% in real terms.
- --------------------------------------------------------------------------------
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FUEL OIL
To develop a detailed fuel oil price assessment for the Southeast, C.C. Pace
considered the three primary factors that impact the fuel oil commodity pricing.
They are:
o Crude oil markets
o Demand for fuel oil
o Residual oil and other refined oil products
C.C. Pace compared the historical pricing trends of crude oil, residual fuel
oil, and two other major refined products (i.e., gasoline, distillate fuel oil).
Exhibit VII - 8 shows the price histories of these petroleum products. As shown
in Exhibit VII - 8, the price paid for residual oil, as well as other refined
products moves in almost direct correlation with crude oil prices. As a
consequence of this relationship, Exhibit VII - 8 supports that the main driver
to residual or distillate fuel oil pricing is the supply/demand balance for
crude oil.
As shown in Exhibit VII - 8, in terms of general fuel oil market trends, the
price of both residual and distillate increased in 1989 and 1990. The price
increase in 1990 was primarily attributable to Iraq's invasion of Kuwait and the
subsequent U.N. embargo on oil exports from both Iraq and Kuwait. The price of
both products fell every year from 1991-1994, followed by a slight rise in 1995.
Even with the impact of the Gulf War, the average price increase over this
period was only 2.2% for No. 2 fuel oil and 2.9% for No. 6 fuel oil, slightly
below or equal to inflation.
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Exhibit VII - 8: Price Comparison of Crude Oil and Major Refined Products
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
Backcasting further into the mid- to late 1980s provides little additional
information due to the influence of OPEC. Oil prices fell dramatically in 1986
as Saudi Arabia ignored the rest of OPEC and expanded production. The price
increases in subsequent years were partially attributable to the artificially
low price level the market achieved in 1986 and the restoration of a long term
market balance.
Based on the analysis of long term oil price trends and the supply/demand
balance for crude oil, C.C. Pace anticipates that world oil prices (both crude
oil and refined products) will remain constant in real terms. Because long-term
crude oil prices are not projected to rise faster than the rate of inflation,
refined product prices (i.e., residual and distillate fuel oil) can also be
expected to remain stable over the long run. Nearly all forecasters share C.C.
Pace's view that real oil prices will remain flat over the long term.
C.C. Pace Fuel Oil Price Forecast
Distillate Oil
Because fuel oil is used in such small quantities in the Southeast, plant
specific data does not yield consistent and accurate delivered fuel costs. To
achieve more accurate data, C.C. Pace
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aggregated fuel consumption and pricing data at the state level. Monthly data on
consumption and delivered fuel cost electric utilities from 1994 to the present
was analyzed to arrive at average state-wide delivered distillate prices.
Distillate prices were assumed to remain constant (in real terms) throughout the
forecasting period. Plant-level distillate prices are therefore:
Alabama - $3.98/MMBtu
Gaston
Portland
Arkansas - $4.21/MMBtu
o Blytheville
o Cecil Lynch
o Paragould Turbine
Georgia - $4.17/MMBtu
o Arkwright
o Atkinson
o Bowen
o McDonough
o McManus
o Mitchell (GA)
o Wansley
o Wilson
Louisiana - $3.85/MMBtu
o A.B. Paterson
o Buras
Mississippi - $3.93/MMBtu
o Paulding
o Rex Brown
Tennessee - $4.37/MMBtu
o Gallatin
o Johnsonville
- --------------------------------------------------------------------------------
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Residual Oil
Base year residual oil prices were estimated by calculating the average price
difference of residual and distillate oil sold in the U.S. and adjusting the
state level distillate prices by this amount (i.e., $1.69/MMBtu). The
plant-level residual oil price for the only plant unit in the region using
residual oil as its primary fuel is:
Georgia-$2.48/MMBtu
o McManus
URANIUM
C.C. Pace did not conduct a detailed uranium market pricing study. However, C.C.
Pace analyzed historic uranium costs of the major power plants in the Southeast.
As shown in Exhibit VII - 9, it is evident that the utility uranium costs have
been converging at between $5.00-7.00/MWh. Average fuel costs at TVA's newly
operational Watts Bar nuclear facility were below this range during 1996 at
$3.18/MWh. C.C. Pace does not expect any real price movement of uranium over the
next 20 years. Therefore, C.C. Pace assumed utility uranium prices would be
equal to their 1996 average value and escalated at 0.0% annually, in real terms.
Exhibit VII - 9: Southeast Nuclear Generation Historical Prices - $/MWh
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Farley 6.94 6.46 5.95 5.71 4.35 5.09 4.92 5.01 4.96
Arkansas 7.92 8.07 7.83 7.53 6.86 6.03 5.17 5.59 5.45
Waterford 8.59 7.99 7.70 6.52 5.81 5.19 5.24 5.51 5.56
Hatch 10.95 11.20 8.77 6.95 7.12 6.13 7.28 7.17 6.20
Vogtle 11.99 11.00 10.12 8.57 6.02 5.54 5.60 5.01 4.78
Grand Gulf 15.00 12.52 11.87 9.50 7.49 5.95 5.56 5.59 5.27
Browns Ferry N.A. N.A. N.A. 22.51 12.64 11.94 11.27 6.03 6.16
Sequoyah 8.86 9.56 8.99 9.11 9.99 10.17 10.70 6.17 5.40
Watts Bar N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 3.18
- ------------------------------------------------------------------------------------------------------
Weighted Avg 10.01 9.56 8.66 8.10 7.42 6.43 6.67 5.73 5.38
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NATURAL GAS
Most, if not all gas destined for the Southeast region originates either from
the Gulf Coast or Louisiana production areas.
As an indicator of future expectations of Gulf Coast gas pricing, Exhibit VI-10
provides a summary of Henry-Hub based NYMEX five-year strip gas prices.
Examining NYMEX price history, NYMEX prices have averaged between $1.63 and
$2.59/MMBtu. In the future, the NYMEX price strip anticipates further average
price erosion to the $2.20 - $2.30 level over 1998
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through 2000. As shown in Exhibit VII - 10, the NYMEX forward curve has shifted
up dramatically since last summer. For example, the 1999 NYMEX strip has risen
approximately $0.25 over the past 8 months. Despite the upward shift, the price
expectations are still well below 1997 averages.
Exhibit VII - 10: Historical and Projected NYMEX Henry Hub Gas Prices
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ann. Avg. of Nearby Ann. Avg. NYMEX Henry Hub Price "Strips"
- --------------------------------------------------------------------------------
Year NYMEX Henry Hub Price 7/1/97 1/30/98 3/3/98
- --------------------------------------------------------------------------------
1992 $1.81
- --------------------------------------------------------------------------------
1993 $2.11
- --------------------------------------------------------------------------------
1994 $1.98
- --------------------------------------------------------------------------------
1995 $1.63
- --------------------------------------------------------------------------------
1996 $2.40
- --------------------------------------------------------------------------------
1997 $2.49
- --------------------------------------------------------------------------------
1998 $2.15 $2.22 $2.35
- --------------------------------------------------------------------------------
1999 $2.11 $2.28 $2.37
- --------------------------------------------------------------------------------
2000 $2.17 $2.32 $2.36
- --------------------------------------------------------------------------------
Further, Exhibit VII - 11 provides comparisons of the forecasted real growth
rates of gas prices by several commonly referenced forecasters. These forecasts
show a consistent downward pattern from past forecast years. However, all
forecasters still predict a real price increase for gas over the long term.
Current rates range between 0.9% to a high of 3.1% real escalation.
Exhibit VII - 11: Ten Year Price Forecasts of Annual Average Rates of Change
(Real Terms)
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
Percent
Reduction
1993 1994 1995 1996 '93 to latest
----------------------------------------------------------------------
AGA 4.20% 2.49% 1.38% n/a 66%
GRI 3.46% 2.40% 1.70% 0.90% 74%
DRI 4.98% 4.25% 4.15% 3.16% 37%
EIA 4.23% 3.48% 3.09% 2.40% 43%
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Overall, market forecasting mechanisms such as NYMEX Swaps indicate that gas
priced from the Henry Hub should be priced at $2.00/MMBtu or higher for the next
5 years. Independent forecasters concur with this expectation calling for real
price escalation of approximately 1-2% from current market pricing levels of
$2.00-$2.15/MMBtu.
C.C. Pace Natural Gas Price Forecast
C.C. Pace's gas market analysis strongly indicates a change in the Southeast gas
market's supply and demand balance, resulting in lower future market prices.
C.C. Pace's underlying analysis of the gas commodity supply/demand balance for
Gulf Coast gas indicates the following:
- --------------------------------------------------------------------------------
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o Trends in consumption show the gas demand growing moderately.
o Demand for Gulf Coast gas supplies from its traditional Northeast
markets will decrease with the completion of additional pipeline
projects from Canadian supply basins.
o Gulf Coast production capacity is increasing. C.C. Pace's market
review shows that Gulf Coast production will likely increase by over
1 Bcf per day over the next 12-18 months, several projects for
increased Gulf Coast production to market (i.e., gathering system
interconnects with major east coast interstate pipelines) are under
development, and peaking supply storage capacity in the Gulf Coast
and in the Northeast market area is increasing -- augmenting Gulf
Coast gas production capability.
o 1997 storage injections coupled with a mild 1997-1998 winter in the
Northeast will allow production to catch up to historical storage
reserve levels.
C.C. Pace expects market pricing to fall from 1996 and 1997 Henry Hub cash price
high values of $2.76/MMBtu and $2.57/MMBtu, respectively. Specifically, C.C.
Pace expects that 1998 prices will achieve approximately $2.20/MMBtu with a 0.5%
annual real price escalation, thereafter.
In terms of plant specific gas prices, C.C. Pace derived gas prices on a state
level based on the historic basis differential between the Henry Hub cash price
and delivered utility gas prices. For each state, C.C. Pace calculated the
average difference between the Henry Hub price and the average electric utility
gas price for the period 1994-1997 (see Exhibit VII - 12). The state basis
differential was then applied to C.C. Pace's forecast of annual average gas
prices at the Henry Hub (see Exhibit VII - 13) through 2015.
Exhibit VII - 12: Average Electric Utility Delivered Gas Cost Basis Difference
from Henry Hub - (cents/MMBtu)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1994 1995 1996 *1997 Average
- --------------------------------------------------------------------------------
Alabama 58 23 11 57 37
Arkansas (14) (11) (4) (23) (13)
Louisiana 28 4 18 1 13
Mississippi 33 (6) 13 2 10
Georgia** N.A. N.A. N.A. N.A. 25
Tennessee** N.A. N.A. N.A. N.A. 25
Texas 24 2 (25) (11) (3)
- --------------------------------------------------------------------------------
* Average through August 1997.
** Gas use for utility did not provide useable numbers for basis calculation.
C.C. Pace's estimated transportation costs to these states to be 25
cents/MMBtu.
- --------------------------------------------------------------------------------
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Exhibit VII - 13: Southeast Gas Hub and Delivered to Utility Gas Forecast
($/MMBtu)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Henry Hub Alabama Arkansas Louisiana Mississippi Georgia Tennessee Texas
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 2.20 2.57 2.07 2.33 2.30 2.45 2.45 2.17
1999 2.21 2.58 2.08 2.34 2.32 2.46 2.46 2.19
2000 2.22 2.60 2.09 2.35 2.33 2.47 2.47 2.20
2001 2.23 2.61 2.10 2.36 2.34 2.49 2.49 2.21
2002 2.24 2.62 2.11 2.37 2.35 2.50 2.50 2.22
2003 2.26 2.64 2.12 2.39 2.36 2.51 2.51 2.23
2004 2.27 2.65 2.13 2.40 2.37 2.52 2.52 2.24
2005 2.28 2.66 2.14 2.41 2.39 2.54 2.54 2.25
2006 2.29 2.68 2.16 2.42 2.40 2.55 2.55 2.26
2007 2.30 2.69 2.17 2.43 2.41 2.56 2.56 2.27
2008 2.31 2.70 2.18 2.45 2.42 2.58 2.58 2.29
2009 2.32 2.72 2.19 2.46 2.43 2.59 2.59 2.30
2010 2.34 2.73 2.20 2.47 2.45 2.60 2.60 2.31
2011 2.35 2.74 2.21 2.48 2.46 2.61 2.61 2.32
2012 2.36 2.76 2.22 2.50 2.47 2.63 2.63 2.33
2013 2.37 2.77 2.23 2.51 2.48 2.64 2.64 2.34
2014 2.38 2.78 2.24 2.52 2.50 2.65 2.65 2.36
2015 2.39 2.80 2.25 2.53 2.51 2.67 2.67 2.37
2016 2.41 2.81 2.27 2.55 2.52 2.68 2.68 2.38
2017 2.42 2.83 2.28 2.56 2.53 2.69 2.69 2.39
2018 2.43 2.84 2.29 2.57 2.55 2.71 2.71 2.40
2019 2.44 2.86 2.30 2.58 2.56 2.72 2.72 2.41
2020 2.46 2.87 2.31 2.60 2.57 2.73 2.73 2.43
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
These regional prices were then applied to each plant based on its location. The
following lists each plant's location and 1998 base year gas price.
- --------------------------------------------------------------------------------
C-61
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
Alabama-$2.57/MMBtu
o Chickasaw
o Greene County Combustion Turbine
o McWilliams
Arkansas-$2.07/MMBtu
o Carl Bailey
o Harvey Couch
o Lake Catherine
o Mabelvale
o McClellan
o Paragould Turbine
o Robert E. Ritchie
o Thomas Fitzhugh
Georgia-$2.45/MMBtu
o Atkinson
o Boulevard
o Crisp
o John Harmon
o McIntosh (GA)
o Plant Kraft (Port Wentworth)
o RVIerside
o Robins
Tennessee-$2.45/MMBtu
o Allen (TN)
o Colbert
Texas-$2.17/MMBtu
o Lewis Creek
o Nelson
o Sabine
o Willow Glen
Louisiana-$2.33/MMBtu
o Big Cajun 1
o Coughlin
o D.G. Hunter
o Doc Bonin
o Franklin
o Houma
o Little Gypsy
o Michoud
o Ninemile Point
o Plaquemine
o Ruston
o Sterlington
o Teche
o Waterford
Mississippi-$2.30/MMBtu
o Baxter Wilson
o Benndale
o Chevron Cogen (Standard Oil)
o Delta
o Eaton
o Gerald Andrus
o Henderson-Ms
o Jack Watson
o Moselle
o Rex Brown
o Sweatt
o Wilkins
o Wright
o Yazoo
FUEL PRICE FORECASTING METHODOLOGY
In developing long-term fuel price forecast inputs, C.C. Pace followed the
methodology outlined in Exhibit VII - 14. As shown, C.C. Pace collected
historical plant level fuel pricing for a three year period from FERC and EIA
sources. The average cost of fuel at each plant was then compared to the
weighted average cost of that fuel for all plants in the entire market area. A
"fuel factor" (i.e., the ratio of that unit's fuel cost to the weighted average)
was then derived for each unit and assigned to that unit within the CEMAS data
set. Due to the long term horizon of the Southeast Market study and the lack of
consistent seasonal patterns of natural gas, C.C. Pace did not assume any
seasonal price changes for natural gas or any other fuels.
- --------------------------------------------------------------------------------
C-62
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
To develop unit fuel price assumptions for gas-fired expansion units, C.C. Pace
used the fuel price assumptions defined for each state and applied an adjustment
based on the weighted average retail electricity sales for the states in the
sub-region.
Exhibit VII - 14: C.C. Pace Fuel Pricing Methodology
- --------------------------------------------------------------------------------
[FLOW CHART OMITTED]
- --------------------------------------------------------------------------------
Next, long-term fuel escalation factors were developed based on C.C. Pace's
market outlook summarized above for the study period and shown in Exhibit VII -
15. The forecasted growth rates were then applied to the weighted average fuel
prices previously derived. Lastly, these projected annual fuel prices for the
four fossil-fuel categories were fed into the Fuel Pricing section of the Market
Clearing Price Module and Revenue Requirements Module.
- --------------------------------------------------------------------------------
Exhibit VII - 15: Average Annual Fuel Price Escalation*
- --------------------------------------------------------------------------------
---------------------------------------------------
Escalation
Rate
---------------------------------------------------
Coal -1.0%
---------------------------------------------------
No. 6 0.0%
---------------------------------------------------
No. 2 0.0%
---------------------------------------------------
Natural Gas 0.5%
---------------------------------------------------
Nuclear (Uranium) 0.0%
---------------------------------------------------
* All escalation rates are expressed in real terms (i.e., exclusive
of the effects of inflation).
- --------------------------------------------------------------------------------
C-63
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
- --------------------------------------------------------------------------------
ATTACHMENT I
REGIONAL MARKET DEFINITION AND TRANSMISSION CAPABILITY
ASSUMPTIONS & SUPPORTING ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit I-1: Southeast Net Purchases/(Sales) - MWh
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year
Sub-Region S/B Sub-Region 1990 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SE AZNMA 38 -- -- -- -- 600 316,454
ECARSR 4,320 3,564 -- 231,848 303,155 430,021 (4,276)
EMO 122,717 (161,957) (367,750) 593,329 456,108 (1,957,507) 25,469
ERCOTS (306,240) (270,675) 82,822 (82,127) 286,872 446,673 (425,299)
FRCCSR (4,560) -- (210,132) (104,092) -- -- (124,497)
N 3,223,131 1,817,766 2,209,852 1,105,544 3,632,445 2,816,862 4,214,805
VACAR -- -- 1,350 14,025 -- -- --
WC 2,369,303 3,513,167 5,735,641 5,798,503 5,025,043 6,608,970 5,557,015
- ------------------------------------------------------------------------------------------------------------------------------------
SE Total 5,408,709 4,901,865 7,451,783 7,557,030 9,703,623 8,345,619 9,559,671
- ------------------------------------------------------------------------------------------------------------------------------------
STHRN AEP -- -- -- -- (14,152) (12,722) (15,097)
APS -- -- -- -- -- (1,359) (1,157)
ECARSR 1,765,541 1,588,190 2,157,204 2,479,853 1,068,659 1,575,219 1,445,379
EMO -- -- -- -- -- -- 12,003
ERCOTS -- -- -- -- -- -- 51,855
FRCCSR (24,146,324) (19,909,692) (17,200,925) (12,877,370) (10,819,517) (10,515,810) (10,212,770)
N -- -- -- -- -- 168,066 36,737
PJM -- -- 80,441 108,853 77,375 27,380 109,416
RMPA -- -- -- -- -- (2,561) --
SCI 129,744 -- -- -- (43,300) (41,675) (41,785)
VACAR 44,925 (21,406) 215,135 115,394 (1,323,818) (900,454) (651,729)
WC -- (21,492) -- -- -- -- --
MAPPSR -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
STHRN Total (22,206,114) (18,364,400) (14,748,145) (10,173,270) (11,054,753) (9,703,916) (9,267,148)
- ------------------------------------------------------------------------------------------------------------------------------------
TVA AEP 11,250 -- -- 831,175 76,222 323,256 (214,524)
ECARSR (2,628,403) (2,699,467) (2,566,447) (802,790) (1,390,212) (2,272,393) (5,729,577)
EMO -- -- -- -- 1,200,007 1,845,380 (575,987)
ERCOTS -- -- -- -- -- -- 1,236
FRCCSR -- -- -- -- -- 7,900 10,089
N -- -- -- 75,899 68,748 226,011 120,114
PJM -- -- -- -- -- -- 324,438
SCI -- -- -- (234,591) (1,152,441) 9,706 15,130
VACAR (1,259,925) (1,043,500) (995,687) (1,681,658) (965,150) (1,120,689) (1,375,509)
WC -- -- -- -- -- -- 100
NI -- -- -- -- -- -- 10
- ------------------------------------------------------------------------------------------------------------------------------------
TVA Total (3,877,078) (3,742,967) (3,562,134) (1,811,965) (2,162,826) (980,829) (7,424,480)
- ------------------------------------------------------------------------------------------------------------------------------------
Grand Total (20,674,483) (17,205,502) (10,858,496) (4,428,205) (3,513,956) (2,339,126) (7,131,957)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit I-2: Southeast Net Purchases/(Sales) - MWh
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SE 5,408,709 4,901,865 7,451,783 7,557,030 9,703,623 8,345,619 9,559,671
STHRN (22,206,114) (18,364,400) (14,748,145) (10,173,270) (11,054,753) (9,703,916) (9,267,148)
TVA (3,877,078) (3,742,967) (3,562,134) (1,811,965) (2,162,826) (980,829) (7,424,480)
- -----------------------------------------------------------------------------------------------------------------------
Total (20,674,483) (17,205,502) (10,858,496) (4,428,205) (3,513,956) (2,339,126) (7,131,957)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit I-3: Southeast Net Purchases/(Sales) @100% LF - MW
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SE 617 560 851 863 1,108 953 1,091
STHRN (2,535) (2,096) (1,684) (1,161) (1,262) (1,108) (1,058)
TVA (443) (427) (407) (207) (247) (112) (848)
- -----------------------------------------------------------------------------------------------------------------------
Total (2,360) (1,964) (1,240) (506) (401) (267) (814)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
- --------------------------------------------------------------------------------
ATTACHMENT II
DEMAND ASSUMPTIONS & SUPPORTING ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-1: Historical Levels of Key Economic Indicators - 1989-1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPP-SE
- ------------------------------------------------------------------------------------------------------------------------------------
Total Employment (000) 2,452 2,452 2,511 2,529 2,526 2,591 2,644 2,702
Total Disposable Personal Income (000) 116 117 120 124 127 131 134 136
Total Population (000) 7,298 7,287 7,342 7,412 7,475 7,542 7,613 7,669
Demand 110,638 113,274 115,165 116,963 123,299 125,552 132,509 136,682
- ------------------------------------------------------------------------------------------------------------------------------------
Southern
- ------------------------------------------------------------------------------------------------------------------------------------
Total Employment (000) 5,946 6,064 6,043 6,114 6,335 6,557 6,655 6,842
Total Disposable Personal Income (000) 224 228 231 241 247 256 267 273
Total Population (000) 13,126 13,266 13,451 13,665 75,948 14,114 14,324 14,522
Demand 149,114 154,870 157,874 159,847 170,949 172,980 181,320 188,615
- ------------------------------------------------------------------------------------------------------------------------------------
TVA
- ------------------------------------------------------------------------------------------------------------------------------------
Total Employment (000) 2,720 2,740 2,730 2,776 2,849 3,038 3,076 3,121
Total Disposable Personal Income (000) 102 103 104 110 114 117 122 123
Total Population (000) 5,946 5,986 6,048 6,125 6,207 6,291 6,377 6,455
Demand 118,595 118,983 128,717 122,661 129,884 133,854 142,031 148,040
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
Total Employment (000) 11,119 11,256 11,284 11,420 11,711 12,186 12,375 12,665
Total Disposable Personal Income (000) 441 448 456 476 488 504 523 533
Total Population (000) 26,369 26,538 26,840 27,201 89,629 27,948 28,313 28,646
Demand 378,347 387,127 401,756 399,471 424,132 432,386 455,860 473,337
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-2: Statistical Relationship between Economic Indicators and Demand
- --------------------------------------------------------------------------------
Standard Standard
Deviation Deviation
Sub Region R(2) GWh MW - YR
- --------------------------------------------------------------------------------
SPP-SE 0.975 1,492 170
STHRN 0.987 1,574 180
TVA 0.964 2,010 229
- --------------------------------------------------------------------------------
Total N.A. 5,075 579
- --------------------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-3: Growth Rates of Demand and Key Drivers
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1989- 1996- 2000- 2005- 2010- 2015-
1996 2000 2005 2010 2015 2020
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SPP-SE
- --------------------------------------------------------------------------------------------------------
Total Employment (000) 1.40% 1.43% 1.22% 1.11% 1.00% 1.02%
Total Disposable Personal Income (000) 2.38% 2.25% 2.13% 2.09% 2.06% 2.09%
Total Population (000) 0.71% 0.68% 0.66% 0.67% 0.70% 0.70%
Demand 3.07% 2.39% 2.04% 1.85% 1.72% 1.59%
- --------------------------------------------------------------------------------------------------------
Southern
- --------------------------------------------------------------------------------------------------------
Total Employment (000) 2.02% 1.90% 1.69% 1.59% 1.49% 1.52%
Total Disposable Personal Income (000) 2.87% 2.73% 2.56% 2.50% 2.45% 2.48%
Total Population (000) 1.45% 1.22% 1.18% 1.19% 1.20% 1.21%
Demand 3.41% 2.56% 2.10% 1.82% 1.58% 1.47%
- --------------------------------------------------------------------------------------------------------
TVA
- --------------------------------------------------------------------------------------------------------
Total Employment (000) 1.98% 1.74% 1.49% 1.42% 1.34% 1.39%
Total Disposable Personal Income (000) 2.78% 2.49% 2.32% 2.31% 2.31% 2.35%
Total Population (000) 1.18% 0.92% 0.85% 0.89% 0.93% 0.94%
Demand 3.22% 1.72% 1.41% 1.52% 1.62% 1.50%
- --------------------------------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------
Total Employment (000) 1.88% 1.76% 1.54% 1.45% 1.35% 1.39%
Total Disposable Personal Income (000) 2.72% 2.55% 2.40% 2.35% 2.32% 2.36%
Total Population (000) 1.19% 1.01% 0.97% 0.99% 1.01% 1.02%
Demand 3.25% 2.24% 1.87% 1.74% 1.63% 1.51%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-4: Projected Growth of Subregional Demand Forecasts - 1998-2015
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPP-SE
- -------------------------------------------------------------------------------------------------------------------------------
Demand (GWH) 2.13% 2.40% 2.34% 2.13% 2.08% 2.04% 2.00% 1.96% 1.92% 1.88%
Summer Peak (MW) 3.87% 2.40% 2.34% 2.13% 2.08% 2.04% 2.00% 1.96% 1.92% 1.88%
Winter Peak (MW) -2.13% 2.40% 2.34% 2.13% 2.08% 2.04% 2.00% 1.96% 1.92% 1.88%
- -------------------------------------------------------------------------------------------------------------------------------
Southern
- -------------------------------------------------------------------------------------------------------------------------------
Demand (GWH) 2.20% 2.52% 2.47% 2.19% 2.14% 2.10% 2.06% 2.02% 1.88% 1.85%
Summer Peak (MW) 2.56% 2.52% 2.47% 2.19% 2.14% 2.10% 2.06% 2.02% 1.88% 1.85%
Winter Peak (MW) 0.79% 2.52% 2.47% 2.19% 2.14% 2.10% 2.06% 2.02% 1.88% 1.85%
- -------------------------------------------------------------------------------------------------------------------------------
TVA
- -------------------------------------------------------------------------------------------------------------------------------
Demand (GWH) 2.19% 1.49% 1.46% 1.46% 1.43% 1.41% 1.39% 1.37% 1.57% 1.54%
Summer Peak (MW) 4.31% 1.49% 1.46% 1.46% 1.43% 1.41% 1.39% 1.37% 1.57% 1.54%
Winter Peak (MW) 3.24% 1.49% 1.46% 1.46% 1.43% 1.41% 1.39% 1.37% 1.57% 1.54%
- -------------------------------------------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------------------------------
Demand (GWH) 2.18% 2.16% 2.12% 1.94% 1.91% 1.87% 1.84% 1.81% 1.80% 1.77%
Summer Peak (MW) 3.45% 2.18% 2.14% 1.96% 1.92% 1.89% 1.85% 1.82% 1.80% 1.77%
Winter Peak (MW) 0.82% 2.13% 2.09% 1.92% 1.89% 1.85% 1.82% 1.79% 1.79% 1.75%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013 2014 2015
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPP-SE
- -------------------------------------------------------------------------------------------------------
Demand (GWH) 1.85% 1.82% 1.78% 1.78% 1.75% 1.72% 1.69% 1.66%
Summer Peak (MW) 1.85% 1.82% 1.78% 1.78% 1.75% 1.72% 1.69% 1.66%
Winter Peak (MW) 1.85% 1.82% 1.78% 1.78% 1.75% 1.72% 1.69% 1.66%
- -------------------------------------------------------------------------------------------------------
Southern
- -------------------------------------------------------------------------------------------------------
Demand (GWH) 1.82% 1.79% 1.76% 1.62% 1.60% 1.58% 1.55% 1.53%
Summer Peak (MW) 1.82% 1.79% 1.76% 1.62% 1.60% 1.58% 1.55% 1.53%
Winter Peak (MW) 1.82% 1.79% 1.76% 1.62% 1.60% 1.58% 1.55% 1.53%
- -------------------------------------------------------------------------------------------------------
TVA
- -------------------------------------------------------------------------------------------------------
Demand (GWH) 1.52% 1.49% 1.47% 1.68% 1.65% 1.62% 1.60% 1.57%
Summer Peak (MW) 1.52% 1.49% 1.47% 1.68% 1.65% 1.62% 1.60% 1.57%
Winter Peak (MW) 1.52% 1.49% 1.47% 1.68% 1.65% 1.62% 1.60% 1.57%
- -------------------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------
Demand (GWH) 1.74% 1.71% 1.68% 1.68% 1.66% 1.63% 1.61% 1.58%
Summer Peak (MW) 1.74% 1.71% 1.69% 1.68% 1.66% 1.63% 1.61% 1.58%
Winter Peak (MW) 1.73% 1.70% 1.67% 1.68% 1.66% 1.63% 1.60% 1.58%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-5: Subregional Demand Forecasts - 1998-2015
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPP-SE
- ----------------------------------------------------------------------------------------------------------------------
Demand (GWH) 142,577 145,998 149,420 152,600 155,780 158,962 162,146 165,331 168,502 171,675
Summer Peak (MW) 27,156 27,808 28,460 29,066 29,671 30,277 30,884 31,491 32,094 32,699
Winter Peak (MW) 21,303 21,814 22,325 22,800 23,275 23,751 24,226 24,702 25,176 25,650
- ----------------------------------------------------------------------------------------------------------------------
Southern
- ----------------------------------------------------------------------------------------------------------------------
Demand (GWH) 197,010 201,985 206,965 211,489 216,019 220,555 225,097 229,646 233,961 238,283
Summer Peak (MW) 38,752 39,730 40,710 41,600 42,491 43,383 44,276 45,171 46,020 46,870
Winter Peak (MW) 32,596 33,419 34,243 34,991 35,741 36,491 37,243 37,995 38,709 39,424
- ----------------------------------------------------------------------------------------------------------------------
TVA
- ----------------------------------------------------------------------------------------------------------------------
Demand (GWH) 154,596 156,892 159,188 161,504 163,820 166,135 168,449 170,762 173,437 176,112
Summer Peak (MW) 27,610 28,020 28,430 28,844 29,257 29,671 30,084 30,497 30,975 31,452
Winter Peak (MW) 28,425 28,847 29,269 29,695 30,121 30,547 30,972 31,398 31,889 32,381
- ----------------------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------------------
Demand (GWH) 494,183 504,875 515,573 525,593 535,619 545,652 555,692 565,739 575,901 586,069
Summer Peak (MW) 93,518 95,558 97,600 99,509 101,419 103,331 105,244 107,159 109,089 111,021
Winter Peak (MW) 82,323 84,080 85,837 87,487 89,137 90,789 92,441 94,095 95,775 97,456
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013 2014 2015
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPP-SE
- ------------------------------------------------------------------------------------------------
Demand (GWH) 174,848 178,024 181,201 184,424 187,648 190,874 194,101 197,330
Summer Peak (MW) 33,303 33,908 34,513 35,127 35,741 36,356 36,970 37,585
Winter Peak (MW) 26,124 26,599 27,073 27,555 28,037 28,519 29,001 29,483
- ------------------------------------------------------------------------------------------------
Southern
- ------------------------------------------------------------------------------------------------
Demand (GWH) 242,611 246,945 251,285 255,360 259,441 263,528 267,622 271,722
Summer Peak (MW) 47,721 48,574 49,427 50,229 51,032 51,836 52,641 53,447
Winter Peak (MW) 40,140 40,857 41,576 42,250 42,925 43,601 44,279 44,957
- ------------------------------------------------------------------------------------------------
TVA
- ------------------------------------------------------------------------------------------------
Demand (GWH) 178,785 181,458 184,129 187,219 190,309 193,397 196,484 199,570
Summer Peak (MW) 31,930 32,407 32,884 33,436 33,988 34,539 35,091 35,642
Winter Peak (MW) 32,873 33,364 33,855 34,423 34,992 35,559 36,127 36,694
- ------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------
Demand (GWH) 596,244 606,426 616,615 627,003 637,398 647,799 658,208 668,623
Summer Peak (MW) 112,954 114,889 116,825 118,792 120,761 122,731 124,702 126,675
Winter Peak (MW) 99,137 100,820 102,504 104,228 105,953 107,679 109,406 111,135
- ------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit II-6: Utility vs. C.C. Pace Demand Forecast Comparison
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C.C. Pace
- ----------------------------------------------------------------------------------------------------------
SPP-SE
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 142,577 145,998 149,420 152,600 155,780 158,962 162,146 165,331 168,502
Summer Peak (MW) 27,156 27,808 28,460 29,066 29,671 30,277 30,884 31,491 32,094
Winter Peak (MW) 21,303 21,814 22,325 22,800 23,275 23,751 24,226 24,702 25,176
- ----------------------------------------------------------------------------------------------------------
Southern
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 197,010 201,985 206,965 211,489 216,019 220,555 225,097 229,646 233,961
Summer Peak (MW) 38,752 39,730 40,710 41,600 42,491 43,383 44,276 45,171 46,020
Winter Peak (MW) 32,596 33,419 34,243 34,991 35,741 36,491 37,243 37,995 38,709
- ----------------------------------------------------------------------------------------------------------
TVA
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 154,596 156,892 159,188 161,504 163,820 166,135 168,449 170,762 173,437
Summer Peak (MW) 27,610 28,020 28,430 28,844 29,257 29,671 30,084 30,497 30,975
Winter Peak (MW) 28,425 28,847 29,269 29,695 30,121 30,547 30,972 31,398 31,889
- ----------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 494,183 504,875 515,573 525,593 535,619 545,652 555,692 565,739 575,901
Summer Peak (MW) 93,518 95,558 97,600 99,509 101,419 103,331 105,244 107,159 109,089
Winter Peak (MW) 82,323 84,080 85,837 87,487 89,137 90,789 92,441 94,095 95,775
- ----------------------------------------------------------------------------------------------------------
Utilties
- ----------------------------------------------------------------------------------------------------------
SPP-SE
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 134,134 133,288 136,539 138,883 140,089 141,288 141,123 145,140 146,027
Summer Peak (MW) 25,965 26,142 26,660 27,058 27,364 27,697 28,027 28,506 28,801
Winter Peak (MW) 18,926 18,993 19,059 19,397 19,688 19,937 20,163 20,528 20,760
- ----------------------------------------------------------------------------------------------------------
Southern
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 199,723 202,392 206,024 209,365 212,116 215,918 220,280 224,769 229,510
Summer Peak (MW) 39,423 40,460 41,447 42,455 43,413 44,405 45,399 46,500 47,644
Winter Peak (MW) 33,939 34,792 35,658 36,473 37,333 38,181 39,153 40,164 40,050
- ----------------------------------------------------------------------------------------------------------
TVA
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 152,159 156,064 159,310 162,410 165,508 168,605 171,704 174,706 177,491
Summer Peak (MW) 27,479 28,107 28,656 29,170 29,689 30,205 30,722 31,244 31,752
Winter Peak (MW) 27,509 28,141 28,704 29,267 29,827 30,391 30,952 31,403 31,853
- ----------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 486,016 491,744 501,873 510,658 517,713 525,811 533,107 544,615 553,028
Summer Peak (MW) 92,867 94,709 96,763 98,683 100,466 102,307 104,148 106,250 108,197
Winter Peak (MW) 80,374 81,926 83,421 85,137 86,848 88,509 90,268 92,095 92,663
- ----------------------------------------------------------------------------------------------------------
Difference
- ----------------------------------------------------------------------------------------------------------
SPP-SE
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 8,443 12,710 12,881 13,717 15,691 17,674 21,023 20,191 22,475
Summer Peak (MW) 1,191 1,666 1,800 2,008 2,307 2,580 2,857 2,985 3,293
Winter Peak (MW) 2,377 2,821 3,266 3,403 3,587 3,814 4,063 4,174 4,416
- ----------------------------------------------------------------------------------------------------------
Southern
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) -2,713 -407 941 2,124 3,903 4,637 4,817 4,877 4,451
Summer Peak (MW) -671 -730 -737 -855 -922 -1,022 -1,123 -1,329 -1,624
Winter Peak (MW) -1,343 -1,373 -1,415 -1,482 -1,592 -1,690 -1,910 -2,169 -1,341
- ----------------------------------------------------------------------------------------------------------
TVA
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 2,437 828 -122 -906 -1,688 -2,470 -3,255 -3,944 -4,054
Summer Peak (MW) 131 -87 -226 -326 -432 -534 -638 -747 -777
Winter Peak (MW) 916 706 565 428 294 156 20 -5 36
- ----------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------
Demand (GWH) 8,167 13,131 13,700 14,935 17,906 19,841 22,585 21,124 22,873
Summer Peak (MW) 651 849 837 826 953 1,024 1,096 909 892
Winter Peak (MW) 1,949 2,154 2,416 2,350 2,289 2,280 2,173 2,000 3,112
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
- --------------------------------------------------------------------------------
ATTACHMENT III
EXISTING AND PLANNED UNIT COST ASSUMPTIONS
& SUPPORTING ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-1: Southeast Steam Generation Embedded Cost Summary
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Steam $ 1,637,316,069 1,648,821,207 1,647,898,095 1,879,507,980
Sum of Variable O&M Steam $ 56,110,855 56,535,684 55,556,413 55,344,461
Sum of Fixed O&M Steam $ 254,190,431 256,722,818 254,462,338 251,533,731
Sum of Fixed Steam $ 667,860,725 682,577,036 559,173,509 549,830,230
Total Variable 1,693,426,924 1,705,356,891 1,703,454,508 1,934,852,441
Total Fixed 922,051,156 939,299,854 813,635,847 801,363,961
Total Costs 2,615,478,080 2,644,656,745 2,517,090,355 2,736,216,402
Sum of Steam Gen 74,854,356 79,566,581 86,767,931 80,075,877
- --------------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Steam $ 2,416,294,601 2,212,630,755 2,288,807,399 2,310,629,821
Sum of Variable O&M Steam $ 111,985,984 110,515,156 114,186,219 117,662,009
Sum of Fixed O&M Steam $ 458,834,554 453,429,046 454,963,906 472,869,666
Sum of Fixed Steam $ 1,250,865,832 1,205,769,544 1,215,996,463 1,260,083,627
Total Variable 2,528,280,585 2,323,145,911 2,402,993,618 2,428,291,830
Total Fixed 1,709,700,386 1,659,198,590 1,670,960,369 1,732,953,293
Total Costs 4,237,980,971 3,982,344,501 4,073,953,987 4,161,245,123
Sum of Steam Gen 128,184,763 124,617,317 132,954,616 139,204,824
- --------------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Steam $ 1,232,508,847 1,236,668,549 1,191,126,696 1,189,490,468
Sum of Variable O&M Steam $ 54,621,571 65,001,999 64,414,856 70,123,167
Sum of Fixed O&M Steam $ 218,486,282 260,007,995 257,659,422 280,492,666
Sum of Fixed Steam $ 833,867,192 904,156,825 958,283,427 939,224,042
Total Variable 1,287,130,418 1,301,670,548 1,255,541,552 1,259,613,635
Total Fixed 1,052,353,474 1,164,164,820 1,215,942,849 1,219,716,708
Total Costs 2,339,483,892 2,465,835,368 2,471,484,401 2,479,330,343
Sum of Steam Gen 97,201,013 92,082,543 94,384,049 97,045,750
- --------------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Steam $ 5,286,119,517 5,098,120,511 5,127,832,190 5,379,628,269
Total Sum of Variable O&M Steam $ 222,718,410 232,052,839 234,157,488 243,129,637
Total Sum of Fixed O&M Steam $ 931,511,267 970,159,859 967,085,666 1,004,896,063
Total Sum of Fixed Steam $ 2,752,593,749 2,792,503,405 2,733,453,399 2,749,137,899
Total Variable 5,508,837,927 5,330,173,350 5,361,989,678 5,622,757,906
Total Fixed 3,684,105,016 3,762,663,264 3,700,539,065 3,754,033,962
Total Costs 9,192,942,943 9,092,836,614 9,062,528,743 9,376,791,868
Total Sum of Steam Gen 300,240,133 296,266,441 314,106,596 316,326,451
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
$/MWh $/MWh $/MWh $/MWh
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Steam $ 21.87 20.72 18.99 23.47
Sum of Variable O&M Steam $ 0.75 0.71 0.64 0.69
Sum of Fixed O&M Steam $ 3.40 3.23 2.93 3.14
Sum of Fixed Steam $ 8.92 8.58 6.44 6.87
Total Variable 22.62 21.43 19.63 24.16
Total Fixed 12.32 11.81 9.38 10.01
Total Costs 34.94 33.24 29.01 34.17
Sum of Steam Gen
- ---------------------------------------------------------------------------------------------
STHRN Sum of Fuel Steam $ 18.85 17.76 17.21 16.60
Sum of Variable O&M Steam $ 0.87 0.89 0.86 0.85
Sum of Fixed O&M Steam $ 3.58 3.64 3.42 3.40
Sum of Fixed Steam $ 9.76 9.68 9.15 9.05
Total Variable 19.72 18.64 18.07 17.44
Total Fixed 13.34 13.31 12.57 12.45
Total Costs 33.06 31.96 30.64 29.89
Sum of Steam Gen
- ---------------------------------------------------------------------------------------------
TVA Sum of Fuel Steam $ 12.68 13.43 12.62 12.26
Sum of Variable O&M Steam $ 0.56 0.71 0.68 0.72
Sum of Fixed O&M Steam $ 2.25 2.82 2.73 2.89
Sum of Fixed Steam $ 8.58 9.82 10.15 9.68
Total Variable 13.24 14.14 13.30 12.98
Total Fixed 10.83 12.64 12.88 12.57
Total Costs 24.07 26.78 26.19 25.55
Sum of Steam Gen
- ---------------------------------------------------------------------------------------------
Total Sum of Fuel Steam $ 17.61 17.21 16.33 17.01
Total Sum of Variable O&M Steam $ 0.74 0.78 0.75 0.77
Total Sum of Fixed O&M Steam $ 3.10 3.27 3.08 3.18
Total Sum of Fixed Steam $ 9.17 9.43 8.70 8.69
Total Variable 18.35 17.99 17.07 17.78
Total Fixed 12.27 12.70 11.78 11.87
Total Costs 30.62 30.69 28.85 29.64
Total Sum of Steam Gen
- ---------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-2: Southeast Nuclear Generation Embedded Cost Summary
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Nuclear $ 228,666,362 216,429,419 211,995,630 210,991,949
Sum of Variable O&M Nuclear $ 97,496,291 91,696,568 81,799,172 88,012,443
Sum of Fixed O&M Nuclear $ 401,313,363 377,517,913 330,812,881 355,737,211
Sum of Fixed Nuclear $ 1,849,400,190 1,815,948,122 1,483,182,385 1,674,455,197
Total Variable 326,162,653 308,125,987 293,794,802 299,004,392
Total Fixed 2,250,713,553 2,193,466,035 1,813,995,266 2,030,192,408
Total Costs 2,576,876,206 2,501,592,022 2,107,790,068 2,329,196,800
Sum of Nuke Gen 34,996,064 35,329,549 34,566,276 37,422,994
- --------------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Nuclear $ 224,754,066 249,740,179 236,918,156 232,594,371
Sum of Variable O&M Nuclear $ 95,719,685 87,083,707 88,626,819 92,542,965
Sum of Fixed O&M Nuclear $ 386,402,568 351,676,391 357,691,491 372,844,034
Sum of Fixed Nuclear $ 1,600,549,536 1,511,299,495 1,470,513,874 1,550,345,078
Total Variable 320,473,751 336,823,886 325,544,975 325,137,336
Total Fixed 1,986,952,104 1,862,975,886 1,828,205,365 1,923,189,112
Total Costs 2,307,425,855 2,199,799,772 2,153,750,340 2,248,326,448
Sum of Nuke Gen 40,096,590 43,068,450 42,310,669 43,716,533
- --------------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Nuclear $ 134,620,098 201,473,184 142,998,266 194,190,337
Sum of Variable O&M Nuclear $ 51,235,067 54,464,251 47,948,142 68,080,077
Sum of Fixed O&M Nuclear $ 204,940,269 217,857,003 191,792,568 272,320,309
Sum of Fixed Nuclear $ 999,959,494 914,200,075 877,064,027 1,340,142,006
Total Variable 185,855,165 255,937,435 190,946,408 262,270,414
Total Fixed 1,204,899,763 1,132,057,078 1,068,856,595 1,612,462,315
Total Costs 1,390,754,928 1,387,994,513 1,259,803,003 1,874,732,729
Sum of Nuke Gen 12,327,848 18,365,833 23,365,730 35,426,263
- --------------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Nuclear $ 588,040,526 667,642,782 591,912,052 637,776,657
Total Sum of Variable O&M Nuclear $ 244,451,043 233,244,526 218,374,133 248,635,485
Total Sum of Fixed O&M Nuclear $ 992,656,200 947,051,307 880,296,940 1,000,901,554
Total Sum of Fixed Nuclear $ 4,449,909,220 4,241,447,692 3,830,760,286 4,564,942,281
Total Variable 832,491,569 900,887,308 810,286,185 886,412,142
Total Fixed 5,442,565,420 5,188,498,999 4,711,057,226 5,565,843,835
Total Costs 6,275,056,989 6,089,386,307 5,521,343,411 6,452,255,977
Total Sum of Nuke Gen 87,420,502 96,763,833 100,242,675 116,565,790
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
$/MWh $/MWh $/MWh $/MWh
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Nuclear $ 6.53 6.13 6.13 5.64
Sum of Variable O&M Nuclear $ 2.79 2.60 2.37 2.35
Sum of Fixed O&M Nuclear $ 11.47 10.69 9.57 9.51
Sum of Fixed Nuclear $ 52.85 51.40 42.91 44.74
Total Variable 9.32 8.72 8.50 7.99
Total Fixed 64.31 62.09 52.48 54.25
Total Costs 73.63 70.81 60.98 62.24
Sum of Nuke Gen
- --------------------------------------------------------------------------------------------
STHRN Sum of Fuel Nuclear $ 5.61 5.80 5.60 5.32
Sum of Variable O&M Nuclear $ 2.39 2.02 2.09 2.12
Sum of Fixed O&M Nuclear $ 9.64 8.17 8.45 8.53
Sum of Fixed Nuclear $ 39.92 35.09 34.76 35.46
Total Variable 7.99 7.82 7.69 7.44
Total Fixed 49.55 43.26 43.21 43.99
Total Costs 57.55 51.08 50.90 51.43
Sum of Nuke Gen
- --------------------------------------------------------------------------------------------
TVA Sum of Fuel Nuclear $ 10.92 10.97 6.12 5.48
Sum of Variable O&M Nuclear $ 4.16 2.97 2.05 1.92
Sum of Fixed O&M Nuclear $ 16.62 11.86 8.21 7.69
Sum of Fixed Nuclear $ 81.11 49.78 37.54 37.83
Total Variable 15.08 13.94 8.17 7.40
Total Fixed 97.74 61.64 45.74 45.52
Total Costs 112.81 75.57 53.92 52.92
Sum of Nuke Gen
- --------------------------------------------------------------------------------------------
Total Sum of Fuel Nuclear $ 6.73 6.90 5.90 5.47
Total Sum of Variable O&M Nuclear $ 2.80 2.41 2.18 2.13
Total Sum of Fixed O&M Nuclear $ 11.35 9.79 8.78 8.59
Total Sum of Fixed Nuclear $ 50.90 43.83 38.21 39.16
Total Variable 9.52 9.31 8.08 7.60
Total Fixed 62.26 53.62 47.00 47.75
Total Costs 71.78 62.93 55.08 55.35
Total Sum of Nuke Gen
- --------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-3: Southeast Hydro Generation Embedded Cost Summary
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Subregion Data 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Hydro $ 843,183 1,030,216 955,941 952,033
Sum of Variable O&M Hydro $ 973,498 1,036,972 907,702 1,238,416
Sum of Fixed O&M Hydro $ 7,204,249 7,282,389 6,793,227 8,293,296
Sum of Fixed Hydro $ 105,891,391 127,984,741 131,648,919 134,631,576
Total Variable 1,816,681 2,067,188 1,863,643 2,190,449
Total Fixed 113,095,640 135,267,130 138,442,146 142,924,872
Total Costs 114,912,321 137,334,318 140,305,789 145,115,321
Sum of Hydro Gen 1,728,722 1,507,454 1,295,965 1,385,968
- -----------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Hydro $ 719,237 936,811 1,494,060 2,221,409
Sum of Variable O&M Hydro $ 5,357,022 5,413,183 7,771,422 7,094,931
Sum of Fixed O&M Hydro $ 21,802,102 22,134,079 31,790,875 289,644,461
Sum of Fixed Hydro $ 171,458,668 169,872,115 226,730,715 279,543,857
Total Variable 6,076,259 6,349,994 9,265,482 9,316,340
Total Fixed 193,260,770 192,006,194 258,521,590 308,488,318
Total Costs 199,337,029 198,356,188 267,787,072 317,804,658
Sum of Hydro Gen 15,643,863 15,673,151 14,539,342 16,235,920
- -----------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Hydro $ 41,672 29,494 76,221 21,951
Sum of Variable O&M Hydro $ 12,012,020 13,206,991 9,172,183 8,948,955
Sum of Fixed O&M Hydro $ 48,048,080 52,827,963 36,688,732 35,795,819
Sum of Fixed Hydro $ 185,063,894 189,175,638 179,631,657 164,262,687
Total Variable 12,053,692 13,236,485 9,248,404 8,970,906
Total Fixed 233,111,974 242,003,601 216,320,389 200,058,506
Total Costs 245,165,666 255,240,086 225,568,793 209,029,412
Sum of Hydro Gen 22,059,186 24,961,393 17,819,970 20,785,284
- -----------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Hydro $ 1,604,092 1,996,521 2,526,222 3,195,393
Total Sum of Variable O&M Hydro $ 18,342,540 19,657,146 17,851,307 17,282,302
Total Sum of Fixed O&M Hydro $ 77,054,431 82,244,431 75,272,834 333,733,576
Total Sum of Fixed Hydro $ 462,413,953 487,032,494 538,011,291 578,438,120
Total Variable 19,946,632 21,653,667 20,377,529 20,477,695
Total Fixed 539,468,384 569,276,925 613,284,125 651,471,696
Total Costs 559,415,016 590,930,592 633,661,654 671,949,391
Total Sum of Hydro Gen 39,431,771 42,141,998 33,655,277 38,407,172
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Subregion Data 1993 1994 1995 1996
$/MWh $/MWh $/MWh $/MWh
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Hydro $ 0.49 0.68 0.74 0.69
Sum of Variable O&M Hydro $ 0.56 0.69 0.70 0.89
Sum of Fixed O&M Hydro $ 4.17 4.83 5.24 5.98
Sum of Fixed Hydro $ 61.25 84.90 101.58 97.14
Total Variable 1.05 1.37 1.44 1.58
Total Fixed 65.42 89.73 106.83 103.12
Total Costs 66.47 91.10 108.26 104.70
Sum of Hydro Gen
- ----------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Hydro $ 0.05 0.06 0.10 0.14
Sum of Variable O&M Hydro $ 0.34 0.35 0.53 0.44
Sum of Fixed O&M Hydro $ 1.39 1.41 2.19 17.84
Sum of Fixed Hydro $ 10.96 10.84 15.59 17.22
Total Variable 0.39 0.41 0.64 0.57
Total Fixed 12.35 12.25 17.78 19.00
Total Costs 12.74 12.66 18.42 19.57
Sum of Hydro Gen
- ----------------------------------------------------------------------------------------------------
TVA Sum of Fuel Hydro $ 0.00 0.00 0.00 0.00
Sum of Variable O&M Hydro $ 0.54 0.53 0.51 0.43
Sum of Fixed O&M Hydro $ 2.18 2.12 2.06 1.72
Sum of Fixed Hydro $ 8.39 7.58 10.08 7.90
Total Variable 0.55 0.53 0.52 0.43
Total Fixed 10.57 9.70 12.14 9.63
Total Costs 11.11 10.23 12.66 10.06
Sum of Hydro Gen
- ----------------------------------------------------------------------------------------------------
Total Sum of Fuel Hydro $ 0.04 0.05 0.08 0.08
Total Sum of Variable O&M Hydro $ 0.47 0.47 0.53 0.45
Total Sum of Fixed O&M Hydro $ 1.95 1.95 2.24 8.69
Total Sum of Fixed Hydro $ 11.73 11.56 15.99 15.06
Total Variable 0.51 0.51 0.61 0.53
Total Fixed 13.68 13.51 18.22 16.96
Total Costs 14.19 14.02 18.83 17.50
Total Sum of Hydro Gen
- ----------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-4: Southeast Other Generation Embedded Cost Summary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Oth Prod $ 706,773 1,778,521 1,194,688 1,322,491
Sum of Variable O&M Oth Prod $ 208,314 190,282 303,888 295,925
Sum of Fixed O&M Oth Prod $ 2,140,065 2,068,002 2,522,751 2,490,503
Sum of Tot Fixed Oth Prod $ 4,869,173 4,364,191 3,510,232 3,430,878
Total Variable 915,087 1,968,803 1,498,576 1,618,416
Total Fixed 7,009,238 6,432,193 6,032,983 5,921,381
Total Costs 7,924,325 8,400,996 7,531,559 7,539,797
Sum of Other Gen 13,196 10,967 13,811 15,433
- -------------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Oth Prod $ 9,119,315 6,203,219 26,269,325 37,121,491
Sum of Variable O&M Oth Prod $ 2,773,369 2,476,832 3,331,386 4,054,290
Sum of Fixed O&M Oth Prod $ 11,881,664 10,747,245 14,412,432 17,952,603
Sum of Tot Fixed Oth Prod $ 14,072,126 33,870,025 67,243,904 95,630,028
Total Variable 11,892,684 8,680,051 29,600,711 41,175,781
Total Fixed 25,953,790 44,617,270 81,656,336 113,582,631
Total Costs 37,846,474 53,297,321 111,257,047 154,758,412
Sum of Other Gen 669,155 998,688 1,141,764 1,759,487
- -------------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Oth Prod $ 16,071,564 12,219,294 14,205,537 10,921,640
Sum of Variable O&M Oth Prod $ 657,439 788,588 923,354 922,704
Sum of Fixed O&M Oth Prod $ 2,629,757 3,154,354 3,693,416 3,690,815
Sum of Tot Fixed Oth Prod $ 49,251,345 56,295,061 57,222,758 55,319,992
Total Variable 16,729,003 13,007,882 15,128,891 11,844,344
Total Fixed 51,881,102 59,449,415 60,916,174 59,010,807
Total Costs 68,610,105 72,457,297 76,045,065 70,855,151
Sum of Other Gen 316,931 239,032 393,396 217,207
- -------------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Oth Prod $ 25,897,652 20,201,034 41,669,550 49,365,622
Total Sum of Variable O&M Oth Prod $ 3,639,122 3,455,702 4,558,628 5,272,919
Total Sum of Fixed O&M Oth Prod $ 16,651,486 15,969,601 20,628,599 24,133,921
Total Sum of Tot Fixed Oth Prod $ 68,192,643 94,529,278 127,976,894 154,380,898
Total Variable 29,536,774 23,656,736 46,228,178 54,638,541
Total Fixed 84,844,129 110,498,879 148,605,493 178,514,819
Total Costs 114,380,903 134,155,615 194,833,671 233,153,360
Total Sum of Other Gen 999,282 1,248,687 1,548,971 1,992,127
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
$/MWh $/MWh $/MWh $/MWh
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Oth Prod $ 53.56 162.17 86.50 85.69
Sum of Variable O&M Oth Prod $ 15.79 17.35 22.00 19.17
Sum of Fixed O&M Oth Prod $ 162.17 188.57 182.67 161.38
Sum of Tot Fixed Oth Prod $ 368.98 397.94 254.17 222.31
Total Variable 69.34 179.52 108.51 104.87
Total Fixed 531.15 586.50 436.83 383.68
Total Costs 600.50 766.02 545.34 488.55
Sum of Other Gen
- -----------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Oth Prod $ 13.63 6.21 23.01 21.10
Sum of Variable O&M Oth Prod $ 4.14 2.48 2.92 2.30
Sum of Fixed O&M Oth Prod $ 17.76 10.76 12.62 10.20
Sum of Tot Fixed Oth Prod $ 21.03 33.91 58.89 54.35
Total Variable 17.77 8.69 25.93 23.40
Total Fixed 38.79 44.68 71.52 64.55
Total Costs 56.56 53.37 97.44 87.96
Sum of Other Gen
- -----------------------------------------------------------------------------------------------------
TVA Sum of Fuel Oth Prod $ 50.71 51.12 36.11 50.28
Sum of Variable O&M Oth Prod $ 2.07 3.30 2.35 4.25
Sum of Fixed O&M Oth Prod $ 8.30 13.20 9.39 16.99
Sum of Tot Fixed Oth Prod $ 155.40 235.51 145.46 254.69
Total Variable 52.78 54.42 38.46 54.53
Total Fixed 163.70 248.71 154.85 271.68
Total Costs 216.48 303.13 193.30 326.21
Sum of Other Gen
- -----------------------------------------------------------------------------------------------------
Total Sum of Fuel Oth Prod $ 25.92 16.18 26.90 24.78
Total Sum of Variable O&M Oth Prod $ 3.64 2.77 2.94 2.65
Total Sum of Fixed O&M Oth Prod $ 16.66 12.79 13.32 12.11
Total Sum of Tot Fixed Oth Prod $ 68.24 75.70 82.62 77.50
Total Variable 29.56 18.95 29.84 27.43
Total Fixed 84.91 88.49 95.94 89.61
Total Costs 114.46 107.44 125.78 117.04
Total Sum of Other Gen
- -----------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-5: Southeast Total Generation Embedded Cost Summary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Total $ 1,867,532,387 1,868,059,363 1,862,044,354 2,092,774,453
Sum of Variable O&M Total $ 154,788,958 149,459,506 138,567,175 144,891,245
Sum of Fixed O&M Total $ 664,848,108 643,591,122 594,591,197 618,054,741
Sum of Fixed Total $ 2,628,021,478 2,630,874,090 2,177,515,045 2,362,347,881
Total Variable 2,022,321,345 2,017,518,869 2,000,611,529 2,237,665,698
Total Fixed 3,292,869,586 3,274,465,212 2,772,106,242 2,980,402,622
Total Costs 5,315,190,931 5,291,984,081 4,772,717,771 5,218,068,320
Sum of Total Gen 111,592,339 116,414,552 122,643,983 118,900,272
- -------------------------------------------------------------------------------------------------------------------
STHRN Sum of Fuel Total $ 2,650,887,219 2,469,510,964 2,553,488,940 2,582,567,092
Sum of Variable O&M Total $ 215,836,060 205,488,878 213,915,846 221,354,195
Sum of Fixed O&M Total $ 878,920,888 837,986,761 858,858,704 1,153,310,764
Sum of Fixed Total $ 3,036,946,162 2,920,811,179 2,980,484,957 3,185,602,590
Total Variable 2,866,723,279 2,674,999,842 2,767,404,786 2,803,921,287
Total Fixed 3,915,867,050 3,758,797,940 3,839,343,661 4,078,213,354
Total Costs 6,782,590,329 6,433,797,782 6,606,748,447 6,882,134,641
Sum of Total Gen 184,594,371 184,357,607 190,946,391 200,916,764
- -------------------------------------------------------------------------------------------------------------------
TVA Sum of Fuel Total $ 1,383,242,181 1,450,390,521 1,348,406,720 1,394,624,396
Sum of Variable O&M Total $ 118,526,097 133,461,829 122,458,535 148,074,903
Sum of Fixed O&M Total $ 474,104,388 533,847,315 489,834,138 592,299,609
Sum of Fixed Total $ 2,068,141,925 2,063,827,599 2,072,201,869 2,498,948,727
Total Variable 1,501,768,278 1,583,852,350 1,470,865,255 1,542,699,299
Total Fixed 2,542,246,313 2,597,674,914 2,562,036,007 3,091,248,336
Total Costs 4,044,014,591 4,181,527,264 4,032,901,262 4,633,947,635
Sum of Total Gen 131,904,978 135,648,800 135,963,145 153,474,504
- -------------------------------------------------------------------------------------------------------------------
Total Sum of Fuel Total $ 5,901,661,787 5,787,960,848 5,763,940,014 6,069,965,941
Total Sum of Variable O&M Total $ 489,151,115 488,410,213 474,941,556 514,320,343
Total Sum of Fixed O&M Total $ 2,017,873,384 2,015,425,198 1,943,284,039 2,363,665,114
Total Sum of Fixed Total $ 7,733,109,565 7,615,512,868 7,230,201,871 8,046,899,198
Total Variable 6,390,812,902 6,276,371,061 6,238,881,570 6,584,286,284
Total Fixed 9,750,982,949 9,630,938,066 9,173,485,910 10,149,864,312
Total Costs 16,141,795,851 15,907,309,127 15,412,367,480 16,734,150,596
Total Sum of Total Gen 428,091,688 436,420,958 449,553,519 473,291,540
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------
Sub-Region Data 1993 1994 1995 1996
$/MWh $/MWh $/MWh $/MWh
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SE Sum of Fuel Total $ 16.74 16.05 15.18 17.60
Sum of Variable O&M Total $ 1.39 1.28 1.13 1.22
Sum of Fixed O&M Total $ 5.96 5.53 4.85 5.20
Sum of Fixed Total $ 23.55 22.60 17.75 19.87
Total Variable 18.12 17.33 16.31 18.82
Total Fixed 29.51 28.13 22.60 25.07
Total Costs 47.63 45.46 38.92 43.89
Sum of Total Gen
- ---------------------------------------------------------------------------------------
STHRN Sum of Fuel Total $ 14.36 13.40 13.37 12.85
Sum of Variable O&M Total $ 1.17 1.11 1.12 1.10
Sum of Fixed O&M Total $ 4.76 4.55 4.50 5.74
Sum of Fixed Total $ 16.45 15.84 15.61 15.86
Total Variable 15.53 14.51 14.49 13.96
Total Fixed 21.21 20.39 20.11 20.30
Total Costs 36.74 34.90 34.60 34.25
Sum of Total Gen
- ---------------------------------------------------------------------------------------
TVA Sum of Fuel Total $ 10.49 10.69 9.92 9.09
Sum of Variable O&M Total $ 0.90 0.98 0.90 0.96
Sum of Fixed O&M Total $ 3.59 3.94 3.60 3.86
Sum of Fixed Total $ 15.68 15.21 15.24 16.28
Total Variable 11.39 11.68 10.82 10.05
Total Fixed 19.27 19.15 18.84 20.14
Total Costs 30.66 30.83 29.66 30.19
Sum of Total Gen
- ---------------------------------------------------------------------------------------
Total Sum of Fuel Total $ 13.79 13.26 12.82 12.83
Total Sum of Variable O&M Total $ 1.14 1.12 1.06 1.09
Total Sum of Fixed O&M Total $ 4.71 4.62 4.32 4.99
Total Sum of Fixed Total $ 18.06 17.45 16.08 17.00
Total Variable 14.93 14.38 13.88 13.91
Total Fixed 22.78 22.07 20.41 21.45
Total Costs 37.71 36.45 34.28 35.36
Total Sum of Total Gen
- ---------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-6: Expansion Unit Characteristics - SE
- ----------------------------------------------------------------------
Item Unit CT CC Coal
- ----------------------------------------------------------------------
Assumptions
Capacity MW 230 360 500
Cost $/kW 300 500 1,100
Capacity Factor* % 15% 85% 85%
Annual Maintenance Weeks 2 3 4
Forced Outage % 2.5% 2.5% 5.0%
Fuel Cost $/MMBtu 2.24 2.24 1.37
Fixed O&M $/kW-yr 4.00 12.00 29.00
Variable O&M $/MWh 3.50 0.75 1.50
Heat Rate Btu/kWh 9,700 6,600 9,600
Percent Equity % 30% 30% 30%
Discount Rate % 8.5% 8.5% 8.5%
Return on Equity % 14% 14% 14%
Project Life Years 20 20 20
Installed Cost ($000) 69,000 180,000 550,000
Fixed O&M ($000) 920 4,320 14,500
Amount of Equity ($000) 20,700 54,000 165,000
Amount of Debt ($000) 48,300 126,000 385,000
- ----------------------------------------------------------------------
Annual Fixed Costs
Total Debt ($000) 5,104 13,315 40,683
Interest ($000) 4,106 10,710 32,725
Principal ($000) 998 2,605 7,958
ROI ($000) 2,898 7,560 23,100
Fixed O&M ($000) 920 4,320 14,500
Taxes ($000) 1,265 3,218 12,375
Total Fixed ($000) 10,187 28,413 90,658
- ----------------------------------------------------------------------
Cost Summary
Variable Costs $/MWh 25.23 15.53 14.65
Fixed Costs $/MWh 33.71 10.60 24.35
Total Costs $/MWh 58.93 26.13 39.00
- ----------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-7: Expansion Unit Characteristics - Southern
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Item Unit CT CC Coal USGen CT Mid-GA CC
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assumptions
Capacity MW 230 360 500 215 300
Cost $/kW 300 500 1,100 238 415
Capacity Factor* % 15.0% 85.0% 85.0% 15.0% 85.0%
Annual Maintenance Weeks 2 3 4 2 3
Forced Outage % 2.5% 2.5% 5.0% 2.5% 2.5%
Fuel Cost $/MMBtu 2.38 2.38 1.44 2.38 2.38
Fixed O&M $/kW-yr 4 12 29 8 12
Variable O&M $/MWh 3.50 0.75 2.50 3.50 3.50
Heat Rate Btu/kWh 9,700 6,600 9,600 9,700 7,500
Percent Equity % 30.0% 30.0% 30.0% 30.0% 30.0%
Discount Rate % 8.5% 8.5% 8.5% 8.5% 8.5%
Return on Equity % 14.0% 14.0% 14.0% 14.0% 15.0%
Project Life Years 20 20 20 20 20
Installed Cost ($000) 69,000 180,000 550,000 51,170 124,500
Fixed O&M ($000) 920 4,320 14,500 1,720 3,600
Amount of Equity ($000) 20,700 54,000 165,000 15,351 37,350
Amount of Debt ($000) 48,300 126,000 385,000 35,819 87,150
- -----------------------------------------------------------------------------------------------
Annual Fixed Costs
Total Debt ($000) 5,104 13,315 40,683 3,785 9,209
Interest ($000) 4,106 10,710 32,725 3,045 7,408
Principal ($000) 998 2,605 7,958 740 1,801
ROI ($000) 2,898 7,560 23,100 2,149 5,603
Fixed O&M ($000) 920 4,320 14,500 1,720 3,600
Taxes ($000) 1,265 3,218 12,375 1,184 2,681
Total Fixed ($000) 10,187 28,413 90,658 8,838 21,093
- -----------------------------------------------------------------------------------------------
Cost Summary
Variable Costs $/MWh 26.59 16.46 16.32 26.59 21.35
Fixed Costs $/MWh 33.71 10.60 24.35 31.28 9.44
Total Costs $/MWh 60.29 27.06 40.67 57.87 30.79
- -----------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit III-8: Expansion Unit Characteristics-TVA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Item Unit CT CC Coal Red Hills
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assumptions
Capacity MW 230 360 500 440
Cost $/kW 300 500 1,100 1,050
Capacity Factor* % 15.0% 85.0% 85.0% 85.0%
Annual Maintenance Weeks 2 3 4 4
Forced Outage % 2.5% 2.5% 5.0% 5.0%
Fuel Cost $/MMBtu 2.34 2.34 1.30 1.00
Fixed O&M $/kW-yr 4.00 12.00 29.00 29.00
Variable O&M $/MWh 3.50 0.75 1.50 1.50
Heat Rate Btu/kWh 9,700 6,600 9,600 9,600
Percent Equity % 30.0% 30.0% 30.0% 30.0%
Discount Rate % 8.5% 8.5% 8.5% 8.5%
Return on Equity % 14.0% 14.0% 14.0% 14.0%
Project Life Years 20 20 20 20
Installed Cost ($000) 69,000 180,000 550,000 462,000
Fixed O&M ($000) 920 4,320 14,500 12,760
Amount of Equity ($000) 20,700 54,000 165,000 138,600
Amount of Debt ($000) 48,300 126,000 385,000 323,400
- ----------------------------------------------------------------------------------
Annual Fixed Costs
Total Debt ($000) 5,104 13,315 40,683 34,174
Interest ($000) 4,106 10,710 32,725 27,489
Principal ($000) 998 2,605 7,958 6,685
ROI ($000) 2,898 7,560 23,100 19,404
Fixed O&M ($000) 920 4,320 14,500 12,760
Taxes ($000) 1,265 3,218 12,375 10,890
Total Fixed ($000) 10,187 28,413 90,658 77,228
- ----------------------------------------------------------------------------------
Cost Summary
Variable Costs $/MWh 26.20 16.19 13.98 11.10
Fixed Costs $/MWh 33.71 10.60 24.35 23.57
Total Costs $/MWh 59.90 26.79 38.33 34.67
- ----------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
CC Pace
- --------------------------------------------------------------------------------
ATTACHMENT IV
FULE PRICING ASSUMPTIONS & SUPPORTING ANALYSIS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-1: Southeast Coal Percent of Volumes Purchased "Over-Market" Costs
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Barry Crist Gadsden Gaston Gorgas Greene County Miller White Bluff
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 60% 100% 85% 85% 50% 30% 58% 85%
1997 60% 100% 85% 85% 50% 30% 58% 85%
1998 60% 100% 85% 85% 50% 30% 58% 85%
1999 45% 100% 64% 64% 38% 23% 44% 64%
2000 45% 100% 64% 64% 38% 23% 44% 64%
2001 45% 100% 64% 64% 38% 23% 44% 64%
2002 23% 100% 32% 32% 19% 11% 22% 32%
2003 23% 100% 32% 32% 19% 11% 22% 32%
2004 23% 50% 32% 32% 19% 11% 22% 32%
2005 0% 50% 0% 0% 0% 0% 0% 0%
2006 0% 50% 0% 0% 0% 0% 0% 0%
2007 0% 0% 0% 0% 0% 0% 0% 0%
2008 0% 0% 0% 0% 0% 0% 0% 0%
2009 0% 0% 0% 0% 0% 0% 0% 0%
2010 0% 0% 0% 0% 0% 0% 0% 0%
2011 0% 0% 0% 0% 0% 0% 0% 0%
2012 0% 0% 0% 0% 0% 0% 0% 0%
2013 0% 0% 0% 0% 0% 0% 0% 0%
2014 0% 0% 0% 0% 0% 0% 0% 0%
2015 0% 0% 0% 0% 0% 0% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Bowen Harlee Branch Scherer Smith Wansley Flint Creek Welsh Morrow Allen (TN)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 10% 23% 21% 52% 65% 65% 65% 100% 0%
1997 10% 23% 21% 52% 65% 65% 65% 100% 0%
1998 10% 23% 21% 52% 65% 65% 65% 100% 0%
1999 8% 17% 16% 100% 49% 49% 49% 75% 0%
2000 8% 17% 16% 100% 49% 49% 49% 75% 0%
2001 8% 17% 16% 100% 49% 49% 49% 75% 0%
2002 4% 8% 8% 100% 24% 24% 24% 38% 0%
2003 4% 8% 8% 100% 24% 24% 24% 38% 0%
2004 4% 8% 8% 50% 24% 24% 24% 38% 0%
2005 0% 0% 0% 50% 0% 0% 0% 0% 0%
2006 0% 0% 0% 50% 0% 0% 0% 0% 0%
2007 0% 0% 0% 0% 0% 0% 0% 0% 0%
2008 0% 0% 0% 0% 0% 0% 0% 0% 0%
2009 0% 0% 0% 0% 0% 0% 0% 0% 0%
2010 0% 0% 0% 0% 0% 0% 0% 0% 0%
2011 0% 0% 0% 0% 0% 0% 0% 0% 0%
2012 0% 0% 0% 0% 0% 0% 0% 0% 0%
2013 0% 0% 0% 0% 0% 0% 0% 0% 0%
2014 0% 0% 0% 0% 0% 0% 0% 0% 0%
2015 0% 0% 0% 0% 0% 0% 0% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
Bull Run Colbert Gallatin Johnsonville Shawnee Widows Creek
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 19% 25% 26% 23% 40% 17%
1997 19% 25% 26% 23% 40% 17%
1998 19% 25% 26% 23% 40% 17%
1999 15% 19% 19% 18% 30% 12%
2000 15% 19% 19% 18% 30% 12%
2001 15% 19% 19% 18% 30% 12%
2002 7% 9% 10% 9% 15% 6%
2003 7% 9% 10% 9% 15% 6%
2004 7% 9% 10% 9% 15% 6%
2005 0% 0% 0% 0% 0% 0%
2006 0% 0% 0% 0% 0% 0%
2007 0% 0% 0% 0% 0% 0%
2008 0% 0% 0% 0% 0% 0%
2009 0% 0% 0% 0% 0% 0%
2010 0% 0% 0% 0% 0% 0%
2011 0% 0% 0% 0% 0% 0%
2012 0% 0% 0% 0% 0% 0%
2013 0% 0% 0% 0% 0% 0%
2014 0% 0% 0% 0% 0% 0%
2015 0% 0% 0% 0% 0% 0%
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit IV-2: Southeast Coal "Over-Market" Cost Forecast
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Barry Crist Gadsden Gaston Gorgas Greene County Miller White Bluff
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 204 216 191 212 180 153 190 186
1997 204 216 191 212 180 153 190 186
1998 204 216 191 212 180 153 190 186
1999 204 216 191 212 180 153 190 186
2000 204 216 191 212 180 153 190 186
2001 204 216 191 212 180 153 190 186
2002 204 216 191 212 180 153 190 186
2003 204 216 191 212 180 153 190 186
2004 204 216 191 212 180 153 190 186
2005 204 216 191 212 180 153 190 186
2006 204 216 191 212 180 153 190 186
2007 204 216 191 212 180 153 190 186
2008 204 216 191 212 180 153 190 186
2009 204 216 191 212 180 153 190 186
2010 204 216 191 212 180 153 190 186
2011 204 216 191 212 180 153 190 186
2012 204 216 191 212 180 153 190 186
2013 204 216 191 212 180 153 190 186
2014 204 216 191 212 180 153 190 186
2015 204 216 191 212 180 153 190 186
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Bowen Harlee Branch Scherer Smith Wansley Flint Creek Welsh Morrow Allen (TN)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 171 175 230 202 208 162 200 -- 132
1997 171 175 230 202 208 162 200 -- 132
1998 171 175 230 202 208 162 200 -- 132
1999 171 175 230 202 208 162 200 -- 132
2000 171 175 230 202 208 162 200 -- 132
2001 171 175 230 202 208 162 200 -- 132
2002 171 175 230 202 208 162 200 -- 132
2003 171 175 230 202 208 162 200 -- 132
2004 171 175 230 202 208 162 200 -- 132
2005 171 175 230 202 208 162 200 -- 132
2006 171 175 230 202 208 162 200 -- 132
2007 171 175 230 202 208 162 200 -- 132
2008 171 175 230 202 208 162 200 -- 132
2009 171 175 230 202 208 162 200 -- 132
2010 171 175 230 202 208 162 200 -- 132
2011 171 175 230 202 208 162 200 -- 132
2012 171 175 230 202 208 162 200 -- 132
2013 171 175 230 202 208 162 200 -- 132
2014 171 175 230 202 208 162 200 -- 132
2015 171 175 230 202 208 162 200 -- 132
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
Bull Run Colbert Gallatin Johnsonville Shawnee Widows Creek
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 115 126 126 123 137 134
1997 115 126 126 123 137 134
1998 115 126 126 123 137 134
1999 115 126 126 123 137 134
2000 115 126 126 123 137 134
2001 115 126 126 123 137 134
2002 115 126 126 123 137 134
2003 115 126 126 123 137 134
2004 115 126 126 123 137 134
2005 115 126 126 123 137 134
2006 115 126 126 123 137 134
2007 115 126 126 123 137 134
2008 115 126 126 123 137 134
2009 115 126 126 123 137 134
2010 115 126 126 123 137 134
2011 115 126 126 123 137 134
2012 115 126 126 123 137 134
2013 115 126 126 123 137 134
2014 115 126 126 123 137 134
2015 115 126 126 123 137 134
- -------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-3: Southeast Coal Market Cost Forecast
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Barry Crist Gadsden Gaston Gorgas Greene County Miller White Bluff
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 134 141 130 142 142 122 134 158
1997 133 140 129 141 141 121 133 156
1998 131 138 128 139 139 120 131 155
1999 130 137 126 138 138 118 130 153
2000 129 135 125 136 136 117 129 152
2001 127 134 124 135 135 116 127 150
2002 126 133 123 134 134 115 126 149
2003 125 131 121 132 132 114 125 147
2004 124 130 120 131 131 113 124 146
2005 122 129 119 130 130 111 122 144
2006 121 128 118 128 128 110 121 143
2007 120 126 117 127 127 109 120 141
2008 119 125 115 126 126 108 119 140
2009 118 124 114 125 125 107 118 139
2010 116 122 113 123 123 106 116 137
2011 115 121 112 122 122 105 115 136
2012 114 120 111 121 121 104 114 135
2013 113 119 110 120 120 103 113 133
2014 112 118 109 119 119 102 112 132
2015 111 116 108 117 117 101 111 131
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Bowen Harlee Branch Scherer Smith Wansley Flint Creek Welsh Morrow Allen (TN)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 136 149 159 141 145 108 135 134 110
1997 135 148 157 140 144 107 134 133 110
1998 134 146 156 138 142 106 132 131 110
1999 132 145 154 137 141 105 131 130 110
2000 131 143 153 135 139 104 130 129 110
2001 130 142 151 134 138 103 128 127 110
2002 128 140 149 133 137 102 127 126 110
2003 127 139 148 131 135 101 126 125 110
2004 126 137 147 130 134 100 125 124 110
2005 125 136 145 129 132 99 123 122 110
2006 123 135 144 128 131 98 122 121 110
2007 122 133 142 126 130 97 121 120 110
2008 121 132 141 125 129 96 120 119 110
2009 120 131 139 124 127 95 118 118 110
2010 119 129 138 122 126 94 117 116 110
2011 117 128 137 121 125 93 116 115 110
2012 116 127 135 120 123 92 115 114 110
2013 115 126 134 119 122 91 114 113 110
2014 114 124 132 118 121 90 113 112 110
2015 113 123 131 116 120 89 112 111 110
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Bull Run Colbert Gallatin Johnsonville Shawnee Widows Creek
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 107 112 113 114 117 110
1997 107 112 113 114 117 110
1998 107 112 113 114 117 110
1999 107 112 113 114 117 110
2000 107 112 113 114 117 110
2001 107 112 113 114 117 110
2002 107 112 113 114 117 110
2003 107 112 113 114 117 110
2004 107 112 113 114 117 110
2005 107 112 113 114 117 110
2006 107 112 113 114 117 110
2007 107 112 113 114 117 110
2008 107 112 113 114 117 110
2009 107 112 113 114 117 110
2010 107 112 113 114 117 110
2011 107 112 113 114 117 110
2012 107 112 113 114 117 110
2013 107 112 113 114 117 110
2014 107 112 113 114 117 110
2015 107 112 113 114 117 110
- --------------------------------------------------------------------------------------------------
</TABLE>
Exhibit IV-4: Southeast Coal "Over-Market" Plant Level Cost Forecast
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Year Barry Crist Gadsden Gaston Gorgas Greene Cty Miller White Bluff
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 176 216 182 202 161 131 166 182
1997 175 216 182 201 160 130 166 182
1998 175 216 181 201 160 130 165 181
1999 163 216 168 185 154 126 156 174
2000 163 216 167 185 153 125 155 174
2001 162 216 167 184 152 124 155 173
2002 144 216 144 159 142 119 140 161
2003 143 216 144 158 141 118 139 160
2004 142 173 143 157 140 117 138 159
2005 122 172 119 130 130 111 122 144
2006 121 172 118 128 128 110 121 143
2007 120 126 117 127 127 109 120 141
2008 119 125 115 126 126 108 119 140
2009 118 124 114 125 125 107 118 139
2010 116 122 113 123 123 106 116 137
2011 115 121 112 122 122 105 115 136
2012 114 120 111 121 121 104 114 135
2013 113 119 110 120 120 103 113 133
2014 112 118 109 119 119 102 112 132
2015 111 116 108 117 117 101 111 131
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Year Bowen Harlee Branch Scherer Crist Wansley Flint Creek Welsh Morrow Allen (TN)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 140 155 174 173 186 143 177 -- 110
1997 139 154 172 172 185 143 177 -- 110
1998 138 153 171 171 185 142 176 -- 110
1999 135 150 166 202 174 133 165 33 110
2000 134 149 165 202 173 132 164 32 110
2001 133 147 163 202 172 132 163 32 110
2002 130 143 156 202 154 116 145 79 110
2003 129 142 154 202 153 116 144 78 110
2004 128 141 153 166 152 115 143 77 110
2005 125 136 145 165 132 99 123 122 110
2006 123 135 144 165 131 98 122 121 110
2007 122 133 142 126 130 97 121 120 110
2008 121 132 141 125 129 96 120 119 110
2009 120 131 139 124 127 95 118 118 110
2010 119 129 138 122 126 94 117 116 110
2011 117 128 137 121 125 93 116 115 110
2012 116 127 135 120 123 92 115 114 110
2013 115 126 134 119 122 91 114 113 110
2014 114 124 132 118 121 90 113 112 110
2015 113 123 131 116 120 89 112 111 110
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Bull Run Colbert Gallatin Johnsonville Shawnee Widows Creek
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 109 116 116 116 125 114
1997 109 116 116 116 125 114
1998 109 116 116 116 125 114
1999 108 115 115 115 123 113
2000 108 115 115 115 123 113
2001 108 115 115 115 123 113
2002 108 113 114 114 120 112
2003 108 113 114 114 120 112
2004 108 113 114 114 120 112
2005 107 112 113 114 117 110
2006 107 112 113 114 117 110
2007 107 112 113 114 117 110
2008 107 112 113 114 117 110
2009 107 112 113 114 117 110
2010 107 112 113 114 117 110
2011 107 112 113 114 117 110
2012 107 112 113 114 117 110
2013 107 112 113 114 117 110
2014 107 112 113 114 117 110
2015 107 112 113 114 117 110
- --------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-5: Southeast Coal Market Based Cost Forecast
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Year Lowman Big Cajun 2 Dolet Hills Rodemacher Independence Arkwright Hammond McDonough Mitchell
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 137 158 134 151 160 135 149 132 170
1998 136 156 133 149 158 134 148 131 168
1999 134 155 131 148 157 132 146 129 167
2000 133 153 130 147 155 131 145 128 165
2001 132 152 129 145 154 130 143 127 163
2002 130 150 127 144 152 128 142 126 162
2003 129 149 126 142 151 127 140 124 160
2004 128 147 125 141 149 126 139 123 158
2005 126 146 124 139 148 125 137 122 157
2006 125 144 122 138 146 123 136 121 155
2007 124 143 121 137 145 122 135 119 154
2008 123 141 120 135 143 121 133 118 152
2009 121 140 119 134 142 120 132 117 151
2010 120 139 118 133 140 118 131 116 149
2011 119 137 116 131 139 117 129 115 148
2012 118 136 115 130 138 116 128 114 146
2013 117 135 114 129 136 115 127 112 145
2014 115 133 113 127 135 114 126 111 143
2015 114 132 112 126 134 113 124 110 142
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Yates Watson Daniel McIntosh Scholz Pirkey Cumberland John Sevier Kingston
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 151 130 143 144 140 111 105 125 121
1998 149 128 142 143 138 100 105 125 121
1999 148 127 140 141 137 100 105 125 121
2000 146 126 139 140 135 100 105 125 121
2001 145 125 138 138 134 100 105 125 121
2002 143 123 136 137 133 100 105 125 121
2003 142 122 135 136 131 100 105 125 121
2004 140 121 134 134 130 100 105 125 121
2005 139 120 132 133 129 100 105 125 121
2006 138 119 131 132 128 100 105 125 121
2007 136 117 130 130 126 100 105 125 121
2008 135 116 128 129 125 100 105 125 121
2009 134 115 127 128 124 100 105 125 121
2010 132 114 126 126 122 100 105 125 121
2011 131 113 124 125 121 100 105 125 121
2012 130 112 123 124 120 100 105 125 121
2013 128 111 122 123 119 100 105 125 121
2014 127 109 121 121 118 100 105 125 121
2015 126 108 120 120 116 100 105 125 121
- -------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-6: Southeast Nuclear Generation Plant Level Price Forecast - $/MWh
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Farley Arkansas Waterford Hatch Vogtle Grand Gulf Browns Ferry Sequoyah Watts Bar
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
1998 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
1999 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2000 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2001 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2002 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2003 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2004 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2005 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2006 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2007 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2008 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2009 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2010 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2011 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2012 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2013 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2014 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
2015 4.96 5.45 5.56 6.20 4.78 5.27 6.16 5.40 3.18
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-7 Delivered to Electric Utility Gas Costs -c/MMBtu
- ----------------------------------------------------------------------------
1994 1995 1996 *1997 Average
- ----------------------------------------------------------------------------
Alabama 244 203 287 314 262
Arkansas 172 169 272 234 212
Louisiana 214 184 294 258 237
Mississippi 219 174 289 259 235
Texas 210 182 251 246 222
- ----------------------------------------------------------------------------
*Avg through Aug. 1997
Exhibit IV-8: Average Electric Utility Delivered Gas Cost Basis Difference From
Henry Hub -c/MMBtu
- ----------------------------------------------------------------------------
1994 1995 1996 1997 Average
- ----------------------------------------------------------------------------
Henry Hub 186 180 276 257 N/A
- ----------------------------------------------------------------------------
Alabama 58 23 11 57 37
Arkansas (14) (11) (4) (23) (13)
Louisiana 28 4 18 1 13
Mississippi 33 (6) 13 2 10
Georgia* N.A. N.A. N.A. N.A. 25
Tennessee* N.A. N.A. N.A. N.A. 25
Texas 24 2 (25) (11) (3)
- ----------------------------------------------------------------------------
* Gas use for utility did not provide useable numbers for basis calculation.
25 c/MMBtu represents C.C. Pace's transportation cost estimate to these states
Proprietary & Confidential
5-13-99
<PAGE>
Exhibit IV-9 Southeast Average Distillate Fuel Oil Costs - Cents/MMBtu
- ----------------------------------------------------------------------------
1994 1995 1996 *1997 Average
- ----------------------------------------------------------------------------
Alabama 415 318 439 421 398
Arkansas 395 398 447 444 421
Georgia 395 393 413 466 417
Louisiana 399 359 434 349 385
Mississippi 385 369 373 443 393
Tennessee 428 418 453 449 437
- ----------------------------------------------------------------------------
*Avg through Aug. 1997
Exhibit IV-10: Average Price Relationship of Refined Oil Products - Cents/Gallon
- --------------------------------------------------------------------------------
[GRAPH OMITTED]
- --------------------------------------------------------------------------------
Exhibit IV-11: Southeast Average Imputed Residual Fuel Oil Costs - Cents/MMBtu
- -----------------------------------------------------------
Average Average
Average Residual Imputed
Distillate Difference Residual
State Prices Price Price
- -----------------------------------------------------------
Alabama 398 169 229
Arkansas 421 169 252
Georgia 417 169 248
Louisiana 385 169 216
Mississippi 393 169 224
Tennessee 437 169 268
- -----------------------------------------------------------
Proprietary & Confidential
5-13-99
<PAGE>
ANNEX D
FORM OF REQUEST FOR INFORMATION FROM THE TRUSTEE
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Attention: ____________________________
Pursuant to Section [ ] of that certain Trust Indenture, dated as of
May , 1999 (as amended, modified or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among LSP Energy Limited
Partnership (the "Partnership"), LSP Batesville Funding Corporation (the
"Funding Corporation" and, together with the Partnership, the "Issuers") and The
Bank of New York, as Trustee (the "Trustee"), [NAME OF HOLDER], as beneficial
holder, hereby requests, which request is a continuing request until further
notice to the contrary, that you deliver to us at [ADDRESS OF HOLDER] all
information and copies of all documents that the Issuers are required to deliver
to you pursuant to Rule 144A(d) under the Securities Act of 1933, as amended, or
pursuant to the Indenture. [NAME OF HOLDER] hereby certifies that it is a
beneficial holder of Series [ ] Senior Secured Bonds.
[NAME OF HOLDER]
____________________________ _______________
Authorized Signature Date
D-1
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations in connection with the offer
contained herein other than those contained in this prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Issuers. This prospectus does not constitute an offer to sell,
or the solicitation of an offer to buy, any security other than those to which
it relates nor does it constitute an offer to sell, or the solicitation of an
offer to buy, to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Issuers since the date
hereof or that the information contained herein is correct as of any time
subsequent to the date of this prospectus.
---------------------
PROSPECTUS
---------------------
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
, 1999
Until , 1999, all dealers effecting transactions in the Exchange
Bonds, whether or not participating in this distribution, may be required to
deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
provides that a corporation has the power to indemnify any director or officer,
or former director or officer, who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) against the expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the defense of any action by
reason of being or having been directors or officers, if such person has acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, provided that such person had no reasonable cause to believe his
conduct was unlawful, except that, if such action will be in the right of the
corporation, no such indemnification will be provided as to any claim, issue or
matter as to which such person will have been judged to have been liable to the
corporation unless and only to the extent that the Court of Chancery of the
State of Delaware (the "Court of Chancery"), or any court in such suit or action
was brought, will determine upon application that, despite the liability
judgment, but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the Court of
Chancery or such other court will deem proper.
Accordingly, the Certificate of Incorporation and the amendments thereto
dated August 3, 1998 and May 18, 1999 of the Funding Corporation (filed herewith
as Exhibit 3.1) provide that no director will be personally liable to LSP
Batesville Funding Corporation (the "Funding Corporation") or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Funding Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the DGCL (director liability for unlawful
payment of dividends, stock purchaser or redemption), or (iv) for any
transaction from which the director derived an improper personal benefit.
Furthermore, the By-Laws of the Funding Corporation dated August 3, 1998
(filed herewith as Exhibit 3.3) provide for the indemnification by the Funding
Corporation of any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Funding Corporation) by reason of the fact that he is
or was a director or officer of the Funding Corporation, or is or was a director
or officer of the Funding Corporation serving at the request of the Funding
Corporation as a director or officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorney's fees) judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, or the defense or settlement of such action or suit,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, create a presumption that the person did not act
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Funding Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. With respect to any such defense or settlement of such
action or suit, no indemnification will be made in respect of any claim, issue
or matter as to which such person will have been adjudged to be liable to the
Funding Corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought determines upon application
that, despite the
II-1
<PAGE>
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court deems proper.
Expenses incurred by a director or officer defending or investigating a
threatened or pending action, suit or proceeding will be paid by the Funding
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it will ultimately be determined that he is not
entitled to be indemnified by the Funding Corporation. The indemnification or
advancement of expenses provided by the Funding Corporation will not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-Law, agreement, contract,
vote of stockholders or disinterested directors or pursuant to the direction of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Funding Corporation that the indemnification
of such directors and officers be made to the fullest extent permitted by law.
The Funding Corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Funding Corporation, or is or
was a director or officer of the Funding Corporation serving at the request of
the Funding Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Funding Corporation would have the power or the obligation to indemnify him
against such liability.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act (the
"Partnership Act") provides that a limited partnership may indemnify and hold
harmless any partners or other persons from and against any and all claims and
demands whatsoever, subject to such standards and restrictions set forth in the
partnership agreement.
Accordingly, the Limited Partnership Agreement and the amendments thereto
dated February 8, 1996, August 24, 1998 and May 19, 1999 of the Partnership
(filed herewith as Exhibit 3.2) provide that the partners and their respective
officers, directors, shareholders, constituent partners, trustees, agents,
employees and other representatives will be indemnified and held harmless by the
Partnership from and against any and all losses, claims, damages, liabilities,
whether joint or several, expenses (including legal fees and disbursements),
judgments, fines, settlements and other amounts suffered by them in connection
with or arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which they may be
involved, or threatened to be involved, as a party or otherwise, by reason of
their status as a partner or an officer, director, shareholder, constituent
partner, trustee, employee or other representative of a partner except when they
result from fraud, willful misconduct, gross negligence or breach of any
fiduciary duty. This indemnification will be in addition to any other rights to
which such party may be entitled to, as a matter of law or otherwise, in such
person's capacity as a partner or as an officer, director, shareholder,
constituent partner, trustee or other representative of a partner and will inure
to the benefit of the heirs, successors, assigns and administrators of such
person. Furthermore, any indemnification will be satisfied solely out of the
assets of the Partnership. In no event will such person subject the Partnership
to personal liability by reason of these indemnification provisions.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of LSP Batesville Funding Corporation.
3.2 -- Amended and Restated Limited Partnership Agreement of LSP Energy Limited Partnership.
3.3 -- By-Laws of LSP Batesville Funding Corporation.
4.1 -- Indenture, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy
Limited Partnership and The Bank of New York, as Trustee.
4.2 -- First Supplemental Indenture, dated May 21, 1999 among LSP Batesville Funding Corporation, LSP
Energy Limited Partnership and The Bank of New York, as Trustee, relating to $150,000,000
aggregate principal amount of 7.164% Series A Senior Secured Bonds due 2014.
4.3 -- Second Supplemental Indenture, dated May 21, 1999 among LSP Batesville Funding Corporation, LSP
Energy Limited Partnership and The Bank of New York, as Trustee, relating to $176,000,000
aggregate principal amount of 8.160% Series B Senior Secured Bonds due 2025.
4.4 -- Form of Third Supplemental Indenture among LSP Batesville Funding Corporation, LSP Energy
Limited Partnership and The Bank of New York, as Trustee, relating to $150,000,000 aggregate
principal amount of 7.164% Series C Senior Secured Bonds due 2014.
4.5 -- Form of Fourth Supplemental Indenture among LSP Batesville Funding Corporation, LSP Energy
Limited Partnership and The Bank of New York, as Trustee, relating to $176,000,000 aggregate
principal amount of 8.160% Series D Senior Secured Bonds due 2025.
4.6 -- Specimen Certificate of 7.164% Series A Senior Secured Bonds due 2014.
4.7 -- Specimen Certificate of 8.160% Series B Senior Secured Bonds due 2025.
4.8 -- Form of Specimen Certificate of 7.164% Series C Senior Secured Bonds due 2014.
4.9 -- Form of Specimen Certificate of 8.160% Series D Senior Secured Bonds due 2025.
4.10 -- Registration Rights Agreement, dated as of May 21, 1999, among LSP Batesville Funding
Corporation, LSP Energy Limited Partnership, Credit Suisse First Boston Corporation, Scotia
Capital Markets (USA) Inc. and TD Securities (USA) Inc.
4.11 -- Second Amended and Restated Common Agreement, dated as of May 21, 1999, among LSP Batesville
Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Collateral
Agent, Administrative Agent and Intercreditor Agent.
4.12 -- Intercreditor Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation,
LSP Energy Limited Partnership, Credit Suisse First Boston, as VEPCO L/C Agent, and The Bank of
New York, as Collateral Agent, Trustee, Administrative Agent and Intercreditor Agent.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------
<C> <C> <S>
4.13 -- Second Amended and Restated Equity Contribution Agreement, dated as of May 21, 1999, among LSP
Batesville Holding, LLC, LSP Energy Limited Partnership and The Bank of New York, as Collateral
Agent.
4.14 -- Second Amended and Restated Collateral Agency Agreement, dated as of May 21, 1999, among LSP
Batesville Funding Corporation, LSP Energy Limited Partnership, the Senior Secured Parties
party thereto from time to time, The Bank of New York, as Administrative Agent, Collateral
Agent and Intercreditor Agent and Credit Suisse First Boston, as Additional Collateral Agent.
4.15 -- Pledge and Security Agreement, dated as of May 21, 1999 (Funding Corporation's Stock), between
LSP Batesville Holding, LLC and The Bank of New York, as Collateral Agent.
4.16 -- Second Amended and Restated Pledge and Security Agreement (LSP Energy, Inc.'s Stock), dated as
of May 21, 1999, between LSP Batesville Holding, LLC and The Bank of New York, as Collateral
Agent.
4.17 -- Second Amended and Restated Pledge and Security Agreement (Limited Partnership Interest in the
Partnership), dated as of May 21, 1999, between LSP Batesville Holding, LLC and The Bank of New
York, as Collateral Agent.
4.18 -- Second Amended and Restated Pledge and Security Agreement (General Partnership Interest in the
Partnership), dated as of May 21, 1999, between LSP Energy, Inc. and The Bank of New York, as
Collateral Agent.
4.19 -- Second Amended and Restated Security Agreement, dated as of May 21, 1999, between LSP Energy
Limited Partnership and The Bank of New York, as Collateral Agent.
4.20 -- Security Agreement, dated as of May 21, 1999, between LSP Batesville Funding Corporation and
The Bank of New York, as Collateral Agent.
4.21 -- Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as
of May 21, 1999, by LSP Energy Limited Partnership, as trustor, to James W. O'Mara, as trustee,
for the benefit of The Bank of New York, as Collateral Agent.
4.22 -- Second Amended and Restated Securities Account Control Agreement, dated as of May 21, 1999,
among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New
York, as Collateral Agent and Securities Intermediary.
5.1 -- Opinion of Latham & Watkins regarding the validity of the Exchange Bonds.
10.1 -- Purchase Agreement, dated May 13, 1999, among LSP Energy Limited Partnership, LSP Batesville
Funding Corporation, Credit Suisse First Boston Corporation, Scotia Capital Markets (USA) Inc.
and TD Securities (USA) Inc.
*10.2 -- Power Purchase Agreement and amendments thereto, dated May 18, 1998, July 22, 1998 and August
11, 1998, between LSP Energy Limited Partnership and Virginia Electric and Power Company.
10.3 -- Power Purchase Agreement and amendments thereto, dated May 21, 1998, July 14, 1998, July 16,
1998 and August 27, 1998, among LSP Energy Limited Partnership, Aquila Energy Marketing
Corporation and Utilicorp United Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------
<C> <C> <S>
10.4 -- Interconnection Agreement, dated July 22, 1998, between LSP Energy Limited Partnership and the
Tennessee Valley Authority.
10.5 -- Interconnection and Operating Agreement and amendments thereto, dated May 18, 1998 and August
18, 1998, between LSP Energy Limited Partnership and Entergy Mississippi, Inc.
10.6 -- Interconnection Agreement, dated July 28, 1998, between LSP Energy Limited Partnership and ANR
Pipeline Company.
10.7 -- Facilities Agreement, dated June 23, 1998, between Tennessee Gas Pipeline Company and LSP
Energy Limited Partnership.
10.8 -- Turnkey Engineering, Procurement and Construction Agreement and amendments thereto, dated July
22, 1998, October 22, 1998, November 2, 1998, November 5, 1998, December 10, 1998, February 1,
1999 and April 12, 1999, between LSP Energy Limited Partnership and BVZ Power
Partners--Batesville.
10.9 -- Engineering Services Agreement, dated July 24, 1998, between LSP Limited Partnership and Black
& Veatch, LLP.
10.10 -- Guaranty Agreement, dated July 22, 1998, by Black & Veatch, LLP in favor of LSP Energy Limited
Partnership.
10.11 -- Management Services Agreement, dated August 24, 1998, between LSP Energy Limited Partnership
and LS Power Management, LLC.
10.12 -- Operation and Maintenance Agreement, dated August 24, 1998, between LSP Energy Limited
Partnership and Cogentrix Batesville Operations, LLC.
10.13 -- Water Supply Storage Agreement and amendments thereto, dated June 8, 1998 and March 15, 1999,
between LSP Energy Limited Partnership and the United States of America.
10.14 -- Letter Agreement/Blanket Purchase Order, dated July 23, 1998, between LSP Energy Limited
Partnership and Siemens Westinghouse Power Corporation.
10.15 -- Ad Valorem Tax Contract, dated August 24, 1998, among LSP Energy Limited Partnership, Panola
County, Mississippi, the City of Batesville, Mississippi, the Department of Economic and
Community Development and the Panola County Tax Assessor/Collector.
10.16 -- Letter of Credit Agreement, dated August 28, 1998, among LSP Energy Limited Partnership, Credit
Suisse First Boston, as the VEPCO L/C Agent and the VEPCO L/C Issuer, and the VEPCO L/C Banks.
23.1 -- Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
23.3 -- Consent of R.W. Beck, Inc.
23.4 -- Consent of C.C. Pace Consulting, L.L.C.
25.1 -- Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of
The Bank of New York.
27.1 -- Financial Data Schedule.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------
<C> <C> <S>
99.1 -- Form of Letter of Transmittal to tender unregistered 7.164% Series A Senior Secured Bonds due
2014 and unregistered 8.160% Series B Senior Secured Bonds of LSP Energy Partnership and LSP
Batesville Funding Corporation.
99.2 -- Form of Letter to Registered Holders and DTC Participants from LSP Energy Limited Partnership
and LSP Batesville Funding Corporation regarding the exchange offer.
99.3 -- Form of Instruction to Registered Holder or DTC Participant from Beneficial Owner of 7.164%
Senior Secured Bonds due 2014 and/or 8.160% Senior Secured Bonds due 2025 of LSP Energy Limited
Partnership and LSP Batesville Funding Corporation.
99.4 -- Form of Letter to Clients from Registered Holder or DTC Participant regarding the exchange
offer.
99.5 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules.
Financial statement schedules are not included as the required information
is inapplicable or is presented in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrants hereby undertake: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the application form.
The undersigned Registrants hereby undertake that every prospectus (i) that
is filed pursuant to the immediately preceding paragraph or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment will be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
The undersigned Registrants hereby undertake to file an application of the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Trust
Indenture Act.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANTS HAVE DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON THEIR
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK, ON AUGUST 5, 1999.
<TABLE>
<S> <C> <C>
LSP BATESVILLE FUNDING CORPORATION
By: /s/ MIKHAIL SEGAL
-----------------------------------------
Name: Mikhail Segal
Title: President
LSP ENERGY LIMITED PARTNERSHIP
By: LSP ENERGY, INC.,
its general partner
By: /s/ MIKHAIL SEGAL
----------------------------------------
Name: Mikhail Segal
Title: President
</TABLE>
II-7
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
LSP ENERGY LIMITED
PARTNERSHIP
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President (Principal
/s/ MIKHAIL SEGAL Executive Officer) and
- ------------------------------ Director of LSP Energy, August 5, 1999
Mikhail Segal Inc. (General Partner
Director)
Senior Vice President and
/s/ FRANK E. HARDENBERGH Secretary and Director
- ------------------------------ of LSP Energy, Inc. August 5, 1999
Frank E. Hardenbergh (General Partner
Director)
Treasurer (Principal
/s/ MARK BRENNAN Financial Officer and
- ------------------------------ Principal Accounting August 5, 1999
Mark Brennan Officer) of LSP Energy,
Inc.
</TABLE>
II-8
<PAGE>
LSP BATESVILLE FUNDING
CORPORATION
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ MIKHAIL SEGAL President and Director
- ------------------------------ (Principal Executive August 5, 1999
Mikhail Segal Officer)
/s/ FRANK E. HARDENBERGH
- ------------------------------ Senior Vice President, August 5, 1999
Frank E. Hardenbergh Secretary and Director
Treasurer (Principal
/s/ MARK BRENNAN Financial Officer and
- ------------------------------ Principal Accounting August 5, 1999
Mark Brennan Officer)
</TABLE>
II-9
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LSP BATESVILLE FUNDING CORPORATION
FIRST: The name of the corporation is LSP Batesville Funding
Corporation (hereinafter, the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The limited nature and the sole business or purpose of the
Corporation is to engage exclusively in the following business and financial
activities:
(a) to incur the indebtedness evidenced by the senior secured bonds issued
under that certain indenture among LSP Energy Limited Partnership, a
Delaware limited partnership (the "Partnership"), the Corporation and The
Bank of New York, as Trustee, dated on or around May 21, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Indenture") and
such other bonds or indebtedness as may be issued under the Indenture
(collectively, the "Bonds"); and
(b) to do any and all legal acts and things necessary, appropriate,
proper, advisable, incidental to or convenient for the furtherance and
accomplishment of such purposes and not otherwise prohibited by the
Indenture.
Title to the Corporation's assets shall be held in the Corporation's name.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is one thousand (1000) shares of Common Stock,
each having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
George Lofaso
Latham & Watkins
885 Third Avenue
New York, NY 10022
<PAGE>
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) Subject to Article ELEVENTH, the directors shall have concurrent power
with the stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the General
Corporation Law of the State of Delaware (the "GCL"), or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article SIXTH by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Amended and Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: So long as the Bonds or any portion thereof are outstanding
or until the Bonds have been defeased in accordance with the Indenture, the
Corporation may not amend, alter, change or repeal Article THIRD, this Article
EIGHTH, Article NINTH, Article TENTH, Article ELEVENTH or Article TWELFTH,
provided, that, subject to Article ELEVENTH, the Corporation reserves the right
to amend, alter, change or repeal any other provision contained in this Amended
and Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this
2
<PAGE>
reservation. Effective immediately upon the maturity, redemption, defeasance,
termination or repayment in full of all of the Bonds or the occurrence of any
other event upon which the Bonds shall no longer be outstanding, the Corporation
reserves the right to amend, alter, change, or repeal any and all provisions
contained in this Amended and Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, with or without the consent of an
Independent Director (as defined below), and all rights conferred upon
stockholders are granted subject to this reservation.
NINTH: The Corporation may not enter into any transactions with any
Affiliate (as defined below) except if such transaction is on an arm's length
basis and on commercially reasonable terms. An "Affiliate" shall mean, with
reference to the Corporation: (a) a person or entity that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the Corporation or (b) any person or entity that
is an officer, partner, or trustee of, or serves in a similar capacity with
respect to the Corporation, or for which the Corporation is an officer, partner,
or trustee, or serves in a similar capacity.
TENTH: The Corporation shall have one Independent Director (as
defined below) for the period beginning on the date of the issuance of any Bonds
pursuant to the Indenture and ending on the date of the maturity, redemption,
defeasance, termination or repayment in full of all of the Bonds or the
occurrence of any other event upon which the Bonds shall no longer be
outstanding. An "Independent Director" shall mean a director who is not at the
time of initial appointment and has not been at any time during the preceding
five (5) years and shall not be at any time while serving as Independent
Director: (a) a shareholder, director, officer, employee, partner, attorney or
member of the Corporation, the Partnership, LSP Energy, Inc., a Delaware
corporation ("LSP Energy"), LSP Batesville Holding, LLC, a Delaware limited
liability company ("Holding"), LS Power Management, LLC, a Delaware limited
liability company ("LSP Management") or any Affiliate of any of them, provided,
that no director shall be disqualified from serving as an Independent Director
of the Corporation by virtue of such director's serving as an independent
director or independent manager of the Partnership, LSP Energy, Holding, LSP
Management or any Affiliate of any of them; (b) a customer, supplier or other
person who derives more than 10% of its purchases or revenues from its
activities with the Corporation, the Partnership, LSP Energy, Holding, LSP
Management or any Affiliate of any of them; (c) a person or other entity
controlling or under the common control with any such shareholder, director,
officer, employee, partner, member, customer, supplier or other person; or (d) a
member of the immediate family of any such shareholder, director, officer,
employee, partner, member, customer, supplier or other person. (As used herein,
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or activities of a person
or entity, whether through ownership of voting securities, by contract or
otherwise.)
ELEVENTH: Notwithstanding any other provision hereof to the contrary
(but subject to the proviso contained in clause (8) below), the unanimous
consent of all directors (including that of the Independent Director) is
required for the Corporation to:
(1) institute proceedings to be adjudicated bankrupt or insolvent;
3
<PAGE>
(2) consent to the institution of bankruptcy or insolvency proceedings
against it;
(3) file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy;
(4) seek or consent to the appointment of a receiver, liquidator,
conservator, assignee, trustee, sequestrator, custodian or other similar
official of the Corporation or a substantial part of its properties;
(5) make any assignment for the benefit of creditors;
(6) admit in writing its inability to pay its debts generally as they
become due;
(7) otherwise seek relief under any laws relating to the relief of debtors
or the protection of debtors generally; or
(8) subject to Article EIGHTH, cause the amendment of or allow the
Corporation to amend its Amended and Restated Certificate of
Incorporation, provided, however, that effective immediately upon the
maturity, redemption, defeasance, termination or repayment in full of all
of the Bonds or the occurrence of any other event upon which the Bonds
shall no longer be outstanding, the Corporation may amend, alter, change,
or repeal any and all provisions contained in this Amended and Restated
Certificate of Incorporation without the consent of an Independent
Director.
TWELFTH: The Corporation shall:
(1) except as expressly permitted by the Indenture, not incur any
indebtedness, secured or unsecured, direct or contingent (including
assuming or guaranteeing any obligation of any other person or entity);
(2) maintain its books, records, financial statements, accounting records,
bank accounts, if any (except as permitted by the Indenture), and other
organizational documents and records separate from those of any other
entity;
(3) hold itself out to creditors and the public as a legal entity separate
and distinct from any other person or entity, including any Affiliate, and
not hold out its credit as being available to satisfy the obligations of
such other persons or entities (other than obligations in respect of the
Bonds);
(4) not acquire obligations or securities of its Affiliates, except to the
extent permitted under the Indenture;
(5) not pledge its assets for the benefit of another entity, except to the
extent permitted under the Indenture;
(6) not make any loans or advances to another entity, including an
Affiliate, except to the extent permitted under the Indenture;
4
<PAGE>
(7) except as expressly permitted by the Indenture, not commingle its
assets or funds with the assets or funds of another entity, participate in
a cash management system with any other entity or person or fail to use
its own separate stationery, invoices and checks;
(8) correct any known misunderstandings regarding its separate identity;
(9) prepare and file a separate tax return or, if part of a consolidated
group, show itself as a separate member of such group;
(10) maintain its assets in such a manner that it is not costly or
difficult to segregate, identify or ascertain such assets; and
(11) hold regular Board of Director and shareholder meetings (as
appropriate), observe all its corporate formalities (including conducting
its own business in its own name) and preserve its existence as an entity
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.
THIRTEENTH: The duration of the Corporation shall be perpetual.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
IN WITNESS WHEREOF, I have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by me and are true and correct.
Date: May 18, 1999
LSP BATESVILLE FUNDING CORPORATION
By:/s/ Frank Hardenbergh
------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
State of: New York)
) ss
County of: New York)
I, Brenda L. Alvarez, a notary public, do hereby certify that on
this 18th day of May, 1999, personally appeared before me Frank Hardenbergh,
who, being by me first duly sworn, declared that he is the Senior Vice
President and Secretary of LSP Batesville Funding Corporation, that he signed
the foregoing document as Senior Vice President and Secretary of the
corporation, and that the statements made therein are true.
/s/ Brenda L. Alvarez
---------------------
Notary Public
(notary seal)
Brenda L. Alvarez
Notary Public, State of New York
No. 01AL5068561, Qual. in Kings County
Commission Expires November 4, 2000
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
CONSENT OF SOLE SHAREHOLDER
IN LIEU OF SPECIAL MEETING
------------------------------
May 18, 1999
------------------------------
LSP Batesville Holding, LLC, a Delaware limited liability company
("Holding"), being the holder of all of the issued and outstanding shares of
capital stock of LSP Batesville Funding Corporation, a Delaware corporation (the
"Funding Corporation"), by written consent without a meeting hereby takes the
following action in lieu of a special meeting of the stockholders of the Funding
Corporation:
First: The Amended and Restated Certificate of Incorporation of the
Funding Corporation, in the form attached hereto, is hereby approved
and adopted.
Second: The Officers of the Funding Corporation are, and each of
them is, hereby authorized and directed, for and on behalf of the
Funding Corporation, to execute and file with the office of the
Secretary of the State of Delaware the Amended and Restated
Certificate of Incorporation of the Funding Corporation and to
execute and deliver such other documents and instruments and to take
such action as such acting Officer or Officers may deem necessary or
advisable to effect and to evidence the amending and restating of
the certificate of incorporation of the Funding Corporation.
This consent was executed and delivered on behalf of Holding by Frank
Hardenbergh, Senior Vice President of LS Power Management, LLC, pursuant to
Section 6.2.2. of the First Amended and Restated Limited Liability Company
Operating Agreement of Holding dated as of December 15, 1998, to the Secretary
of the above-named corporation, and the action taken hereby was effective, on
the date specified above.
<PAGE>
IN WITNESS WHEREOF, the party hereto has caused this Consent to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first set forth above.
LSP BATESVILLE HOLDING, LLC
By: LS POWER MANAGEMENT, LLC, its
Manager
By:/s/ Frank Hardenbergh
------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
<PAGE>
Exhibit 3.2
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP
AGREEMENT
OF
LSP Energy Limited Partnership
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. ORGANIZATION AND CERTAIN DEFINITIONS...............................1
Section 1.1. Formation...................................................1
Section 1.2. Certain Definitions.........................................2
Section 1.3. Name........................................................8
Section 1.4. Principal Place of Business.................................8
Section 1.5. Purposes....................................................8
Section 1.6. Duration....................................................8
Section 1.7. General Partner.............................................8
Section 1.8. Limited Partners............................................8
Section 1.9. Statutory Compliance........................................8
Section 1.10. Authority of Partners......................................9
Section 1.11. Registered Office and Registered Agent.....................9
ARTICLE II. CAPITAL CONTRIBUTIONS; OTHER FINANCE..............................9
Section 2.1. Initial Partnership Interests; Adjustments..................9
Section 2.2. Financing of the Partnership; Partner Loans................10
Section 2.3. Withdrawal of Capital; Limitation on
Distributions..............................................10
ARTICLE III. PROFITS AND LOSSES..............................................10
Section 3.1. Introduction...............................................10
Section 3.2. Book Allocations...........................................11
Section 3.3. Tax Allocations............................................13
ARTICLE IV. CONDUCT OF PARTNERSHIP AFFAIRS...................................14
Section 4.1. General Partner............................................14
Section 4.2. Tax Matters Partner; Tax Elections.........................17
Section 4.3. Compensation of Partners and Affiliates....................18
Section 4.4. Limitations on Partners....................................18
Section 4.5. Meetings...................................................18
Section 4.6. Good Faith Actions.........................................18
Section 4.7. Limited Partner Rights.....................................18
ARTICLE V. BOOKS; INSURANCE..................................................20
Section 5.1. Administrative Services, Books, Records and
Reports....................................................20
Section 5.2. Insurance..................................................22
Section 5.3. Elections..................................................22
i
<PAGE>
ARTICLE VI. DISTRIBUTIONS....................................................22
Section 6.1. Distributions..............................................22
Section 6.2. Restoration of Funds.......................................23
ARTICLE VII. TRANSFERS OF PARTNERSHIP INTERESTS..............................23
Section 7.1. Condition to Transfer of Any Interest of a
Limited Partner............................................23
Section 7.2. Admission of Additional Limited Partners...................24
Section 7.3. Voluntary Withdrawal by a Limited Partner..................24
Section 7.4. Assignees Not Admitted as Substituted Partners.............25
Section 7.5. Involuntary Withdrawal of a Limited Partner................25
Section 7.6. Effectiveness of Transfer..................................26
Section 7.7. General Partner Withdrawal or Transfers;
Events of Withdrawal.......................................26
Section 7.8. Right of First Offer.......................................28
Section 7.9. Regulatory Status Change...................................29
Section 7.10. Bankruptcy Limitation.....................................29
Section 7.11. Certain Restrictions......................................29
ARTICLE VIII. DISSOLUTION AND LIQUIDATION....................................30
Section 8.1. Dissolution................................................30
Section 8.2. Election to Continue the Business..........................31
Section 8.3. Winding Up Affairs and Distribution of Assets..............31
Section 8.4. Termination................................................32
ARTICLE IX. INDEMNIFICATION..................................................33
Section 9.1. Indemnification............................................33
ARTICLE X. MISCELLANEOUS.....................................................33
Section 10.1. Notices...................................................33
Section 10.2. Entire Agreement..........................................34
Section 10.3. Brokers and Finders.......................................34
Section 10.4. Modification..............................................35
Section 10.5. Waivers...................................................35
Section 10.6. Severability..............................................35
Section 10.7. Further Assurances........................................35
Section 10.8. Partner Representations/Certain Agreements................35
Section 10.9. Governing Law.............................................36
Section 10.10. Counterparts.............................................36
Section 10.11. Limitation on Rights of Others...........................36
Section 10.12. Gender; Number...........................................36
Section 10.13. Remedies Not Exclusive...................................36
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<PAGE>
Section 10.14. Power of Attorney........................................37
Section 10.15. Successors and Assigns...................................37
Section 10.16. Exhibits.................................................37
Section 10.17. Certain Remedies.........................................37
Section 10.18. Litigation...............................................37
Section 10.19. General Disclosure Duty..................................37
Section 10.20. Visitation; Inspection...................................37
Section 10.21. Other Information........................................37
Section 10.22. Confidentiality..........................................37
Section 10.23. Other Activities and Competition.........................38
Section 10.24. Consent..................................................38
iii
<PAGE>
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
LSP Energy Limited Partnership
This SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is
made and entered into as of May 19, 1999 by and among LSP Energy, Inc., a
Delaware corporation ("LSP Energy"), as the general partner, and the limited
partners named in Exhibit A hereto, as the same may be amended from time to time
pursuant to the provisions hereof.
W I T N E S S E T H:
WHEREAS, the Parties originally entered into the Partnership
Agreement by and among LSP Energy and Granite Power Partners II, L.P. dated as
of February 8, 1996 (the "Original Partnership Agreement");
WHEREAS, the Original Partnership Agreement was amended and restated
by the Amended and Restated Limited Partnership Agreement by and among LSP
Energy and Granite Power Partners II, L.P. dated as of August 24, 1998 (the
"First Restated Partnership Agreement");
WHEREAS, Granite Power Partners II, L.P. transferred all of its
limited partner interests in the Partnership to LSP Batesville Holding, LLC;
WHEREAS, the Parties now desire to amend and restate the First
Restated Partnership Agreement in the manner hereinafter set forth;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree that, effective
as of the date first written above, the First Restated Partnership Agreement is
hereby amended and restated in its entirety as follows:
ARTICLE I.
ORGANIZATION AND CERTAIN DEFINITIONS
Section 1.1. Formation. The Parties (as defined below) hereby
associate as, form and organize a limited partnership (the "Partnership") under
and pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Act")
and other relevant laws of the State of Delaware and in accordance with and
subject to the terms and conditions set forth in this Agreement.
<PAGE>
Section 1.2. Certain Definitions. References herein to Sections and
Articles shall refer to Sections and Articles of this Agreement. As used herein:
"Act" has the meaning specified in Section 1.1.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) such Capital Account shall be deemed to be increased by
any amounts that such Partner is obligated to restore to the Partnership
(pursuant to this Agreement or otherwise) or is deemed to be obligated to
restore pursuant to (A) the penultimate sentence of Regulations section
1.704-2(g) (1), or (B) the penultimate sentence of Regulations section
1.704-2(i) (5); and
(ii) such Capital Account shall be deemed to be decreased by
the items described in Regulations sections 1.704-1(b) (2) (ii) (d) (4), (5) and
(6).
"Affiliate" means, with respect to any Person, another Person
directly or indirectly controlling, controlled by or under common control with
such first Person. The term "control", with respect to any person, means
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such person, whether through the ownership of
voting securities or by contract or otherwise.
"Agreement" means this Second Amended and Restated Limited
Partnership Agreement of LSP Energy Limited Partnership as the same may be
amended from time to time in accordance with the provisions hereof.
"Available Funds" means an amount of cash on hand at the end of each
fiscal quarter equal to the excess of: (x) the amount of cash (including
proceeds of borrowings) available at such time; over (y) the sum of (i) the
amount of cash which the General Partner reasonably believes will be required
during the upcoming fiscal quarter (after taking into account reasonably
expected revenues during such period) to meet all reasonably expected costs and
expenses of the Partnership (including capital expenditures, payments under the
Management Services Agreement and payments of principal and interest on any
debts and other obligations of the Partnership), plus (ii) the amount of any
reasonable reserve the General Partner may establish from time to time.
"Bonds" means the senior secured bonds issued under the Indenture
and such other bonds or indebtedness as may be issued under the Indenture.
"Book Value" means, with respect to any asset of the Partnership,
the adjusted basis of such asset as of the relevant date for federal income tax
purposes, except as follows:
(i) the initial Book Value of any asset contributed by a
Partner to the Partnership shall be the fair market value of such asset;
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<PAGE>
(ii) the Book Values of all Partnership assets (including
intangible assets such as goodwill) shall be adjusted to equal their respective
fair market values as of the date hereof as of the following times:
(A) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution;
(B) the distribution by the Partnership to a Partner of
more than a de minimis amount of money or Partnership property as consideration
for an interest in the Partnership; and
(C) the liquidation of the Partnership within the
meaning of Regulations section 1.704-1(b) (2) (iv) (f) (5) (ii); and
(iii) if the Book Value of an asset has been determined or
adjusted pursuant to subsection (i) or (ii) above, such Book Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses and other items
allocated pursuant to Section 3.2.
The foregoing definition of Book Value is intended to comply with
the provisions of Regulations section 1.704-1(b) (2) (iv) and shall be
interpreted and applied consistently therewith.
"Capital Account" has the meaning specified in Section 5.1(b).
"Capital Contribution" means the amount of money and the agreed fair
market value of other property (net of any liabilities secured by such property
that the Partnership is considered to assume or take subject to under Code
section 752) contributed by a Partner to the Partnership pursuant to this
Agreement.
"Capital Transaction" means any sale, exchange, abandonment,
foreclosure or other disposition of all or substantially all of the
Partnership's assets or of its interest in the Project.
"Claims" shall have the meaning given to it in Section 9.1.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor statute. A reference to a section of the Code shall be
deemed to include any amendatory or successor provision thereto.
"Cogentrix" means Cogentrix/Batesville, LLC or any Affiliate
thereof.
"Cogentrix Capital Contribution" means the amount of capital
contributed to Holding by Cogentrix.
"Common Agreement" means the Common Agreement dated as of Financial
Closing, by and among the Partnership, LSP Batesville Funding Corporation,
Credit Suisse First
3
<PAGE>
Boston, as Tranche A Facility Agent, IBJ Schroder Bank & Trust Company, as
Tranche B Facility Trustee, IBJ Schroder Bank & Trust Company, as Tranche C
Facility Trustee, Credit Suisse First Boston, as L/C Facility Agent, IBJ
Schroder Bank & Trust Company as Administrative Agent, IBJ Schroder Bank & Trust
Company as Collateral Agent, Credit Suisse First Boston, as Intercreditor Agent
and IBJ Schroder & Trust Company, as Securities Intermediary, as the same may be
amended, modified or supplemented from time to time.
"Completion" is defined in the Common Agreement.
"Debt Service Reserve Accounts" mean the "Senior Debt Service
Reserve Account" and the "Subordinated Debt Service Reserve Account" established
pursuant to the Common Agreement.
"Debt Service Reserve Letter of Credit Amount" means the amount, not
to exceed $9,000,000 in the aggregate, to be withdrawn by the Partnership from
the Debt Service Reserve Accounts upon the posting of a debt service letter of
credit by Cogentrix.
"Depreciation" means, for each Fiscal Year or part thereof, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year or part thereof, except that if the Book Value of an asset differs
from its adjusted basis for federal income tax purposes, the depreciation,
amortization or other cost recovery deduction for such Fiscal Year or part
thereof shall be an amount which bears the same ratio to such Book Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such Fiscal Year or part thereof bears to such adjusted tax basis. If such
asset has a zero adjusted tax basis, the depreciation, amortization or other
cost recovery deduction for each Fiscal Year shall be determined under a method
reasonably selected by the General Partner which is not objectionable to the
other Partners.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time or any successor statute. A reference to a section
of ERISA shall be deemed to include a reference to any amendatory or successor
provision thereto.
"Financial Closing" means the initial closing date of the
financing of the Project.
"Final Completion" is defined in the Common Agreement.
"Fiscal Year" means the taxable year of the Partnership, which shall
be the calendar year.
"GAAP" means generally accepted accounting principles, as in effect
from time to time.
"General Partner" means LSP Energy, Inc. in its capacity as a
general partner in the Partnership, and any other Person which both acquires,
pursuant to this Agreement, an Interest (or portion thereof) as a general
partner in the Partnership and is admitted to the Partnership as a general
partner pursuant to this Agreement.
4
<PAGE>
"Holding" means LSP Batesville Holding, LLC.
"include" and "including" shall be construed as if followed by the
phrase "without being limited to".
"Indemnitee" shall have the meaning given to it in Section 9.1(a).
"Indenture" means that certain indenture by and among the
Partnership, LSP Batesville Funding Corporation, and The Bank of New York, as
Trustee, dated on or around May 21, 1999, pursuant to which the Partnership and
LSP Batesville Funding Corporation will issue the Bonds, as the same may be
amended, supplemented or otherwise modified from time to time.
"Interest" means, with respect to any Partner at any time, such
Partner's entire beneficial ownership interest in the Partnership at such time,
including such Partner's Capital Account, voting rights, and right to share in
Profits and Losses, cash distributions and all other benefits of the Partnership
as specified in this Agreement, together with such Partner's obligations to
comply with all of the terms of this Agreement.
"IRS" means the United States Internal Revenue Service or such other
governmental agency which performs the functions that are performed as of the
date of this Agreement by the United States Internal Revenue Service.
"Limited Partner" means LSP Batesville Holding, LLC and any other
Person which both acquires, pursuant to this Agreement, an Interest (or portion
thereof) as a limited partner in the Partnership and is admitted to the
Partnership as a limited partner pursuant to this Agreement.
"Liquidating Agent" shall have the meaning given to it in Section
8.3(a).
"Management Services Agreement" shall mean the Management Services
Agreement, dated as of August 24, 1998, between the Partnership and LS Power
Management, LLC.
"Nonrecourse Liability" means any Partnership liability (or Portion
thereof) for which no Partner or a Related Person bears the economic risk of
loss for that liability under Regulations section 1.752-2.
"Notices" has the meaning specified in Section 10.1(a).
"Parties" means each Person who may become Partner from time to time
pursuant to the terms of this Agreement.
"Partner" means each of the General Partners and Limited Partners.
"Partner's Income Tax Deficiency" has the meaning specified in
the Partnership Trust Indenture.
5
<PAGE>
"Partner Loans" has the meaning specified in Section 2.2(a).
"Partner Nonrecourse Debt" has the meaning ascribed to such term in
Regulations section 1.704-2(b) (4).
"Partner Nonrecourse Debt Minimum Gain" means the aggregate amount
of gain (of whatever character), determined for each Partner Nonrecourse Debt,
that would be realized by the Partnership if it disposed of the Partnership
property subject to such Partner Nonrecourse Debt in a taxable transaction in
full satisfaction thereof (and for no other consideration) determined in
accordance with the provisions of Regulations section 1.704-2 (i) (5) for
determining a Partner's share of minimum gain attributable to a Partner
Nonrecourse Debt.
"Partner Nonrecourse Deductions" means the excess, if any, of (i)
the net increase, if any, in the amount of Partner Nonrecourse Debt Minimum Gain
during any Fiscal Year over (ii) the aggregate amount of any distributions
during such Fiscal Year of proceeds of a Partner Nonrecourse Debt that are
allocable to an increase in Partner Nonrecourse Debt Minimum Gain, determined
after application of Regulations section 1.704-2(k).
"Partnership" has the meaning specified in Section 1.1.
"Partnership Minimum Gain" means the aggregate amount of gain (of
whatever character), determined for each Nonrecourse Liability of the
Partnership, that would be realized by the Partnership if it disposed of the
Partnership property subject to such liability in a taxable transaction in full
satisfaction thereof (and for no other consideration) and by aggregating the
amounts so computed, determined in accordance with Regulations sections 1.704-2
(d) and (k).
"Person" means an individual, corporation, association, partnership,
trust, unincorporated organization, or other entity or a government or any
agency or political subdivision thereof.
"Profits" and "Losses" means, for each Fiscal Year or part thereof,
the taxable income or loss of the Partnership for such Fiscal Year determined in
accordance with Code section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
section 703(a) (1) shall be included in taxable income or loss), with the
following adjustments:
(i) any income of the Partnership that is exempt from federal
income tax shall be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in Code
section 705(a) (2) (B) or treated as such pursuant to Regulations section
1.704-1(b) (2) (iv) (i) shall be subtracted from such taxable income or loss;
(iii) any Depreciation for such Fiscal Year or part thereof
shall be taken into account in lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable income or
loss;
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(iv) gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed with reference to the Book Value
of the property disposed of, rather than the adjusted tax basis of such
property; and
(v) such taxable income or loss shall be deemed not to include
any income, gain, loss, deduction or other item thereof allocated pursuant to
Section 3.3.
"Project" means the gas fired combined cycle electric generation
project of the Partnership located at Batesville, Mississippi.
"Project Costs" is defined in the Common Agreement.
"Project Debt" means the indebtedness incurred by the Partnership,
Holding or any of their respective Affiliates in connection with the ownership,
development and construction of the Project.
"Project Debt Documents" means the "Credit Documents" as defined in
the Common Agreement and/or the agreements executed and delivered in connection
with the Project Debt.
"Refinancing" means any of (i) a syndication of the loans made
pursuant to, and the facility referred to in, the Tranche A Facility Agreement,
the Tranche B Facility Bonds or Tranche C Facility Bonds, and (ii) a capital
markets refinancing of the loans made pursuant to, and the facility referred to
in, the Tranche A Facility Agreement, the Tranche B Facility Bonds or the
Tranche C Facility Bonds.
"Regulations" means the income tax regulations promulgated under the
Code by the Department of the Treasury, as such regulations may be amended from
time to time.
"Regulatory Allocations" has the meaning specified in Section 3.2(b)
(i) (F).
"Related Person" has the meaning specified in Regulations section
1.752-4(b).
"Residual Project Funding Distribution Amount" means an amount, if
any, equal to the sum of the Project Debt, any proceeds of a hedge transaction
and the Cogentrix Capital Contribution (and any earnings on such amounts) in
excess of any amounts required (whether paid and/or reserved for) (i) to pay in
full Project Costs, (ii) without duplication, to fund the Debt Service Reserve
Account in full and (iii) without duplication, to pay losses of a hedge
transaction and to be distributed to Holding pursuant to Section 6.1(d).
"State" means the State of Delaware.
"Subordinated Notes" has the meaning specified in Section 7.3(a).
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"Subsidiary" shall mean a corporation of which 100% of the common
stock is owned directly or indirectly by the Partnership or a general or limited
partnership of which 100% of the equity interest is owned by the Partnership,
its Partners or Related Persons.
"Tranche A Facility Agreement" is defined in the Common Agreement.
"Tranche B Bonds" is defined in the Common Agreement.
"Tranche C Bonds" is defined in the Common Agreement.
Section 1.3. Name. The name of the Partnership shall be "LSP Energy
Limited Partnership". All business of the Partnership shall be conducted in such
name and all contracts, property and contract rights of the Partnership shall be
held in such name.
Section 1.4. Principal Place of Business. The Partnership's
principal place of business shall be LSP Energy Limited Partnership, 200
Industrial Drive, Batesville, Mississippi 38606, or at such other place in the
continental United States of America as the General Partner shall designate.
Section 1.5. Purposes. The sole purposes of the Partnership shall be
to own, construct, finance, manage, design, develop, operate, encumber, sell or
otherwise dispose of and otherwise deal with the Project and any other assets of
the Partnership relating to the Project. The Partnership shall have the power to
do any and all legal acts and things necessary, appropriate, proper, advisable,
incidental to or convenient for the furtherance and accomplishment of such
purposes.
Section 1.6. Duration. The Partnership shall commence upon
compliance with section 17-201 of the Act and shall continue until dissolved
pursuant to Section 8.1.
Section 1.7. General Partner. LSP Energy, Inc. shall be the General
Partner of the Partnership. The affairs of the Partnership shall be conducted as
provided in Article IV.
Section 1.8. Limited Partners. Except as otherwise expressly
provided in this Agreement, the Limited Partners in their capacity as such shall
not participate in making the decisions of the Partnership. In no event shall
the Limited Partners in their capacity as such have the power to manage or
transact any Partnership business or act for or in the name of, or otherwise
bind, the Partnership, except as specifically set forth herein. No Limited
Partner shall take any action which would, if taken, cause a partition of any
Project. No Limited Partner shall ever be personally liable for any part of the
debts or other obligations of the Partnership or any General Partner, or
obligated to make contributions to the Partnership in excess of the Capital
Contributions required to be made by it pursuant to this Agreement.
Section 1.9. Statutory Compliance. The Partnership shall exist
under, be governed by, and this Agreement shall be construed in accordance with
the laws of the State applicable to limited partnerships. All real and personal
property owned by the Partnership shall be deemed owned by the Partnership as an
entity and held in its name, and no Partner shall have
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any ownership interests in any such property in its individual name. The General
Partner shall execute and the General Partner shall file on behalf and at the
expense of the Partnership all appropriate certificates required by law to be
filed in connection with the formation of the Partnership, and shall execute and
so file such other documents and instruments as it may reasonably deem necessary
or appropriate with respect to the formation of and the conduct of business by
the Partnership.
Section 1.10. Authority of Partners. No Partner shall take any
action on behalf of or in the name of the Partnership or enter into any contract
or other agreement binding upon the Partnership, except for (i) actions
expressly provided for in this Agreement or (ii) actions by the General Partner
pursuant to this Agreement.
Section 1.11. Registered Office and Registered Agent. The address of
the registered office and agent for service of process of the Partnership in the
State of Delaware is CT Corporation System with offices on the date hereof at
1209 Orange Street, Wilmington, DE 19801.
ARTICLE II.
CAPITAL CONTRIBUTIONS; OTHER FINANCE
Section 2.1. Initial Partnership Interests; Adjustments.
(a) The initial Partnership Interests shall be as set forth in
Exhibit A. On the date hereof, the parties agree that the fair market value of
the assets of the Partnership are $49,550,000 in excess of their tax basis and
accordingly agree to adjust the Book Value of the assets of the Partnership by
such amount. The amount will also be credited to the Capital Accounts of the
Partners on the date hereof in accordance with their Partnership Interests (as
set forth on Exhibit A).
(b) Any newly admitted Limited Partner shall make such Capital
Contributions and obtain such Interest on terms and conditions as may be
acceptable to each Partner in accordance with Section 7.2 hereof. Exhibit A
shall be amended as appropriate from time to time to reflect such admission and
the changes in Interests resulting from such admission and at least as
frequently as amendments are necessary pursuant to paragraph (c) below.
(c) The Partnership hereby irrevocably elects that all partnership
interests in the Partnership shall be securities governed by Article 8 of the
Uniform Commercial Code as in effect in the State of New York. Each certificate
evidencing partnership interests in the Partnership shall bear the following
legend: "This certificate evidences an interest in LSP Energy Limited
Partnership and shall be a security for purposes of Article 8 of the Uniform
Commercial Code as in effect in the State of New York." This provision shall not
be amended, and no such purported amendment to this provision, shall be
effective until all outstanding certificates have been surrendered for
cancellation.
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Section 2.2. Financing of the Partnership; Partner Loans.
(a) The money required to finance the business and expenses of the
Partnership including the development of the Project, shall be derived from any
revenues of the Partnership, from Capital Contributions to the Partnership by
the Partners and from loans to the Partnership made by lenders. If funds are not
otherwise reasonably obtainable to finance the business and expenses of the
Partnership, with due regard being given to the particular needs of the
Partnership, then one or more Partners wishing to participate therein may make
loans to the Partnership if such loans are first approved by all the Partners
(such loans made by the Partners referred to herein as "Partner Loans"). Nothing
in the foregoing shall be deemed to require any Partner to make any Partner
Loan.
(b) Partner Loans shall bear interest at a rate per annum equal to
one (1%) percent over the rate publicly announced from time to time by The Chase
Manhattan Bank (National Association), as its prime commercial lending rate at
its principal office in New York City, shall be subordinate to loans made by any
third party institutional lenders on such terms of subordination as shall be
mutually agreed, shall be repayable in whole or in part without premium or
penalty at the option of the partnership; provided, however, that such
prepayments only shall be made if and to the extent that the funds used therefor
are Available Funds. Payments with respect to Partner Loans shall first be
applied to accrued but unpaid interest and then to principal. Payments with
respect to multiple Partner Loans shall be applied pro rate in proportion to the
outstanding principal amount of each such Partner Loan. Partner Loans and
payments with respect thereto shall have no effect on the Capital Accounts of
the Partners. No Partner shall be personally obligated for the payment of any
amounts due with respect to any Partner Loans.
(c) Nothing herein shall be deemed to require any Limited Partner
to make any Partner Loan or to otherwise finance or pay any shortfall in the
funds available under Section 2.2(a) to construct the Project.
Section 2.3. Withdrawal of Capital; Limitation on Distributions.
No Partner shall be entitled to withdraw any part of its Capital
Contributions to, or to receive any distributions from the Partnership except as
provided in Sections 6.1 and 8.3. No Partner shall be entitled to demand or
receive (i) interest on its Capital Contributions or (ii) any property from the
Partnership other than cash.
ARTICLE III.
PROFITS AND LOSSES
Section 3.1. Introduction. This Article III generally sets forth the
rules for book and tax allocations to the Partners. Section 3.2 sets forth the
allocations of Book Profits, Losses and similar items, and Section 3.3 sets
forth the manner in which items of income, gain, loss,
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deduction, credits and basis therefor will be allocated to the Partners for
income tax purposes to the extent such items may be allocated differently from
the book allocations.
Section 3.2. Book Allocations. Section 3.2(a) sets forth the general
rule for book allocations to the Partners, including allocations with respect to
operations and liquidation of the Partnership. Section 3.2(b) sets forth various
special rules that modify or clarify the general rules of Section 3.2(a).
(a) In General.
(i) Operating Profits and Losses. Profits and Losses, other
than those described in Section 3.2(a) (ii), shall be allocated among the
Partners in proportion to their respective percentage Interests in the
Partnership as set forth in Exhibit A.
(ii) Profits and Losses -- Capital Transaction. Profits and
Losses arising from any Capital Transaction shall be allocated to the Partners
as follows:
(1) Profits and items of income shall be allocated
(A) first, to the Partners who have negative balances in their Capital Accounts
in excess of their share of Partnership Minimum Gain and Partner Nonrecourse
Debt Minimum Gain (the "Excess Negative Balance"), in proportion to such Excess
Negative Balances, until such balances equal zero, and (B) thereafter, among the
Partners in proportion to their respective Interests in the Partnership as set
forth in Exhibit A.
(2) Losses shall be allocated (A) first, to the
Partners, if any, having positive balances in their Capital Accounts, in
proportion to such positive balances until such balances have been reduced to
zero, and (B) thereafter, among the Partners in proportion to their respective
Interests in the Partnership as set forth in Exhibit A.
(a) Special Rules. Notwithstanding the general allocation rules
set forth in Section 3.2 (a), the following special allocation rules shall apply
under the circumstances described.
(i) Deficit Capital Account and Nonrecourse Debt Rules.
(A) Limitation on Loss Allocations. The Losses allocated
to any Partner pursuant to Section 3.2(a) with respect to any Fiscal Year shall
not exceed the maximum amount of Losses that can be so allocated without causing
such Partner to have an Adjusted Capital Account Deficit at the end of such
Fiscal Year. All Losses in excess of the limitation set forth in this Section
3.2(b) (i) (A) shall be allocated (1) first, to those Partners who will not be
subject to this limitation, in the ratio that their Interests bear to each
other, and (2) second, any remaining amount to the Partners in the manner
required by the Code and the Regulations.
(B) Qualified Income Offset. If in any Fiscal Year a
Partner unexpectedly receives an adjustment, allocation or distribution
described in Regulations section
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1.704-1(b) (2) (ii) (d) (4), (5) or (6), and such adjustment, allocation or
distribution causes or increases an Adjusted Capital Account Deficit for such
Partner, then, before any other allocations are made under this Agreement or
otherwise, such Partner shall be allocated items of income and gain (consisting
of a pro rata portion of each item of Partnership income, including gross income
and gain) in an amount and manner sufficient to eliminate such Adjusted Capital
Account Deficit as quickly as possible.
(C) Partnership Minimum Gain Chargeback. If there is a
net decrease in Partnership Minimum Gain during any Fiscal Year, then, except as
provided in Regulations section 1.704-2(f) (2), (3) or (5), each Partner shall
be allocated items of income and gain for such Fiscal Year (and, if necessary,
for subsequent Fiscal Years) in proportion to, and to the extent of, such
Partner's share of the net decrease in Partnership Minimum Gain during such
Fiscal Year determined in accordance with Regulations section 1.704-2 (a) (2).
If the Partnership has discretion on the applicability of an exception provided
pursuant to Regulations section 1.704-2(f) (5), the General Partner may, with
the consent of the other Partners, exercise such discretion on behalf of the
Partnership. The General Partners shall, if the application of this Partnership
Minimum Gain chargeback requirement would cause a distortion in the economic
arrangement among the Partners, ask the Commissioner of the IRS to waive the
minimum gain chargeback requirement pursuant to Regulations section 1.704-2(f)
(4). To the extent that this Section 3.2(b) (i) (c) is inconsistent with
Regulations section 1.704-2(f) or 1.704-2(k) or incomplete with respect to such
Regulations, the Partnership Minimum Gain chargeback provided for herein shall
be applied and interpreted in accordance with such Regulations.
(D) Partner Nonrecourse Debt Minimum Gain Chargeback. If
there is a net decrease in Partner Non-recourse Debt Minimum Gain during any
Fiscal Year, then, except as provided in Regulations section 1.704-2(i) (4),
each Partner shall be allocated items of income and gain for such Fiscal Year
(and, if necessary, for subsequent Fiscal Years) in proportion to, and to the
extent of, such Partner's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain during such Fiscal Year determined in a manner consistent with
Regulations section 1.704-2(g) (2). The General Partner shall, if the
application of this Partner Nonrecourse Debt Minimum Gain chargeback requirement
would cause a distortion in the economic arrangement among the Partners, ask the
Commissioner of the IRS to waive the minimum gain chargeback requirement
pursuant to Regulations Section 1.704-2(f) (4). To the extent that this Section
3.2(b) (i) (D) is inconsistent with Regulations section 1.704-2(i) (4) or
1.704-2(k) or incomplete with respect to such Regulations, the Partner Minimum
Gain chargeback provided for herein shall be applied and interpreted in
accordance with such Regulations.
(E) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions shall be allocated among the Partners in accordance with the ratios
in which the Partners share the economic risk of loss for the Partner
Nonrecourse Debt that gave rise to those deductions. This allocation is intended
to comply with the requirements of Regulations section 1.704-2(i) and shall be
interpreted and applied consistently therewith.
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(F) Limited Effect and Interpretation. The special rules
set forth in Sections 3.2(b) (i) (A), (B), (C), (D) and (E) (the "Regulatory
Allocations") shall be applied only to the extent required by applicable
Regulations for the resulting allocations provided for in this Section 3.2,
taking into account such Regulatory Allocations, to be respected for federal
income tax purposes. The Regulatory Allocations are intended to comply with the
requirements of Regulations sections 1.704-1(b), 1.704-2 and 1.752-1 through
1.752-5 and shall be interpreted and applied consistently therewith.
(G) Curative Allocations. The Regulatory Allocations may
not be consistent with the manner in which the Partners intend to divide the
Partnership Profits, Losses and similar items. Accordingly, Profits, Losses and
other items will be reallocated among the Partners in a manner consistent with
Regulations section 1.704-1(b) and 1.704-2 so as to negate as rapidly as
possible any deviation from the manner in which Partnership Profits, Losses and
other items are intended to be allocated among the Partners pursuant to Section
3.2(a) that is caused by the Regulatory Allocations.
(H) Change in Regulations. If the Regulations
incorporating the Regulatory Allocations are hereafter changed or if new
Regulations are hereafter adopted, and such changed or new Regulations, in the
opinion of independent tax counsel for the Partnership, make it necessary to
revise the Regulatory Allocations or provide further special allocation rules in
order to avoid a significant risk that a material portion of any allocation set
forth in this Article III would not be respected for federal income tax
purposes, the Partners shall make such reasonable amendments to this Agreement
as, in the opinion of such counsel, are necessary or desirable, taking into
account the interests of the Partners as a whole and all other relevant factors,
to avoid or reduce significantly such risk to the extent possible without
materially changing the amounts allocable and distributable to any Partner
pursuant to this Agreement.
(i) Change in Partners' Interests. If there is a change in any
Partner's share of the Profits, Losses or other items of the Partnership during
any Fiscal Year, allocations among the Partners shall be made in accordance with
their interests in the Partnership from time to time during such Fiscal Year in
accordance with Code section 706, using the closing-of-the-books method, except
that Depreciation shall be deemed to accrue ratably on a daily basis over the
entire Fiscal Year during which the corresponding asset is owned by the
Partnership if such asset is placed in service prior to or during the Fiscal
Year.
(ii) Minimum General Partner's Allocation. Notwithstanding
anything to the contrary in this Agreement (other than the provisions of Section
3.2(b) (i)), the Interest of the General Partner, taken as a whole, in each item
of income, gain, profit, loss, deduction, expense, and credit of the Partnership
shall be equal to at least 1% of each such item at all times during the
existence of the Partnership.
Section 3.3. Tax Allocations.
(a) In General. Except as set forth in Section 3.3(b), allocations
for tax purposes of items of income, gain, loss, deduction, and credits, and
basis therefor, shall be made
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in the same manner as allocations for book purposes set forth in Section 3.2.
Allocations pursuant to this Section 3.3 are solely for purposes of federal,
state and local income taxes and shall not affect or in any way be taken into
account in computing, any Partner's Capital Account or share of Profits, Losses,
other items or distributions pursuant to any provision of this Agreement.
(b) Special Rules.
(i) Elimination of Book/Tax Disparities. In determining a
Partner's allocable share of Partnership taxable income, the Partner's allocable
share of each item of Profits and Losses shall be properly adjusted to reflect
the difference between such Partner's share of the adjusted tax basis and the
Book Value of Partnership assets used in determining such item. For example,
items of depreciation, amortization, and gain or loss with respect to any
contributed property, or with respect to revalued property where Partnership
property is revalued pursuant to Treasury Regulation Section 1.704-1(b) (2) (iv)
(f), shall be allocated to the Partners under the traditional method as provided
in Treasury Regulation Section 1.704-3(b). This provision is intended to comply
with the requirements of Code section 704(c) and Regulations sections 1.704-1(b)
(2) (iv) (d) (3) and 1.704-3.
(ii) Allocation of Items Among Partners. Except as otherwise
provided in Section 3.3(b) (i), each item of income, gain, loss and deduction
and all other items governed by Code section 702(a) shall be allocated among the
Partners in proportion to the allocation of Profits, Losses and other items to
the Partners hereunder, provided that any gain recognized from any disposition
of a Partnership asset that is treated as ordinary income because it is
attributable to the recapture of any depreciation or amortization shall be
allocated among the Partners in the same ratio as the prior allocations of
Profits, Losses or other items that included such depreciation or amortization,
but not in excess of the gain otherwise allocable to each Partner.
(iii) Tax Credits. Any tax credits shall be allocated among
the Partners in accordance with Regulations section 1.704-1(b) (4) (ii), unless
the applicable Code provision shall otherwise require.
(c) Conformity of Reporting. The Partners are aware of the income
tax consequences of the allocations made by this Section 3.3 and hereby agree to
be bound by the provisions of this Section 3.3 in reporting their shares of
Partnership profits, gains, income, losses, deductions, credits and other items
for income tax purposes.
ARTICLE IV.
CONDUCT OF PARTNERSHIP AFFAIRS
Section 4.1. General Partner.
(a) LSP Energy, Inc. is the initial General Partner of the
Partnership.
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(b) The General Partner shall have exclusive and complete
authority in the management and control of the business of the Partnership for
the purpose herein stated and shall make all decisions affecting the business of
the Partnership, except if consent or approval of a Limited Partner is required
elsewhere herein. Further, the General Partner shall have all of the rights and
powers of a general partner as provided in the Act and as otherwise provided by
law, and any action taken by the General Partner shall constitute the act of and
serve to bind the Partnership. The General Partner shall manage and control the
affairs of the Partnership consistent with the purposes set forth in Section
1.5. Without limiting the generality of the foregoing, the General Partner is
authorized to discharge and shall discharge the following obligations on behalf
and at the expense of the Partnership (to the extent funds are available
therefor):
(i) Do all things necessary or appropriate to conduct the
business of the Partnership (including the expenditure of funds) and report from
time to time to the Partners on the progress or performance of the Partnership.
(ii) Protect and preserve the title to and the interest of the
Partnership in all of its property and assets, real, personal and mixed.
(iii) Pay, before delinquency and prior to the imposition of
any interest or penalty, all taxes, assessments, rents and other impositions
applicable to the Partnership or any part thereof, and undertake its obligations
as the tax matters partner of the Partnership set forth in Section 4.2.
(iv) Keep all books of account and other records of the
Partnership and provide to the Partners reports and statements as required by
Article V.
(v) Retain independent certified public accountants for the
Partnership as required by Section 5.1(c).
(vi) Negotiate, contract with, retain, coordinate and
supervise the performance of all services, financings and refinancings provided
to the Partnership by lenders, construction managers, construction companies,
architects, engineers, accountants, consultants, brokers, attorneys and other
Persons (including suppliers of materials) necessary or appropriate to develop,
construct and operate the Project, it being the understanding of the Partners
that, except with respect to executed or proposed contracts previously disclosed
to the Partners or actions otherwise approved in accordance with this Agreement,
all dealings between the Partnership (directly or through the General Partner)
and a Partner or an Affiliate of a Partner shall be on terms that are no more
favorable to such Partner or Affiliate than terms upon which similar bonafide
dealings generally are had between unrelated parties.
(vii) Obtain all insurance for the Project as required by
Section 5.2 and otherwise in accordance with sound business judgment, and
discharge, as and when due, all insurance premiums, debts and other obligations
of the Partnership, including the cost of construction, operation and
maintenance of the Project in accordance with any construction
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agreement or operations and maintenance agreement which the Partnership may
enter into for the construction or operation and maintenance of the Project.
(viii) Maintain all funds of the Partnership in one or more
bank accounts.
(ix) Determine from time to time, but in any event at least
quarterly, the Partnership's Available Funds.
(x) Make distributions to the Partners as required by Section
6.1.
(xi) Promptly cause the Partnership to comply with all present
and future laws, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments, courts, departments, agencies,
commissions, boards and agencies which may be applicable to the Project or the
Partnership or the use, operation or management thereof.
(xii) Perform all other obligations provided elsewhere in this
Agreement to be performed by the General Partner.
(xiii) Provide or hire all personnel necessary or appropriate
to perform the obligations of the General Partner hereunder (including, without
limitation, entering into the Management Service Agreement).
(xiv) Promptly inform the Partners as to developments which
the General Partner considers material to the business of the Partnership.
(c) Notwithstanding any other provision of this Agreement to the
contrary, without the prior written consent of the Partners, the General Partner
shall have no authority to:
(i) do any act in contravention of this Agreement or
engage in any business activity not permitted in this Agreement;
(ii) do any act which would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement;
(iii) knowingly perform any act that would subject any Limited
Partner to liability as a general partner in any jurisdiction;
(iv) dissolve, liquidate, consolidate or merge the Partnership
or authorize or agree to any of the foregoing;
(v) sell or lease, or otherwise dispose of all or
substantially all, of the assets of the Partnership, other than in its ordinary
course of business, or authorize or agree to any of the foregoing;
(vi) take any action in violation of Section 7.10 or
Section 7.11 hereof; or
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(vii) amend Section 1.5, 4.1(c), 7.7(f), 7.10 or 7.11
hereof.
(d) Third parties dealing with the Partnership shall be fully
protected in relying upon any action taken or instrument executed on behalf of
the Partnership by the General Partner, and on behalf of the General Partner by
any of its officers and directors.
Section 4.2. Tax Matters Partner; Tax Elections. The General Partner
shall be the "tax matters partner" (as that term is used in Code section 6231)
of the Partnership. The tax matters partner shall (i) cause to be prepared and
shall sign all tax returns of the Partnership, which returns shall be reviewed
in advance of filing by independent certified public accountants if a majority
in Interests of the Limited Partners shall so request, (ii) monitor any
governmental tax authority in any audit that such authority may conduct of the
Partnership's books and records or other documents, (iii) unless unanimously
agreed by all Partners to the contrary, make tax decisions to maximize income
tax savings and deductions, (iv) give Notice to all Partners as follows:
(A) within ten (10) days after it receives notice from
the IRS of any administrative proceeding with respect to an examination of, or a
proposed adjustment to, any item of income, gain, loss, deduction or credit of
the Partnership,
(B) from time to time, of the current status of such
administrative proceeding,
(C) within ten (10) days of the final outcome of such
administrative proceeding, as to such outcome, and
(D) at least five (5) days prior to submitting a request
for administrative adjustment on behalf of the Partnership,
(v) promptly send to each Partner a copy of all non-ministerial notices or
communications received by the Partnership from, or sent by the Partnership to,
the IRS, and (vi) take all other action contemplated to be taken by it pursuant
to Code sections 6221 through 6231. The Partnership shall reimburse the tax
matters partner for all direct, out-of-pocket expenses reasonably incurred by it
in connection with any administrative or judicial proceeding with respect to the
tax liabilities of the Partners which relate to the Partnership. Notwithstanding
the foregoing, any Partner shall have the right to participate in any
administrative proceedings relating to the determination of Partnership items at
the Partnership level. The General Partner shall cooperate in good faith with
any Partner that so elects to participate in any such proceedings. Each Partner
that elects to participate in such proceedings shall be responsible for any
expenses incurred by such Partner in connection with such participation and for
any additional costs and expenses incurred by the Partnership due to such
participation. This provision is not intended to alter the rights and
obligations of the General Partner provided elsewhere in the Agreement or to
authorize the General Partner to take any action that is left to the
determination of an individual Partner under sections 6222 through 6233 of the
Code, nor does it constitute a waiver by the Partners of any right provided in
such Code sections.
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Section 4.3. Compensation of Partners and Affiliates. No Partner
shall receive any compensation for its services to the Partnership, except (i)
payment of compensation pursuant to the Management Services Agreement, (ii)
reimbursement to the General Partner for costs and expenses reasonably incurred
by it on behalf of the Partnership and (iii) compensation paid to Partners and
Affiliates of Partners which are engaged on behalf of the Partnership to provide
services or materials that are, in the reasonable judgment of the General
Partner, necessary or desirable for the Partnership; in each case in accordance
with Section 4.1(b) (vi).
Section 4.4. Limitations on Partners. Except as otherwise
specifically provided herein, the Limited Partners as such, shall not
participate in the management or control of the Partnership's business, nor
shall they transact any business for the Partnership, nor shall they have the
power to sign for or bind the Partnership, said powers being vested solely and
exclusively in the General Partner. A Limited Partner shall not be deemed to
have violated this provision by reason of his participation in the management or
control of the General Partner as an officer, director or shareholder thereof.
Section 4.5. Meetings. Regular meetings of the Partnership shall be
held at the principal place of business of the Partnership or at such other
place in the continental United States of America as the General Partner shall
designate.
Section 4.6. Good Faith Actions. No Partner, nor any of its
officers, directors, shareholders, constituent partners, trustees,
representatives, agents or employees, shall be liable to the Partnership or to
any of the other Partners for any action taken (or any failure to act) by it in
good faith on behalf of the Partnership and reasonably believed by it to be
authorized or within the scope of its authority hereunder, unless such action
(or failure to act) constitutes fraud, gross negligence or willful breach hereof
or other willful misconduct.
Section 4.7. Limited Partner Rights. In addition to the rights
otherwise granted hereunder, the Limited Partners shall have the following
rights as a Limited Partner with respect to the Partnership:
(i) the right to approve the sale of any assets of the
Partnership but only if (a) such assets have a then
fair market value in excess of $5,000,000 and (b)
the sale of such assets would have a material
adverse effect on the Project;
(ii) the right to review and approve the annual budget
and tax returns (prior to filing) of the
Partnership;
(iii) the right to approve any distributions to be made
hereunder that are not made in cash;
(iv) the right to approve of any lending of the
Partnership's funds or an extension of credit by the
Partnership which is not in the ordinary course of
the Partnership's business;
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(v) the right to approve any change or reorganization of
the Partnership into any other legal form or
organization;
(vi) except in connection with a Refinancing, the right
to approve the entering into by the Partnership of
any mortgage, deed, guaranty or contract of sale
with respect to any material portion of Partnership
assets;
(vii) the right to approve the filing of a voluntary
petition in bankruptcy or the consenting to the
appointment of a trustee, liquidator or receiver or
the voluntary committing of any other act of
insolvency with respect to the Partnership;
(viii) the right to approve the settlement or compromise of
any litigation affecting the Partnership, but only
if (a) such litigation would materially adversely
impact the business or condition of the Partnership
or (b) is with respect to an amount greater than
$5,000,000;
(ix) the right to approve any selling, leasing,
exchanging or other transfer (other than security
interest transfers) of all or substantially all of
the Partnership's assets;
(x) the right to approve any refinancing or voluntary
payment of Project Debt other than Refinancing;
(xi) the right to consent to any owner's approval
provided under Table Q-1 "Contractor Document
Submittals" of the Turnkey Engineering, Procurement
and Construction Agreement dated as of July 22, 1998
between BVZ Power Partners - Batesville and the
Partnership (the "Construction Contract"); provided,
(i) the Partners sill act within the time provided
for same under the Construction Contract and (ii) in
the event of a split vote of the Partners on any
such consent, the granting or denying of that
consent shall be determined by the Independent
Engineer based on whether the plan, calculation,
specification or drawing satisfies and is otherwise
consistent with the requirements of the Construction
Contract;
(xii) the right to inspect the Project, upon reasonable
prior written notice to LSP Energy, Inc. during
normal business hours;
(xiii) the right to approve any borrowing in excess of
$5,000,000 excluding any Refinancing;
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(xiv) other than with respect to an expansion of the
Project, the right to approve any capital
expenditures in excess of $5,000,000; and
(xv) the right to approve any material modifications or
amendments to a material contract or agreement
related to the sale of power by the Project, supply
of fuel to the Project, or lease or ownership or
operation and maintenance of the Project, but only
if (a) such modification or amendment would
materially adversely impact the business or
condition of the Partnership or (b) is with respect
to an amount greater than $5,000,000 on a net
present value basis.
ARTICLE V.
BOOKS; INSURANCE
Section 5.1. Administrative Services, Books, Records and Reports.
(a) The General Partner shall cause to be performed all general
and administrative services on behalf of the Partnership in order to assure that
complete and accurate books and records of the Partnership are maintained at the
Partnership's principal place of business showing the name, address and Interest
of each of the Partners, all receipts and expenditures, assets and liabilities,
profits and losses, and all other records necessary for recording the
Partnership's business and affairs, including a Capital Account for each Partner
as provided in Section 5.1(b). The books of the Partnership shall be kept on the
accrual basis method of accounting and maintained in accordance with generally
accepted accounting principles, consistently applied. Upon receipt of one
business day's prior notice, the books and records of the Partnership shall be
open to inspection, examination and audit and available for copying by each
Partner and its authorized representatives (as designated in writing to the
General Partner from time to time) at all reasonable times. Any Partner
exercising its right to inspect, examine, audit or copy all or any portion of
such books and records shall bear all direct, out-of-pocket expenses incurred by
both it and the Partnership in connection therewith, except if errors are found
which exceed the cost of such examination in which event the costs shall be paid
by the Partnership.
(b) (i) A "Capital Account" shall be established and maintained on
the books of the Partnership for each Partner in a manner reasonably determined
by the General Partner to be in compliance with the requirements of Regulations
section 1.704-1(b). Each Capital Account shall be: (1) increased by (A) the
Capital Contributions of such Partner, (B) allocations to such Partner of
Profits and items of income or gain pursuant to Section 3.2, and (C) any
positive adjustment to such Capital Account by reason of an adjustment to the
Book Value of Partnership assets, and (2) decreased by (A) the amount of any
cash and the fair market value of any property (net of any liabilities secured
by such property that such Partner is considered to assume or take subject to
under Code section 752) distributed to the Partner, (B) Losses, Partner
Nonrecourse Deductions, and items of loss or deduction allocated to such Partner
pursuant to Section 3.2, and
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(C) any negative adjustment to such Capital Account by reason of an adjustment
to the Book Value of Partnership assets.
(ii) That portion of the Capital Account of each Partner that
the transferor and transferee shall agree is attributable to any Interest such
Partner Transfers shall be transferred to the Capital Account of the transferee
thereof.
(c) The General Partner shall cause to be prepared and
delivered:
(i) to each Partner as soon as available and in any event
within 45 days after the end of each quarterly fiscal period of each Fiscal
Year, statements of income, retained earnings and cash flow of the Partnership
and for such period and for the period from the beginning of the respective
Fiscal Year to the end of such period, and the balance sheets as of the end of
each such period, setting forth in each case in comparative form the
corresponding period in the preceding Fiscal Year (if any), in accordance with
generally accepted accounting principles, consistently applied, as at the end
of, and for, such period (subject to normal year-end audit adjustments);
(ii) to each Partner as soon as available and in any event
within 120 days after the end of each Fiscal Year, statements of income,
retained earnings and cash flow of the Partnership for such year and the balance
sheet as at the end of such year setting forth in each case in comparative form
the corresponding figures for the preceding Fiscal Year, and accompanied in the
case of said statements and balance sheet, by an opinion thereon of independent
certified public accountant of recognized regional standing, which opinion shall
state that said financial statements fairly present the financial condition and
results of operations of the Partnership as at the end of, and for, such Fiscal
Year in accordance with generally accepted accounting principles, consistently
applied, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any default under any credit agreement to which the
Partnership is a party;
(iii) to each Partner promptly upon their becoming available,
copies of all registration statements and regular periodic reports, if any,
which the Partnership shall have filed with the Securities and Exchange
Commission (or any governmental agency substituted therefor) or any national
securities exchange;
(iv) to each Partner promptly upon the mailing thereof to any
Partner or any creditor of the Partnership, copies of all financial statements,
reports and proxy statements so mailed;
(v) to each Partner, at the time of delivery of the financial
statements referred to in clause (ii) above, a copy of the Partnership tax
return and Schedule K-1 for the Partnership with respect to such Fiscal Year,
together with such information with respect to the Partnership as may be
required to enable each Partner to complete properly its federal income tax
return, any required income tax return of any state and any other reporting or
filing requirement imposed by any governmental authority;
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(vi) to each Partner, from time to time and with reasonable
promptness, notice in reasonable detail of any material development with respect
to the Partnership or the Project; and
(vii) to each Partner, from time to time and with reasonable
promptness, such further information in respect of the business, affairs and
financial condition of the Partnership as such Partner reasonably may request.
Section 5.2. Insurance. The Partnership shall purchase policies of
insurance in such amounts, for such coverage and at such times as may be
reasonably determined to be prudent by the General Partner under the
circumstances, taking into account reasonable standards of the independent
electric generation industry.
Section 5.3. Elections. The Partnership shall be permitted in any
Fiscal Year to make such elections as are permitted to be made by the
Partnership under the Code as it may from time to time deem necessary or
appropriate. Any such election under Section 754 of the Code, shall be made by
the Partnership at the request of any Partner that holds a ten percent (10%) or
greater Interest in the Partnership or with the consent of all Partners. Any
other such election shall be binding on all of the Partners and unless
unanimously agreed to the contrary by all Partners shall be made by the General
Partner with the intent of minimizing income tax payable and maximizing
deductions.
ARTICLE VI.
DISTRIBUTIONS
Section 6.1. Distributions.
(a) Subject to the provisions of the Project Debt Documents, at
least quarterly, except as provided in Section 8.3, the General Partner shall
cause the Partnership to distribute Available Funds (other than (i) the Residual
Project Funding Distribution Amount, (ii) the Debt Service Reserve Letter of
Credit Amount, and (iii) the proceeds of any Capital Transaction) in the
following order or priority: first, to repay Partner Loans or other obligations
of the Partnership required to be paid from Available Funds; and second, to the
Partners pro rata in proportion to their respective percentage Interests.
(b) Within 10 days after the receipt of funds attributable to of
the Residual Project Funding Distribution Amount, the General Partner shall
cause the Partnership to distribute such funds to Holding or as Holding may
otherwise direct.
(c) Within ten (10) days of the receipt of funds attributable to
the Debt Service Letter of Credit Amount, the General Partner shall distribute
such funds to Holding or as Holding may otherwise direct.
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(d) Within 10 days after the receipt of funds derived from the
proceeds of any Capital Transaction, the General Partner shall cause the
Partnership to distribute the net proceeds of such Capital Transaction, unless
subject to Section 8.1(b) or any lender requirements, in each case in the
following order of priority: first to repay partner Loans or other obligations
of the partnership required to be paid from Available Funds, and second, to the
Partners pro rata in proportion to their respective Interests.
Section 6.2. Restoration of Funds. Except as otherwise provided by
law, no Partner shall be required to restore to the Partnership any funds
properly distributed to it pursuant to Section 6.1.
ARTICLE VII.
TRANSFERS OF PARTNERSHIP INTERESTS
Section 7.1. Condition to Transfer of Any Interest of a Limited
Partner.
(a) Except as provided in Section 7.1 (b), no Limited Partner
shall have the right to Transfer all or any portion of its Interest.
(b) A Limited Partner shall be allowed to Transfer its Interest:
(i) With the consent of the General Partner, which consent
shall be at the sole discretion of the General Partner;
(ii) If unrelated Limited Partners own at least a ten percent
(10%) Interest in the Partnership, with the consent of all unrelated Limited
Partners, which consent shall be at the sole discretion of such Limited
Partners, if the transferring Partner is related to the General Partner;
(iii) If after the Transfer of a portion of its Interest, the
transferring Partner retains an Interest at least equal to twenty-five percent
(25%) of its original Interest in the Partnership; or
(iv) In the event of a default that remains uncured in the
payment of any obligation of a Partner to another Partner or to a lender created
by the Participation Agreement for which the Partner's Interest in the
Partnership is pledged as security for repayment, but only to the extent
necessary to obtain sale proceeds sufficient to repay any such obligation.
Except in the case of (iv) above, a minimum of twenty-five percent (25%) of the
Interests in the Partnership may not be transferred without the consent (as
described in this Section 7.1(b)) of a Partner unrelated to the transferring
Partner. For purposes of this paragraph (b), a Partner shall be considered
related to another Partner if they are related for purposes of section 267(b) of
the Code.
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(c) Notwithstanding the provisions of Section 7.1(a) and (b), no
Transfer of an Interest or any part thereof may be made by a Limited Partner if
the Transfer in question would:
(i) result in the violation of the Securities Act of 1933 or
any other applicable federal or state laws of the order of any court having
jurisdiction over the Partnership or any Project; or
(ii) be a breach or violation of or an event of default under,
or give rise to a right to accelerate any indebtedness of the Partnership; or
(iii) result in or create a prohibited transaction under, or
cause the Partnership to become a "party in interest" as defined in Section
3(14) of ERISA, or otherwise result in the holder of an Interest or the assets
of the Partnership being subject to the provisions of such statute; or
(iv) result, directly or indirectly, in the termination of the
Partnership under section 708 of the Code except in the case of a Transfer
pursuant to Section 7.1(b) (iv); or
(v) cause the Partnership to be classified as an entity other
than a partnership for purposes of the Code; or
(vi) cause the status of the Project as an "exempt wholesale
generator" as defined in 15 U.S.C. ss.792 - 5a (a-1) or "eligible facility" as
defined in 15 U.S.C. ss.792 - 5a (a-2), to be lost or adversely affected; or
(vii) result in the ownership of more than 50% of the total
Interest in the Partnership outstanding by an "electric utility" or a "public
utility holding company".
(d) No Transfer may be made unless the transferor or transferee
pays to the Partnership all direct out-of-pocket costs reasonably incurred by
the Partnership as a result of such Transfer, and indemnifies the Partnership
(in a manner which is reasonably satisfactory to the General Partner) for any
such costs to be reasonably incurred by it thereafter as a result of such
Transfer.
Section 7.2. Admission of Additional Limited Partners. The General
Partner may, at any time, admit any Person to the Partnership as an additional
Limited Partner with the prior written consent of all of the Limited Partners in
exchange for such capital contributions as the General Partner deems favorable
and advisable to the Partnership, and such additional Limited Partners shall
receive distributions and allocations of profits and losses as the General
Partner deems favorable and advisable to the Partnership.
Section 7.3. Voluntary Withdrawal by a Limited Partner.
(a) If at any time during the term of the Partnership a Limited
Partner or any Affiliate of a Limited Partner, by reason of its interest in the
Partnership or any transaction contemplated by this Agreement, shall be
determined by any governmental authority having
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appropriate jurisdiction to be an "electric utility", a "public utility", a
"public utility holding company" or a similar entity under any federal, state or
local law or regulation, then, upon Notice requesting same given by such Limited
Partner to the General Partner, the Partnership shall redeem said Limited
Partner's entire interest for notes subordinate to all other debt obligations
of, and on parity with distributions to Partners by, the Partnership
("Subordinated Notes"), such Limited Partner shall cease to be a Partner and
shall be barred from voting or otherwise participating in any decision to be
made by the Partnership and the Interests of each of the Limited Partners shall
increase (by an amount which, in the aggregate, equals the Interest of the
Limited Partner so redeemed) in proportion to their respective Interests. Each
Subordinated Note shall provide for payments with respect thereto to be made in
installments at the same times as distributions are made to all Partners, and in
each instance in an amount equal to the amount that the Partnership would have
distributed to the Limited Partner holding such Subordinated Note under Sections
6.1 and 8.3 had its Interest not been so redeemed. In no event shall any payment
with respect to any such Subordinated Notes reduce the amount which would have
been distributed to the non-redeeming Partners if the Interest of said Limited
Partner had not been redeemed pursuant to this Section 7.3(a).
(b) Except as provided in Section 7.3(a) no Limited Partner may
withdraw from the Partnership without the prior written consent of each other
Partner, which consent may be withheld by any such other Partner in its sole and
absolute discretion, unless the Partnership or a General Partner has first
breached this Agreement.
Section 7.4. Assignees Not Admitted as Substituted Partners. Except
as required by law, an assignee of an Interest or any part thereof who does not
become an additional or a substituted Partner shall have no right to require any
information or account of the Partnership's transactions, to inspect the
Partnership books, or to vote on any of the matters as to which a Partner would
be entitled to vote under this Agreement, but such assignee shall, to the extent
of the Interest transferred, be entitled to such Partner's share of the net
profits, net losses and gain and of the distributions.
Section 7.5. Involuntary Withdrawal of a Limited Partner. The death,
legal incapacity or adjudication or bankruptcy of any individual Limited
Partner, or the dissolution, bankruptcy or adjudication of any Limited Partner
which is a corporation, partnership or similar entity, shall not cause a
dissolution of the Partnership, except as provided in Section 8.1(d) hereof in
the event such Limited Partner is also a General Partner. If any such event
shall occur with respect to a Limited Partner, the executor, trustee, personal
representative, successors, heirs or assigns of such Limited Partner shall
succeed to its Interest in the Partnership and shall be responsible for all the
liabilities and obligations of such Limited Partner under this Agreement, but
shall have the right to become a substituted Limited Partner only in accordance
with the provisions of Section 7.1. For the purpose of settling the estate of a
deceased Limited partner, the executor or administrator shall have only such
rights of a Limited Partner as are necessary (including the rights provided in
Section 8.3 hereof).
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Section 7.6. Effectiveness of Transfer.
(a) The Transfer by a Partner or a transferee of a Partner as
provided in this Article VII, of all or part of its Interest, shall become
effective on the first day of the month following receipt by the General Partner
of evidence of such Transfer in form and substance reasonable satisfactory to
the General Partner provided that the General Partner may, in its sole
discretion, establish an earlier effective date for the Transfer if requested to
do so by the transferee and transferor.
(b) No transfer of Partnership interests or any part thereof which
is in violation of this Article VII shall be valid or effective, and the
Partnership shall not recognize the same for the purposes of making payment of
profits, income, return of Capital Contributions or other distributions with
respect to such partnership interests, or part thereof. The Partnership may
enforce the provisions of this Article VII either directly or indirectly or
through its agents by entering an appropriate stop-transfer order on its books
or otherwise refusing to register or transfer or permit the registration or
transfer on its books of any proposed Transfers not in accordance with this
Article VII.
(c) The Partnership shall, from time to time as Interests are
registered in the name of the transferee on the Partnership's books in
accordance with the above provisions, pay to the transferee all further
distributions or profits or other compensation by way of income or return of
capital, on account of the Partnership interest transferred. Until the
registration or transfer on the Partnership's books, the General Partner may
proceed as if no Transfer had occurred.
(d) An Interest once owned by any Partner shall continue to remain
subject to the applicable restrictions of this Article VII as if such Interest
were still owned by its original owner, no matter how many times such Interest
has been Transferred.
Section 7.7. General Partner Withdrawal or Transfers; Events of
Withdrawal.
(a) A General Partner may not resign or withdraw as general partner
of the Partnership or make a Transfer of all or any portion of its Interest
provided that a General Partner may transfer a portion of its Interest so long
as such Transfer shall be in the form of a conversion of a portion of the
general partnership interest of the General Partner to a limited partnership
interest.
(b) A transferee of the General Partner permitted by the preceding
clause (a) of this Section 7.7 shall not be admitted as an additional Limited
Partner unless such transferee shall have delivered to the General Partner an
instrument reasonably satisfactory to the General Partner pursuant to which such
transferee agrees to be bound by the terms of this Agreement and pursuant to
which such transferee makes the representations set forth in paragraphs (a),
(b), (c) and (e) of Section 10.8.
(c) Notwithstanding the provisions of Section 7.7(a) and (b), no
Transfer of an Interest or any part thereof may be made by the General Partner
if (i) the Transfer in question would cause or result in the factual
circumstances described in subparagraphs (i) through (vii) of Section 7.1 (b),
or (ii) the consent to such Transfer has not been given by the Limited Partners.
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(d) No Transfer may be made unless that transferror or transferee
pays to the Partnership all direct out-of-pocket costs reasonably incurred by
the Partnership as a result of such Transfer, and indemnifies the Partnership
(in a manner which is reasonably satisfactory to the Limited Partners) for any
such costs to be reasonably incurred by it thereafter as a result of such
Transfer.
(e) No subsequent Transfer of any Interest or portion thereof
which was originally held by the General Partner may be made unless such
subsequent Transfer would be permitted to be made under this Section 7.7 if it
were being made by the General Partner.
(f) By executing and delivering this Agreement, each Partner shall
be deemed to have consented to (a) the pledge, assignment, hypothecation and
transfer to the Collateral Agent (as defined in the Common Agreement) for the
equal and ratable benefit of the Secured Parties (as defined in the Common
Agreement) of, and the grant to the Collateral Agent for the equal and ratable
benefit of the Secured Parties of a lien on and security interest in, all of the
General Partner's and all of the Limited Partner's right, title and interest in,
to and under its Interest and certain other collateral under certain Collateral
Documents (as defined in the Common Agreement) relating to such Interest or such
other collateral, or any other successor agreements, (b) the exercise by the
Collateral Agent of the rights and remedies set forth in the certain Collateral
Documents or any such successor agreement, including, without limitation, (i)
the right to exercise the voting and consensual rights and other powers of the
General Partner and the Limited Partner and the other collateral subject to
certain Collateral Documents, or any such successor agreement and to cause the
Collateral Agent or any third party designee or purchaser of the Interest to
become an additional or substitute General Partner or Limited Partner and (c)
the provisions of the Common Agreement and the other Credit Documents (as
defined in the Common Agreement) that requires that any transferee of the
General Partner's Interest or the Limited Partner's Interest and all issuances
of new or substituted interests of the General Partner or any new general
partner or limited partner of the Partnership, be subject to a Collateral
Document which Collateral Document shall be entitled to the benefits of this
Section 7.7(f).
(g) A General Partner shall cease to be a General Partner of the
Partnership upon the happening of any of the following events:
(i) Such General Partner withdraws (whether by resignation or
a Transfer) from the Partnership;
(ii) Such General Partner: (A) makes an assignment for the
benefit of creditors; (B) files a voluntary petition in bankruptcy; (C) is
adjudicated a bankrupt or insolvent; (D) files a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation; (E) files an
answer or other pleading admitting or failing to contest any material allegation
of a petition filed against him or it in any proceeding of this nature; or (F)
seeks, consents to, or acquiesces in the appointment of a trustee, receiver or
liquidator of a General Partner or of all or substantial part of his or its
assets;
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(iii) If within 60 days after the commencement of any
proceeding against a General Partner seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, the proceeding has not been dismissed; or if within
60 days after the appointment without its consent or acquiescence of trustee,
receiver or liquidator of a General Partner or of all or any substantial part of
his or its properties, the appointment is not vacated or stayed; or if within 60
days after expiration of any such stay, the appointment is not vacated;
(iv) In the case of a General Partner who is a natural person;
(A) his death, (B) his insanity, (C) his legal incapacity, or (D) the entry by a
court of competent jurisdiction or an order adjudicating him incompetent to
manage his person or his estate;
(v) In the case of a General Partner that is a corporation:
(A) the filing of a certificate of dissolution (or its equivalent) for such
corporation, (B) the relocation of the charter of such corporation, or (C) the
liquidation of such corporation;
(vi) In the case of a General Partner that is a separate
partnership: the dissolution and commencement of winding up of such separate
partnership; or
(vii) A material breach of this Agreement by a General Partner
and the unanimous vote by the other Partners to remove the General Partner
because of such breach;
provided, that, so long as the Bonds or any portion thereof are outstanding or
until the Bonds have been defeased in accordance with the Indenture, if any
General Partner shall cease to be a General Partner of the Partnership in
accordance with the provisions of Section 7.7(g), a successor General Partner
shall have (or shall promptly thereafter have) organizational documents
containing all of the terms, conditions and provisions (including an independent
director, if required) necessary to qualify such General Partner as a "special
purpose entity" or "special purpose vehicle" for ratings purposes under criteria
established and published from time to time by Standard & Poor's Rating
Services, Moody's Investor Service or any other similarly positioned ratings
institution. In the event any General Partner shall cease to be a General
Partner of the Partnership in accordance with the provisions of subsections (ii)
through (vii) of Section 7.7(g), such General Partner shall remain liable for
any obligations of the Partnership accrued at the time of such cessation as if
it had continued as a General Partner.
(h) Right of Remaining General Partner to Elect to Continue. If
any Event of Withdrawal of a General Partner shall occur, the remaining General
Partner(s) may elect to continue the business of the Partnership by a Notice
delivered to all remaining Partners within 60 days after the occurrence of such
Event of Withdrawal.
(i) Election of New General Partners. In the event any Person
ceases to be a General Partner and as a consequence thereof the Partnership has
no General Partner, the Limited Partners may by unanimous action elect one or
more Persons as General Partner.
Section 7.8. Right of First Offer. Except as provided in Section
7.10, if, at any time, any Partner shall desire to sell ("Seller") its Interest
as such a sale may be permitted
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hereunder, then the Seller shall first offer to the other Partners ("Buyer") the
opportunity to purchase Seller's Interest by giving Buyer written notice that it
would be willing to sell Seller's Interest. Buyer shall have the exclusive right
to make a first offer to purchase Seller's Interest, which Buyer may exercise
only by giving written notice of such offer ("Buyer's Offer") to Seller within
thirty (30) days following the date of receipt by Buyer of Seller's notice. Upon
receipt of Buyer's Offer, Seller shall, within thirty (30) days, elect to either
(i) accept Buyer's Offer and consummate the sale and Transfer within one hundred
eighty (180) days of Seller's acceptance thereof, or (ii) sell Seller's Interest
to any third party for a purchase price no lower than that contained in Buyer's
Offer and otherwise on at least the same economic terms and conditions contained
in Buyer's Offer so long as such sale and Transfer is consummated within one
hundred eighty (180) days after Seller's rejection of Buyer's Offer; provided,
however, that any purchase by any Buyer of the Interest of the General Partner
shall be acquired as a limited partner interest, unless the entire Interest of
the General Partner is being sold.
Section 7.9. Regulatory Status Change. In the event that the Project
shall cease to be an "exempt wholesale generator" as defined in 15 U.S.C.
ss.792-5a (a-1) or as an "eligible facility" as defined in 15 U.S.C. ss.792-5a
(a-2) (a "Regulatory Status Change"), and as a result, any Limited Partner would
be materially adversely affected, such Limited Partner shall have the right to
sell its Interest to the Partnership or to sell its Interest to a third party,
any such sale to be pursuant to the terms of this Agreement. If any Limited
Partner elects to sell its Interest to the Partnership, the Partnership shall
pay for the Interest so being sold, but the Partnership shall pay the Limited
Partner by issuing a promissory note for the value of such Interest, the amount
of such promissory note and its payment terms to be limited to the amount and
payment terms of cash distributions that would otherwise have been made to the
Limited Partners pursuant to Article VI of this Agreement. The Limited Partners
hereby agree that in the event of a Regulatory Status Change, the Limited
Partners sole remedy shall be as set forth in this Section 7.9).
Section 7.10. Bankruptcy Limitation. Notwithstanding any provision
to the contrary in this Agreement or applicable law, without the written
approval of all of the Partners, neither the Partners nor the Partnership shall
have the right to (i) institute proceedings to have the Partnership adjudicated
a bankrupt or insolvent; (ii) consent to the institution of bankruptcy or
insolvency proceedings against the Partnership (iii) file a petition or consent
to a petition seeking reorganization or relief on behalf of the Partnership
under any applicable federal or state law relating to bankruptcy; (iv) consent
to the appointment of a receiver, conservator, liquidator, assignee, trustee,
sequestrator (or any similar official) of the Partnership or a substantial
portion of its property; (v) make any assignment for the benefit of the
Partnership's creditors; (vi) cause the Partnership to admit in writing its
inability to pay its debts generally when they become due or admit that it is
otherwise insolvent; or (vii) take any action, or cause the Partnership to take
any action, in furtherance of any of the foregoing.
Section 7.11. Certain Restrictions. At all times after the
establishment of this Partnership:
(i) the Partnership's assets will not commingled with
those of any other Person;
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(ii) the Partnership will conduct its business separate from
any direct or ultimate parent of the Partnership;
(iii) the Partnership will maintain separate partnership
records and books of account from those of any other Person;
(iv) the Partnership will maintain separate financial
statements from those of any other Person;
(v) the Partnership will pay its own expenses and liabilities
from its own funds and will pay the salaries of its own employees, if any;
(vi) the Partnership will maintain an arm's length
relationship with its Affiliates.
(vii) the Partnership will not guarantee or become obligated
for the debts of any other entity or hold its credit as being available to
satisfy the obligations of others, except that the Partnership may guarantee or
otherwise become obligated for the debts of the Funding Corporation to the
extent contemplated by the Indenture; and
(viii) the Partnership will use separate stationery, invoices
and checks and will hold itself out as a separate and distinct entity from any
other Person.
ARTICLE VIII.
DISSOLUTION AND LIQUIDATION
Section 8.1. Dissolution. The Partnership shall be dissolved only
upon the first to occur of any one or more of the following:
(a) The unanimous agreement of the Partners to dissolve the
Partnership;
(b) The sale, transfer or other disposition of all or
substantially all of the assets of the Partnership (including a condemnation or
sale in foreclosure, but not including a pledge, assignment or transfer as
collateral security for the performance by the Partnership of its obligations
with respect to any loans made for the purpose of developing, constructing or
operating the Project) or destruction thereof (if the Partners decide not to
rebuild such assets and continue the business of the Partnership) unless all
Partners agree to continue the Partnership for the purpose of the receipt and
collection of any payments or other consideration due to it or for the
fulfillment of any continuing obligations it may have, in which event the
Partnership shall be dissolved as soon as it has fulfilled any such continuing
obligations or has collected all such payments or consideration, or the General
Partner has reasonably determined that there is no material likelihood that any
further payments or consideration will be collected by the Partnership;
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(c) The acquisition by a Partner of all of the Interests of all
other Partners;
(d) The (i) dissolution or insolvency of the sole General Partner,
(ii) filing in any court pursuant to any statute of the United States or of any
state of a petition for relief for such General Partner under any bankruptcy or
insolvency law, including an application for reorganization, (iii) filing
against such General Partner in any court pursuant to any such statute or for
the appointment of a receiver or trustee of all or any portion of such General
Partner's property, provided, however, that such filing shall not result in a
dissolution if any proceeding resulting therefrom shall have been dismissed
within sixty (60) days after the commencement thereof, (iv) assignment by such
General Partner for the benefit of its creditors, (v) admission in writing by
such General Partner of its failure or inability to pay its debts as they become
due, (vi) consent by such General Partner to or acquiescence by such General
Partner in the appointment of a trustee, receiver or liquidator of any material
portion of such General Partner's property or (vii) levy upon or attachment of
the whole or any portion of the Interest of such General Partner or a
substantial portion of its assets; provided, however, that such levy or
attachment shall not result in a dissolution if such levy or attachment is
released or discharged within sixty (60) days after it is made; and
(e) The occurrence of an event specified under the laws of the
State as one effecting such dissolution, except that if, under the terms of this
Agreement, the Partnership is not required to terminate, and the requirements
for reconstituting the Partnership have been satisfied, then the Partnership
shall immediately be reconstituted and reformed pursuant to all the applicable
terms, conditions and provisions of this Agreement.
Section 8.2. Election to Continue the Business. Upon dissolution of
the Partnership pursuant to Section 8.1(d), and except as otherwise provided in
the Act, the remaining Partners may unanimously agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
withdrawal, of a new General Partner.
Section 8.3. Winding Up Affairs and Distribution of Assets.
(a) Upon dissolution of the Partnership (except dissolution pursuant
to Section 8.1(c)), and in the absence of an election to continue the business
of the Partnership pursuant to Section 8.1(b), Section 8.2, or its
reconstitution under section 8.1(e), the General Partner or, if there is no
General Partner or if any Limited Partner's Capital Contribution or if any
Partner Loans are not repaid, a Person who shall be designated for such purposes
by unanimous vote of the Limited Partners (the General Partner or such Person so
designated hereinafter referred to as the "Liquidating Agent"), shall as soon as
practicable, wind up the affairs of the Partnership and sell and/or distribute
the assets of the Partnership. The Liquidating Agent shall have all of the
rights and powers with respect to the assets and liabilities of the Partnership
in connection with the liquidation and termination of the Partnership that the
General Partner would have with respect to the assets and liabilities of the
Partnership during the term of the Partnership, and the Liquidating Agent is
hereby expressly authorized and empowered to execute any and all documents
necessary or desirable to effectuate the liquidation and termination of the
Partnership an the transfer of any assets. After the assets of the Partnership
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have been (1) sold or restated to their Book Value and (2) any gain or loss on
the sale or any difference between the then current Book Value and the value at
which the asset is reflected on the books of the Partnership has been credited
to the Partner's Capital Account, in accordance with Section 3.2 hereof, then
the assets of the Partnership, including cash received on sale of the assets,
shall be used and/or distributed as follows, and in the following order of
priority:
(i) first, to the payment of debts and liabilities of the
Partnership (including Partner Loans) and the expenses of winding up the
Partnership;
(ii) then, to establish reasonable reserves for any contingent
or unforeseen liabilities or obligations of the Partnership, provided that at
the expiration of such period of time as the Liquidating Agent may deem
advisable, the balance of such reserves remaining after the payment of such
contingencies or liabilities shall be distributed as hereinafter provided;
(iii) then, any balance remaining shall be distributed to the
Partners having positive Capital Accounts in relative proportion to those
Capital Accounts; and
(iv) thereafter to the Partners pro rata in accordance with
their respective Interests.
(b) If the Liquidating Agent, in its sole discretion, shall
determine that it is not feasible to liquidate all of the assets of the
Partnership, then the Liquidating Agent shall determine the Book Value of the
assets not so liquidated. Such assets shall be retained or distributed by the
Liquidating Agent as follows:
(i) the Liquidating Agent shall retain assets having a Book
Value, net of any liability related thereto, equal to the amount by which the
net proceeds of liquidated assets are insufficient to satisfy the requirements
of subparagraphs (i) and (ii) of Section 8.3(a) hereof; and
(ii) the remaining assets shall be distributed to the Partners
in the manner specified in subparagraphs (iii) and (iv) of Section 8.3(a).
If the Liquidating Agent, in its sole discretion, deems it not feasible or
desirable to distribute to each Partner his pro rata share of each asset, the
Liquidating Agent may allocate and distribute specific assets to one or more
Partners, individually or as tenants-in-common, as the Liquidating Agent shall
determine to be fair and equitable, taking into consideration inter alia, the
fair market value of the asset, the liens, if any, to which such property may be
subject, and the tax consequences of the proposed distribution to each of the
Partners (including both distributees and others, if any).
Section 8.4. Termination. Within one hundred and twenty (120) days
after the date of the final distribution to the Partners of the proceeds of
liquidation, the Liquidating Agent shall furnish each Partner with a statement
audited by independent certified public accountants of regionally recognized
standing chosen by the Liquidating Agent showing the profits and losses
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of the Partnership from the date of the last annual statement, to the date of
such final distribution. Such statement shall show the manner in which the
proceeds of liquidation of the Partnership have been distributed. Upon
compliance with the distribution plan set forth in Section 8.3(a) hereof, the
Partnership shall cease to exist as a Partnership, and the Liquidating Agent
shall execute, acknowledge and cause to be filed an appropriate certificate
evidencing dissolution and termination of the Partnership.
ARTICLE IX.
INDEMNIFICATION
Section 9.1. Indemnification.
(a) To the fullest extent permitted by law, the Partners and their
respective officers, directors, shareholders, constituent partners, trustees,
agents, employees and other representatives (individually, an "Indemnitee")
shall be indemnified and held harmless by the Partnership from and against any
and all losses, claims, damages, liabilities, whether joint or several, expenses
(including legal fees and disbursements), judgments, fines, settlements and
other amounts suffered by them in connection with or arising from any and all
claims, demands, actions, suits or proceedings (collectively, "Claims"), whether
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, by reason of
its status as a Partner or an officer, director, shareholder, constituent
partner, trustee, employee or other representative of a Partner except Claims
that result from the fraud, willful misconduct, gross negligence or breach of
any fiduciary duty.
(b) The indemnification provided by this Section 9.1 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, as a matter of law or otherwise, in the Indemnitee's capacity as a
Partner or as an officer, director, shareholder, constituent partner, trustee or
other representative of a Partner, and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(c) Any indemnification hereunder shall be satisfied solely out of
the assets of the Partnership. In no event may an Indemnitee subject a Limited
Partner to personal liability by reason of these indemnification provisions.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Notices.
(a) All notices, consents, calls, approvals, reports, designations,
requests, waivers, elections and other communications (collectively, "Notices")
authorized or required to be given pursuant to this Agreement shall be given in
writing and (i) personally served on the
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Partner (or a General Partner or an executive officer of the Partner) to whom it
is given, or (ii) mailed by registered or certified mail, postage prepaid, or
(iii) sent by courier guaranteeing overnight delivery, in each case addressed as
follows (without regard to telephone number):
If to the Partnership or to LSP Energy, Inc. as General Partner:
LSP Energy Limited Partnership/LSP Energy, Inc.
200 Industrial Drive
Batesville, Mississippi 38606
Telephone: (662) 563-7649
Fax: (662) 563-5724
With a copy to:
LSP Batesville Holding, LLC
c/o LS Power Management, LLC
Two Tower Center
20th Floor
New Brunswick, NJ 08816
Attention: General Counsel
Telephone: (732) 249-6750
Fax: (732) 249-7290
If to the Limited Partner:
LSP Batesville Holding, LLC
c/o LS Power Management, LLC
Two Tower Center
20th Floor
New Brunswick, NJ 08816
Attention: General Counsel
Telephone: (732) 249-6750
Fax: (732) 249-7290
(b) All Notices shall be deemed given when delivered. Any Partner
may change its address and/or telephone number for the receipt of Notices at any
time by giving Notice thereof to all other Partners.
Section 10.2. Entire Agreement. Agreement supersedes all prior
agreements and understandings among the Partners with respect to the subject
hereof.
Section 10.3. Brokers and Finders. Each Partner warrants and
represents to the other Partners and the Partnership that it has not engaged or
dealt with any broker, finder or other
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Person which is entitled to receive a commission, finder's fee or other payment
in connection with such Partner's decision to invest in the Partnership. Each
Partner shall indemnify and hold all other Partners and the Partnership harmless
from and against any commission, fee or other payment due any such broker,
finder or other Person on account of any breach of this representation warranty
by such Partner.
Section 10.4. Modification. This Agreement may be modified only upon
the prior written consent of each Partner.
Section 10.5. Waivers. No waiver of or any breach of any of the
terms of this Agreement shall be effective unless such waiver is in writing and
signed by the Partner against whom such waiver is claimed. No waiver of or any
breach shall be deemed a waiver of any other subsequent breach.
Section 10.6. Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless such provision was fundamental to the objectives of
this Agreement.
Section 10.7. Further Assurances. Each Partner shall execute such
deeds, assignments, endorsements, evidences of Transfer and other instruments
and documents and shall give such further assurances as shall be reasonably
necessary to perform its obligations hereunder.
Section 10.8. Partner Representations/Certain Agreements.
(a) Each Partner represents and warrants to the other Partners and
the Partnership (i) that it is an "accredited investor" within the meaning of
Regulations D of the Securities Act, (ii) that its Interest has been acquired
under this Agreement for its own account, for investment, and not with a present
view to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling such Interest, and (iii) that it
will not make or offer to make a Transfer of its Interest in violation of the
Securities Act or any other applicable federal or state securities law.
(b) Each Partner represents and warrants to the other Partners and
the Partnership that (i) it is not acquiring its Interest with funds of a
pension plan subject to ERISA, and (ii) its acquisition of its Interest pursuant
to this Agreement does not result in or create a prohibited transaction under,
or result in the Partnership becoming a "party in interest" as defined in
Section 3(14) of ERISA, or otherwise result in any other holder of an Interest
or the assets of the Partnership being subject to such statute.
(c) Each Partner represents and warrants to the other Partners and
the Partnership that neither it nor any of its Affiliates is an "electric
utility" or an "electric utility holding company", within the meaning of 18
C.F.R ss. 292.206.
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(d) Each Partner represents and warrants to the other Partners
that this Agreement has been duly authorized, executed and delivered on behalf
of such Partner and is the valid and binding obligation of such Partner
enforceable in accordance with its terms. LSP Energy, Inc. represents and
warrants to the Limited Partners that (i) it is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, (ii) it has full corporate power and authority to enter into this
Agreement, (iii) its execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action, (iv) this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms except to the extent that enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors rights generally and by principles of equity (regardless of
whether enforcement is sought in equity or at law), and (v) neither it nor the
Partnership is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
(e) Each Partner represents and acknowledges to the other Partners
and the Partnership that (i) investment in the Partnership bears a high degree
of risk, (ii) it is able to bear the possible loss associated with such high
degree of risk, (iii) its investment is in accordance with all relevant federal
and state securities laws and that no filing or other registration is required
in connection with the investment of such Partner in the Partnership, (iv) that
no return on capital is guaranteed or assured in any respect (it being
understood that nothing in this clause (iv) shall alter the order of
distributions set forth in this Agreement) and (v) no representation or warranty
is made by the Partnership, the General Partner or their officers, directors,
stockholders or employees as to the reasonability of any projection or the
results of any investment.
Section 10.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State and without
reference to any conflict of law or choice of law principles of the State that
might apply the law of another jurisdiction.
Section 10.10. Counterparts. This Agreement may be executed in any
number of counterparts or with counterpart signature pages, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.
Section 10.11. Limitation on Rights of Others. No Person other than
a Partner and its successors and permitted assigns is, nor is it intended that
any such other Person be treated as, a direct, indirect, intended or incidental
third party beneficiary of this Agreement for any purpose whatsoever, nor shall
any other Person have any legal or equitable right, remedy or claim under or in
respect of this Agreement.
Section 10.12. Gender; Number. As used in this Agreement, the
masculine, feminine or neuter gender, and the singular or plural number, shall
be deemed to be or include the other genders or number, as the case may be,
whenever the context so indicates or requires.
Section 10.13. Remedies Not Exclusive. Whenever the Partnership or
any Partner exercises one or more of the remedies provided for herein, such
exercise shall not
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preclude the exercise of any one or more remedies otherwise available to it
hereunder (unless this Agreement expressly provides otherwise), under contract,
at law, in equity or otherwise.
Section 10.14. Power of Attorney. Each Partner constitutes and
appoints the General Partner its true and lawful attorney with full power of
substitution to make, execute, sign, acknowledge and file a certificate of
limited partnership and/or amendments thereto expressly authorized hereby, and
upon the Partnership's termination, a certificate of dissolution of the
Partnership. The grant of a power of attorney hereunder is coupled with an
interest and shall survive a Partner's disability, incompetence, death or
assignment by such Partner of its Interest pursuant to this Agreement.
Section 10.15. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
successors and permitted assigns.
Section 10.16. Exhibits. All exhibits referenced in this Agreement
shall be incorporated herein by such reference and shall be deemed to be a
integral part hereof.
Section 10.17. Certain Remedies. Each Partner and the Partnership
shall be entitled to all remedies at law and equity for breach of this
Agreement. Each Partner further acknowledges that specific performance is an
appropriate remedy for breach of any obligation hereunder. Without limitation of
such remedy or any other remedy available at law or equity, any Partner in
default in respect of its obligation to make a Capital Contribution hereunder
shall not be entitled to any distributions, which shall be deemed assigned to
the Partnership, until such breach shall have been cured.
Section 10.18. Litigation. In the event of any litigation among
Partners, the reasonable expenses of such litigation shall be paid by the party
who does not prevail.
Section 10.19. General Disclosure Duty. The General Partner shall
keep the other Partners informed generally of the affairs of the Partnership and
shall furnish to the other Partners, upon request, full information and account
of any transaction and matters within the General Partner's knowledge materially
affecting or relating to the business of the Partnership, including any pending
or threatened default in any indebtedness of the Partnership or any Project for
money borrowed, or any material damage or destruction to, or proceedings in
condemnation against, the Project or any other Partnership property.
Section 10.20. Visitation; Inspection. The Partnership shall permit
the Limited Partners, or their duly authorized representatives to visit and
inspect the Project at such times as any Limited Partner may reasonably request.
Section 10.21. Other Information. The General Partner promptly shall
provide each Limited Partner with such other information as may be reasonably
requested by it.
Section 10.22. Confidentiality. Each Partner agrees to treat in a
confidential manner all information it receives from the Partnership concerning
the Partnership and shall not disclose such information to any Person other than
(i) to its employees, attorneys or agents and
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then only to the extent such disclosure, in the good faith determination of such
Partner, is necessary for the performance of the duties or responsibilities of
such Persons, or (ii) in connection with any action, litigation or proceeding
arising out of or in connection with the Partnership Agreement or the other
documents delivered hereunder or the enforcement hereof or thereof (provided,
however, no information concerning the Partnership received by such Partner
hereunder may be used or furnished in connection with any other contemplated
litigation, proceeding or any governmental investigation, except as permitted by
subsections (iii) and (iv) of this Section 10.22), or (iii) to any banking,
governmental or regulatory body having jurisdiction over it, or (iv) as may be
required by law, applicable regulation or subpoena, in which case such Partner,
to the extent practicable and permitted by law, shall notify promptly the
Partnership of such disclosure (other than disclosure made by any Partner
pursuant to subsection (iii) above).
Section 10.23. Other Activities and Competition. Notwithstanding
anything to the contrary contained in this Agreement, any Partner or its
Affiliates and agents, officers, directors and employees of such Partner or its
Affiliates may engage in or possess any interests in business ventures and may
engage in other activities of every kind and description independently or with
others in addition to those relating to the Partnership, including without
limitation the rendering of advice or services of any kind to other investors
and the making or management of other investments. Without in any way limiting
the foregoing, such Partner, its Affiliates and any agent, officer, director or
employee may act as a director of any corporation, trustee of any trust, partner
of any partnership or administrative officer of any business entity, and may
receive compensation for service as a director, employee, advisor, consultant or
manager with respect to, or participate in profits derived from investments in
or of any such corporation, trust, partnership or other business entity. Each
Partner authorizes, consents to and approves of such present and future
activities by such Persons, whether or not any such activities may conflict with
any interest of the Partnership or any of the Partners or be competitive with
the business of the Partnership. Without in any way limiting the foregoing, no
Partner, shall have any obligation or responsibility to disclose or refer any
such investments or other activities to the Partnership or any Partner. Neither
the Partnership nor any Partner shall have any right by virtue of this Agreement
or the partnership relationship created hereby in or to other ventures or
activities of any other Partner or its Affiliates or to the income or proceeds
derived therefrom.
Section 10.24. Consent. The Partners hereby consent to the
performance by the Partnership of the transactions contemplated by and related
to the Common Agreement.
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IN WITNESS WHEREOF, the Partners have duly executed this Agreement
as of the day and year first above written.
GENERAL PARTNER:
LSP ENERGY, INC.
By: /s/ Frank Hardenbergh
-------------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
LIMITED PARTNERS:
LSP BATESVILLE HOLDING, LLC
By: LS POWER MANAGEMENT, LLC,
its Manager
By: /s/ Frank Hardenbergh
--------------------------
Name: Frank Hardenbergh
Title: Senior Vice
President
<PAGE>
EXHIBIT A
PARTNERS' PERCENTAGE INTEREST
Partner Percentage Interest
- ------- -------------------
General Partner
LSP Energy, Inc. 1%
Limited Partners
LSP Batesville Holding, LLC 99%
Total 100.00%
<PAGE>
Exhibit 3.3
BY-LAWS
OF
LSP BATESVILLE FUNDING CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
(ii) the President, if there be one, (iii) any Managing Director, (iv) any Vice
President, (v) the Secretary or (vi) any Assistant Secretary, and shall be
called by any such officer at the request in writing of a majority of the Board
of Directors or at the request in writing of stockholders owning a majority of
the capital stock of the
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Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
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and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next Annual Meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any director may resign at any time
upon notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, if there be one, any
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Managing Director, or any director. Notice thereof stating the place, date and
hour of the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
on twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and
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affairs of the Corporation. Each committee shall keep regular minutes and report
to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President or a Managing Director, a
Secretary and a Treasurer. The Board of Directors, in its discretion, may also
choose a Chairman of the Board of Directors (who must be a director), Managing
Directors, Vice Presidents, Assistant Secretaries, Assistant Treasurers and
other officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these By-Laws.
The officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
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Section 2. Election. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President, if there be one, any Managing
Director or any Vice President and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors, and shall also perform such other
duties and may exercise such other powers as from time to time may be assigned
to him by these By-Laws or by the Board of Directors.
Section 5. President. The President, if there be one, shall, subject
to the control of the Board of Directors, be the chief executive officer of the
Corporation and have general supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The President shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. The President shall also perform
such other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
Section 6. Managing Directors. If there be no President, the
Managing Director (or the Managing Directors jointly if there be more than one)
shall, subject to the control of the Board of Directors, be the chief executive
officer of the Corporation, and shall have the
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duties and exercise the powers prescribed for the President in these By-Laws. If
there be a President, in his absence or in the event of his inability or refusal
to act, the Managing Director or the Managing Directors if there is more than
one (in the order designated by the Board of Directors) shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Managing Directors shall
perform such other duties and have such other powers as the Board of Directors
or the President from time to time may prescribe.
Section 7. Vice Presidents. At the request of the President or a
Managing Director or in their absence or in the event of their inability or
refusal to act, the Vice President or the Vice Presidents if there is more than
one (in the order designated by the Board of Directors) shall perform the duties
of the President/Managing Director, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President/Managing
Director. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe.
Section 8. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
Section 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a
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bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 10. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Managing Director, any Vice
President, or the Secretary, and in the absence of the Secretary or in the event
of his disability or refusal to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 11. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Managing
Director, any Vice President, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 12. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President, a
Managing Director or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
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Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
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NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
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Section 1. Power to Indemnify in Actions, Suits or proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees) judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though
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less than a quorum, or (ii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding
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upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VIII but whom the Corporation has the power or obligation
to indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest
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of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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Exhibit 4.1
================================================================================
TRUST INDENTURE
dated as of May 21, 1999
among
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK,
as Trustee and Securities Intermediary
---------------
Providing for the Issuance from Time to Time of
Debt Securities in One or More Series
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I: DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.............3
Section 1.1 Definitions; Construction..................................3
Section 1.2 Compliance Certificates and Opinions......................45
Section 1.3 Form of Documents Delivered to Trustee....................45
Section 1.4 Notices, Etc. to Trustee, Funding Corporation and
Partnership...............................................46
Section 1.5 Notices to Holders; Waiver................................48
Section 1.6 Effect of Heading and Table of Contents...................49
Section 1.7 Successors and Assigns. ..................................49
Section 1.8 Severability Clause.......................................49
Section 1.9 Benefits of Indenture.....................................49
Section 1.10 Governing Law; Consent to Jurisdiction; Waiver of
Jury Trial................................................49
Section 1.11 Legal Holidays............................................50
Section 1.12 Execution in Counterparts.................................51
Section 1.13 Securities Intermediary...................................51
ARTICLE II: THE BONDS.........................................................54
Section 2.1 Form of Bond to Be Established by Series
Supplemental Indenture....................................54
Section 2.2 Form of Trustee's Authentication..........................54
Section 2.3 Amount; Issuable in Series................................55
Section 2.4 Authentication and Delivery of Bonds......................56
Section 2.5 Form......................................................58
Section 2.6 Execution of Bonds........................................60
Section 2.7 Temporary Bonds...........................................61
Section 2.8 Registration; General Restrictions on Transfer and
Exchange..................................................61
Section 2.9 Transfer and Exchange.....................................63
Section 2.10 Mutilated, Destroyed Lost and Stolen Bonds................80
Section 2.11 Payment of Principal and Interest; Principal and
Interest Rights Preserved.................................82
Section 2.12 Persons Deemed Owners.....................................83
Section 2.13 Cancellation; Purchase by the Funding Corporation or
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the Partnership...........................................84
Section 2.14 Dating of Bonds; Computation of Interest..................84
Section 2.15 Source of Payments Limited; Rights and Liabilities of
the Funding Corporation and the Partnership...............84
Section 2.16 Parity of Bonds...........................................85
ARTICLE III: ESTABLISHMENT OF FUNDS...........................................85
Section 3.1 Establishment of Indenture Funds and SubFunds.............85
Section 3.2 Security Interest.........................................86
Section 3.3 Bond Fund.................................................86
Section 3.4 Interest Sub-Fund; Application of Moneys in Interest
SubFund...................................................87
Section 3.5 Principal Sub-Fund; Application of Moneys in
Principal SubFund.........................................88
Section 3.6 Redemption Sub-Fund; Application of Moneys in
Redemption SubFund........................................88
Section 3.7 Investment of Funds.......................................89
Section 3.8 Disposition of Indenture Funds Upon Retirement of
Bonds.....................................................89
Section 3.9 Fund Balance Statements...................................89
ARTICLE IV: AFFIRMATIVE COVENANTS.............................................90
Section 4.1 Affirmative Covenants of the Partnership..................90
Section 4.2 Affirmative Covenants of the Funding Corporation..........98
Section 4.3 Information Confidential. ................................99
ARTICLE V: NEGATIVE COVENANTS.................................................99
Section 5.1 Negative Covenants of the Partnership.....................99
Section 5.2 Negative Covenants of the Funding Corporation............107
ARTICLE VI: REDEMPTION OF BONDS..............................................108
Section 6.1 Applicability of Article.................................108
Section 6.2 Election to Redeem; Notice to Trustee....................109
Section 6.3 Optional Redemption; Extraordinary Mandatory
Redemption; Redemption at the Option of the
Holders; Selection of Bonds to be Redeemed...............109
Section 6.4 Notice of Redemption.....................................110
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Section 6.5 Bonds Payable on Redemption Date.........................111
Section 6.6 Bonds Redeemed in Part...................................112
Section 6.7 Cancellation of Bonds....................................112
ARTICLE VII: SINKING FUNDS...................................................112
Section 7.1 Applicability of Article.................................112
Section 7.2 Sinking Funds for Bonds..................................112
ARTICLE VIII: EVENTS OF DEFAULT AND REMEDIES.................................113
Section 8.1 Events of Default........................................113
Section 8.2 Enforcement of Remedies..................................116
Section 8.3 Specific Remedies........................................118
Section 8.4 Judicial Proceedings Instituted by Trustee...............119
Section 8.5 Holders May Demand Enforcement of Rights by
Trustee..................................................121
Section 8.6 Control by Holders.......................................122
Section 8.7 Waiver of Past Defaults or Events of Default.............122
Section 8.8 Holder May Not Bring Suit Under Certain Conditions.......122
Section 8.9 Undertaking to Pay Court Costs...........................123
Section 8.10 Right of Holders to Receive Payment Not to be
Impaired.................................................124
Section 8.11 Application of Moneys Collected by Trustee...............124
Section 8.12 Bonds Held by Certain Persons Not to Share in
Distribution.............................................125
Section 8.13 Waiver of Stay or Extension Laws.........................125
Section 8.14 Remedies Cumulative; Delay or Omission Not a
Waiver...................................................126
Section 8.15 The Intercreditor Agreement and the Collateral Agency
Agreement................................................126
ARTICLE IX: CONCERNING THE TRUSTEE...........................................127
Section 9.1 Certain Rights and Duties of Trustee.....................127
Section 9.2 Trustee Not Responsible for Recitals, Etc................130
Section 9.3 Trustee and Others May Hold Bonds........................130
Section 9.4 Moneys held by Trustee or Paying Agent; Investments......130
Section 9.5 Compensation of Trustee and Its Lien.....................130
Section 9.6 Right of Trustee to Rely on Officer's Certificates and
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Opinions of Counsel......................................131
Section 9.7 Persons Eligible for Appointment As Trustee..............132
Section 9.8 Resignation and Removal of Trustee; Appointment of
Successor................................................132
Section 9.9 Acceptance of Appointment by Successor Trustee...........133
Section 9.10 Merger, Conversion or Consolidation of Trustee...........135
Section 9.11 Maintenance of Offices and Agencies......................135
Section 9.12 Trustee Risk.............................................138
Section 9.13 Appointment of CoTrustee.................................138
Section 9.14 Disqualification; Conflicting Interests..................139
Section 9.15 Reports by Trustee.......................................145
Section 9.16 Limitation on Duty of Trustee in Respect of Senior
Collateral...............................................145
Section 9.17 No Liability for Cleanup of Hazardous Materials..........146
ARTICLE X: CONCERNING THE HOLDERS............................................147
Section 10.1 Acts of Holders..........................................147
Section 10.2 Bonds Owned by the Funding Corporation, the
Partnership or Affiliates Deemed Not Outstanding.........148
ARTICLE XI: HOLDERS' MEETINGS................................................149
Section 11.1 Purposes for Which Holders' Meetings May Be Called.......149
Section 11.2 Call of Meetings by Trustee..............................150
Section 11.3 Funding Corporation, Partnership and Holders May
Call Meeting.............................................150
Section 11.4 Persons Entitled To Vote at Meeting......................150
Section 11.5 Determination of Voting Rights; Conduct and
Adjournment of Meeting...................................150
Section 11.6 Counting Votes and Recording Action of Meeting...........151
ARTICLE XII: SUPPLEMENTAL INDENTURES.........................................152
Section 12.1 Supplemental Indentures and Amendments to
Financing Documents Without Consent of Holders...........152
Section 12.2 Supplemental Indenture with Consent of Holders...........154
Section 12.3 Documents Affecting Immunity or Indemnity................155
Section 12.4 Execution of Supplemental Indentures.....................155
Section 12.5 Effect of Supplemental Indentures........................156
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Section 12.6 Reference in Bonds to Supplemental Indentures............156
ARTICLE XIII: DEFEASANCE.....................................................156
Section 13.1 Defeasance...............................................156
Section 13.2 Conditions to Defeasance.................................157
ARTICLE XIV: EXCULPATION.....................................................159
Section 14.1 Liability to Senior Secured Parties......................159
ARTICLE XV: REQUEST FOR INFORMATION FROM THE TRUSTEE.........................161
Section 15.1 Information to Holders...................................161
SCHEDULE I: Closing Date Payments
APPENDIX I: Insurance Requirements
EXHIBIT A: Form of Consent
EXHIBIT B: Form of Request for Information from the Trustee
EXHIBIT C1: Forms of Infrastructure Financing Documents
EXHIBIT C2: Forms of Infrastructure Certifications
EXHIBIT D: Form of Certificate of Transfer
EXHIBIT E: Form of Certificate of Exchange
EXHIBIT F: Form of Letter to be Delivered by Accredited Investors
EXHIBIT G: Form of Bond
<PAGE>
TRUST INDENTURE, dated as of May 21, 1999 (this "Indenture"), among
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation (the "Funding
Corporation"), LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Partnership"), and THE BANK OF NEW YORK, a New York banking corporation
(the "Trustee").
W I T N E S S E T H
WHEREAS, the Partnership and the Funding Corporation have duly
authorized the creation of an issue of their senior secured bonds to be issued
in one or more series (the "Bonds") up to such principal amount authorized in
accordance with the terms of this Indenture, and the Funding Corporation and the
Partnership have duly authorized the execution and delivery of this Indenture to
secure the Bonds and to provide for the authentication and delivery of the Bonds
by the Trustee; and
WHEREAS, the Funding Corporation and the Partnership wish to secure
the payment of the principal of, premium, if any, and interest on the Bonds
authenticated and delivered hereunder and issued by the Funding Corporation and
the Partnership hereunder and the covenants herein and therein contained and to
mortgage, pledge and assign substantially all of their assets for the benefit
of the Collateral Agent, the Trustee and the other Senior Secured Parties; and
WHEREAS, all obligations of the Funding Corporation and the
Partnership under this Indenture will be secured as set forth in the Senior
Security Documents pursuant to which the Collateral Agent has been granted a
security interest in the Senior Collateral; and
WHEREAS, all acts necessary to make this Indenture a valid
instrument for the security of the Bonds, in accordance with its and their
terms, have been done; and
WHEREAS, the Trustee has agreed to maintain control of the Indenture
Funds and each item of property credited to the Indenture Funds (whether cash, a
security, an instrument or obligation, share, participation, interest or other
property whatsoever), each such item of property to be treated as a financial
asset under Article 8 of the New York UCC, in accordance with this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, in consideration of
the premises and of the purchase of the Bonds by the Holders, and in
<PAGE>
order to secure the payment of the principal of, premium, if any, and interest
on all of the Bonds from time to time outstanding and the performance of the
covenants therein and herein contained and to declare the terms and conditions
on which such Bonds are secured, the Funding Corporation and the Partnership
hereby grant, bargain, mortgage, sell, release, convey, assign, transfer,
pledge, set over and confirm to the Trustee, and grant to the Trustee a security
interest in, the following:
All right, title and interest of the Funding Corporation and the
Partnership in and to the Indenture Funds (including any and all moneys
contained therein or hereafter delivered to the Trustee for deposit therein),
including, in each case, all moneys received and the right to receive moneys
thereunder (the "Indenture Collateral");
TO HAVE AND TO HOLD, all the same with all privileges and
appurtenances hereby given, granted, pledged and assigned or agreed or intended
so to be, unto the Trustee and its successors in said trust and to it and its
assigns forever;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of Outstanding Bonds without any
priority of any such Bond over any other such Bond;
PROVIDED, HOWEVER, that if, after the right, title and interest of
the Trustee in and to the Indenture Collateral shall have ceased, terminated and
become void in accordance with Article XIII hereof, or the principal of,
premium, if any, and interest on the Bonds shall have been paid to the Holders
thereof, then and in that case this Indenture and the estate and rights hereby
granted shall cease, terminate and be void, and the Trustee shall cancel and
discharge this Indenture and execute and deliver to the Funding Corporation and
the Partnership such instruments as the Funding Corporation and the Partnership
shall require to evidence the discharge hereof; otherwise this Indenture shall
be and remain in full force and effect; and
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<PAGE>
THE PARTIES HEREBY COVENANT AND AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions; Construction. For all purposes of this
Indenture (and for all purposes of any other Financing Document or other
instrument or agreement that incorporates provisions of this Indenture by
reference, mutatis mutandis), except as otherwise expressly provided or unless
the context otherwise requires:
(a) except as otherwise expressly provided herein, (i) all
accounting terms used herein shall be interpreted, (ii) all financial statements
and all certificates and reports as to financial matters required to be
delivered to the Trustee hereunder shall be prepared and (iii) all calculations
made for the purposes of determining compliance with this Indenture shall
(except as otherwise expressly provided herein) be made in accordance with, or
by application of, GAAP applied on a basis consistent (except inconsistencies
that are disclosed in writing to the Trustee and are in accordance with GAAP as
certified by a firm of independent certified public accountants of recognized
national standing) with those used in the preparation of the latest
corresponding financial statements furnished hereunder to the Trustee;
(b) all references in this Indenture to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Indenture;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(d) unless the context clearly intends to the contrary, pronouns
having a masculine or feminine gender shall be deemed to include the other;
(e) unless otherwise expressly specified, any agreement, contract or
document defined or referred to herein shall mean such agreement, contract or
document as in effect as of the date hereof, as the same may thereafter be
amended, supplemented or otherwise modified from time to time in accordance with
the terms of this Indenture and the
3
<PAGE>
other Transaction Documents and shall include any agreement, contract or
document in substitution or replacement of any of the foregoing entered into in
accordance with the terms of this Indenture and the other Transaction Documents;
(f) any reference to any Person shall include its permitted
successors and assigns in accordance with the terms of this Indenture and the
other Transaction Documents and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities; and
(g) the following terms shall have the following meanings:
"Acceptable PPA" shall mean any of the VEPCO Power Purchase
Agreement, the Aquila Power Purchase Agreement or a Replacement PPA.
"Acceptable Replacement Power Arrangement" shall mean an agreement
for the purchase of Replacement Power entered into or arranged for by the
Partnership: (i) that would not reasonably be expected to result in a Material
Adverse Effect or a material adverse effect on the operation of the Project (as
confirmed by the Partnership); (ii) (a) the counterparty of which or the credit
support provider for such counterparty (including any parent of such
counterparty which guarantees such counterparty's obligations) shall be rated at
least "BBB-" by S&P or at least "Baa3" by Moody's, provided that such
counterparty or such credit support provider, as applicable, shall not be
required to satisfy such rating standard if such counterparty has dedicated
existing generating assets and capacity for the provision of such Replacement
Power and such generating assets have a proven track record for satisfying the
obligation to provide all of such Replacement Power, and (b) that has a term not
exceeding 45 days; or (iii) (a) the counterparty of which is reasonably
experienced in the business of providing power for similar sized obligations and
has a proven track record for satisfying the obligation to provide all of such
Replacement Power and (b) has a term not exceeding 48 hours.
"Account Balance Amount" shall mean the sum of (i) the funds on
deposit in or credited to the Distribution Suspense Account and (ii) the
aggregate of all funds on deposit in or credited to the Debt Service Reserve
Account and the Debt Service Payment Account.
"Account Reserve Requirement" shall mean, as of any date of
determination, the sum of (i) the Debt Service Reserve Requirement as of the
next Scheduled
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Payment Date for the Bonds (or, if the date of determination is a Scheduled
Payment Date for the Bonds, the Debt Service Reserve Requirement as of such
date), (ii) the Senior Indebtedness due and payable on the next Scheduled
Payment Date for the Bonds and (iii) the Senior Indebtedness due and payable
from and after the date of determination and prior to the next Scheduled Payment
Date for the Bonds.
"Accounts" shall mean, collectively, the Construction Account, the
Revenue Account, the O&M Account, the Debt Service Payment Account, the DSRA LOC
Payment Account, the Debt Service Reserve Account, the Major Maintenance Reserve
Account, the Aquila PPA Reserve Account, the Distribution Suspense Account, the
Proceeds Account and such other accounts as may be established pursuant to the
Common Agreement.
"Act," when used with respect to any Holder, shall have the meaning
set forth in Section 10.1.
"Ad Valorem Tax Agreement" shall mean the Ad Valorem Tax Contract,
dated as of August 24, 1998, by and among the Partnership, Panola County,
Mississippi, acting by and through its Board of Supervisors, the City of
Batesville, Mississippi, acting by and through its Mayor and Board of Aldermen,
the Mississippi Department of Economic and Community Development, acting for and
on behalf of the State of Mississippi, and the Panola County Tax
Assessor/Collector.
"Additional Indebtedness" shall have the meaning set forth in
Section 5.1(c)(ix).
"Additional Indebtedness Agent" shall mean any agent, trustee or
similar representative for the Additional Indebtedness Holders under an
Additional Indebtedness Agreement.
"Additional Indebtedness Holders" shall mean the financial
institutions from time to time party to an Additional Indebtedness Agreement.
"Additional Indebtedness Agreement" shall mean an agreement among
the Partnership, an Additional Indebtedness Agent and the Additional
Indebtedness Holders pursuant to which the Additional Indebtedness Holders agree
to provide Additional
5
<PAGE>
Indebtedness to the Partnership on the terms and conditions set forth therein
and in accordance with the Financing Documents, including, without limitation,
Section 5.1(c)(ix).
"Additional Project Document" shall mean any material contract or
undertaking to which the Partnership is a party relating to the development,
construction, operation, administration or maintenance of the Project entered
into after the Closing Date, but excluding any Financing Document.
"Administrative Agent" shall mean, initially, The Bank of New York,
a New York banking corporation, and any Person appointed as a substitute or
replacement Administrative Agent under the Common Agreement.
"Affiliate", with respect to any Person, shall mean any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Affiliate Indebtedness" shall have the meaning set forth in Section
5.1(c)(vi).
"Affiliate Indebtedness Holders" shall mean the partners of the
Partnership or Affiliates thereof from time to time party to an Affiliate
Indebtedness Agreement.
"Affiliate Indebtedness Agreement" shall mean an agreement among the
Partnership and the Affiliate Indebtedness Holders pursuant to which the
Affiliate Indebtedness Holders agree to provide Affiliate Indebtedness to the
Partnership on the terms and conditions set forth therein and in accordance with
the Financing Documents, including, without limitation, Section 5.1(c)(vi).
"Annual Operating Budget" shall have the meaning set forth in
Section 4.1(j).
"ANR" shall mean ANR Pipeline Company, a Delaware corporation.
6
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"ANR Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among ANR, the Partnership and IBJ Schroder Bank & Trust
Company as collateral agent.
"ANR Interconnection Agreement" shall mean the Interconnection
Agreement, dated July 28, 1998, by and between ANR and the Partnership.
"Applicable Law" shall mean any constitution, statute, law, rule,
regulation, ordinance, judgment, order, decree or Governmental Approval, or any
published directive, guideline, requirement or other governmental restriction
which has the force of law, or any determination by, or interpretation of any of
the foregoing by, any judicial authority, applicable to and/or binding on a
given Person or the Project, as the context may require, whether in effect as of
the Closing Date or thereafter and in each case as amended (including, without
limitation, all Environmental Laws and any of the foregoing pertaining to land
use or zoning restrictions).
"Applicable Procedures" shall mean, with respect to any transfer or
exchange of or for beneficial interests in any Global Bond, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Aquila" shall mean Aquila Energy Marketing Corporation, a Delaware
corporation.
"Aquila Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among Aquila, the Partnership and IBJ Schroder Bank &
Trust Company as collateral agent.
"Aquila Extended Term" shall mean the "Extended Term", as such term
is defined in the Aquila Power Purchase Agreement.
"Aquila Initial Term" shall mean the "Initial Term", as such term is
defined in the Aquila Power Purchase Agreement.
"Aquila Power Purchase Agreement" shall mean the Power Purchase
Agreement, dated May 21, 1998, by and among the Partnership, Aquila and
UtiliCorp, as amended by (i) the Letter Agreements dated July 14, 1998 and July
16, 1998, by and
7
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among the Partnership and Aquila, and (ii) the Letter Agreement dated August 27,
1998, by and among the Partnership, Aquila and UtiliCorp.
"Aquila PPA Reserve Account" shall have the meaning given to such
term in the Common Agreement.
"Aquila PPA Reserve Requirement" shall have the meaning given to
such term in the Common Agreement.
"Auditors" shall have the meaning specified in Section 4.1(f)(ii).
"Authenticating Agent" shall mean any Person acting as
Authenticating Agent hereunder pursuant to Section 9.11.
"Authority" shall mean the Mississippi Major Economic Impact
Authority, a division of and within the Department of Economic and Community
Development of the State of Mississippi.
"Authorized Agent" shall mean any Paying Agent, Authenticating Agent
or Security Registrar or other agent appointed in accordance with this Indenture
to perform any function that this Indenture authorizes the Trustee or such agent
to perform.
"Authorized Officer" or "Authorized Representative" shall mean (i)
in the case of the Funding Corporation, any person or persons authorized
pursuant to either its Organizational Documents or a Board Resolution of the
Funding Corporation's Board of Directors to act on behalf of the Funding
Corporation and (ii) in the case of the Partnership, any person or persons
authorized pursuant to either its Organizational Documents or a resolution by
the Partnership (or its General Partner) to act on behalf of the Partnership.
"Available Funds" shall mean, with respect to the payment of
principal of or interest on, as the case may be, any series of Bonds as of any
Payment Date, the aggregate of all amounts on deposit in the Interest Sub-Fund
or Principal Sub- Fund, as the case may be, of the Bond Fund in respect of such
series of Bonds.
"Bankruptcy Code" shall the United States Bankruptcy Reform Act of
1978 of the United States of America, as amended and as the same may be further
8
<PAGE>
amended, and any other Applicable Laws with respect to bankruptcy, insolvency or
reorganization that are successors thereto.
"Bankruptcy Event" shall have the meaning set forth in Section
8.1(g).
"Black & Veatch" shall mean Black & Veatch, LLP, a Missouri limited
liability partnership.
"Black & Veatch Consent" shall mean the Consent and Agreement, dated
as of August 28, 1998, by and among Black & Veatch, the Partnership and IBJ
Schroder Bank & Trust Company as collateral agent.
"Board Resolution" shall mean (i) in the case of the Funding
Corporation, a copy of a resolution certified by the Secretary or an Assistant
Secretary of the Funding Corporation as having been adopted by its Board of
Directors and to be in full force and effect on the date of such certification
and (ii) in the case of the Partnership, a copy of a resolution certified by a
General Partner of the Partnership as having been adopted by the Partnership (or
by a General Partner on behalf of the Partnership) and to be in full force and
effect on the date of such certification.
"Bond Fund" shall mean the Bond Fund established pursuant to Section
3.1.
"Bonding Arrangements" shall have the meaning set forth in Section
5.1(c)(x).
"Bonds" shall have the meaning set forth in the Preamble.
"Broker Dealer" shall mean any broker or dealer registered under the
Exchange Act.
"Business Day" shall mean any day other than a Saturday or Sunday or
other day on which banks in New York, New York are authorized or required to be
closed.
"Buy-Out" shall mean a Voluntary Buy-Out or an Involuntary Buy-Out.
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<PAGE>
"BVZ Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among the EPC Contractor, the Partnership and the
Collateral Agent.
"Capital Lease" shall mean any lease of personal property, which, in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee thereof.
"Cash Available for Debt Service" shall mean, for any period, all
Operating Revenues (excluding any receipts derived from the sale of any property
pertaining to the Project) for such period, minus (i) all O&M Costs for such
period and (ii) all deposits, if any, into the Major Maintenance Reserve Account
for such period.
"Casualty Event" shall mean an event that causes all or a portion of
the Project to be damaged, destroyed or rendered unfit for normal use for any
reason whatsoever, other than an Expropriation Event.
"Casualty Proceeds" shall mean all insurance proceeds or other
amounts actually received on account of a Casualty Event, except proceeds of
delayed opening or business interruption insurance.
"Cedel" shall mean Cedelbank.
"Change of Control" shall mean: (i) LS Power, Cogentrix and/or any
Qualified Transferee shall collectively cease to own, directly or indirectly, at
least 51% of the capital stock of the general partner of the Partnership (unless
any or all of them maintain management control of the Partnership); or (ii) LS
Power, Cogentrix and/or any Qualified Transferee shall collectively cease to
own, directly or indirectly, at least 10% of the ownership and economic
interests in the Partnership; provided that none of the events described in
clauses (i) or (ii) above shall be deemed a "Change of Control" if (x) each
Rating Agency confirms in writing that such events will not result in a Rating
Downgrade by such Rating Agency or (y) such events are approved by Holders
holding at least 66 2/3% in aggregate principal amount of the outstanding Bonds.
"Closing Date" shall mean the date of issuance and delivery of the
Initial Bonds.
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"Closing Date Payments" shall mean each of the payments set forth on
Schedule I hereto.
"Cogentrix" shall mean Cogentrix Energy, Inc., a Delaware
corporation.
"Collateral Agency Agreement" shall mean the Second Amended and
Restated Collateral Agency Agreement, dated as of the Closing Date, by and among
the Partnership, the Funding Corporation, the Trustee, the VEPCO L/C Agent, the
Collateral Agent, the Intercreditor Agent and the Administrative Agent.
"Collateral Agent" shall mean, initially, The Bank of New York, a
New York banking corporation, and any Person appointed as a substitute or
replacement Collateral Agent under the Collateral Agency Agreement.
"Commercial Operation Date" shall mean the later to occur of the
Commercial Operation Date under the VEPCO Power Purchase Agreement and the
Commercial Operation Date under the Aquila Power Purchase Agreement.
"Commercially Feasible Basis" shall mean that, following a Casualty
Event, an Expropriation Event or a Title Event, (i) the Casualty Proceeds, the
Expropriation Proceeds or the Title Proceeds, as the case may be, together with
any other amounts that the Partnership is or the partners of the Partnership are
irrevocably committed to contribute pursuant to support arrangements to
Restoring all or a portion, as the case may be, of the Project, will be
sufficient to permit such Restoration of the Project, (ii) the sum of (a) the
proceeds of the business interruption insurance which the Partnership shall have
received, (b) the moneys available in the Construction Account and the O&M
Account, (c) any amounts that the Partnership is or the partners of the
Partnership are irrevocably committed to contribute pursuant to support
arrangements (without duplication of such amounts referred to in clause (i)
above) and (d) the anticipated Operating Revenues during the estimated period of
Restoration will be sufficient to pay all Senior Debt Service and O&M Costs
(taking into account the limitation on the use of such funds set forth in the
Common Agreement) during the estimated period of Restoration, (iii) the Project
upon being Restored can be reasonably expected to produce Operating Revenues
adequate to maintain (x) a Projected Senior Debt Service Coverage Ratio, for the
period of four consecutive complete fiscal quarters of the Partnership
commencing with the fiscal quarter of the Partnership beginning on or most
recently after the projected date of Restoration, equal to or greater than 1.3
to 1.0 during the 100% PPA Period and the Two-Thirds PPA
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Period and 1.75 to 1.0 during the One-Third PPA Period and the Merchant Period,
and (y) a Projected Senior Debt Service Coverage Ratio, for each complete Fiscal
Year commencing with the Fiscal Year beginning on or most recently after the
projected date of Restoration, equal to or greater than 1.4 to 1 during the 100%
PPA Period and the Two-Thirds PPA Period and 2.0 to 1.0 during the One-Third PPA
Period and the Merchant Period, in each case taking into account any change in
projected operating results due to the impairment of any portion of the Project
and any reduction in Debt Service due to any partial redemption of the Bonds
pursuant to Section 6.3 of this Indenture or any partial prepayment of the
amounts outstanding under the VEPCO L/C Agreement, and (iv) the Partnership
shall reasonably believe that the Project can be operated in accordance with the
provisions of the Project Documents that are then in effect or that are expected
to be in effect after the completion of the Restoration.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Agreement" shall mean the Second Amended and Restated Common
Agreement, dated as of the Closing Date, among the Funding Corporation, the
Partnership, the Collateral Agent, the Intercreditor Agent, the Administrative
Agent and the Securities Intermediary.
"Common Facilities Agreement" shall mean an agreement between the
Partnership and an Expansion Party which provides for the sharing of
transmission lines, interconnections, utilities and other facilities among the
first three combined-cycle units of the Project and any Expansion.
"Completion" shall mean that: (i) Substantial Completion (as defined
in the EPC Contract) of the Facility (as defined the EPC Contract) shall have
occurred and been accepted under the EPC Contract, that all work necessary to
achieve Substantial Completion under the EPC Contract shall have been performed
in accordance with the EPC Contract and the requirements of all applicable
govern mental approvals, and that all liquidated damages then due and payable
under the EPC Contract have been paid in full (other than those that are subject
to a Good Faith Contest); (ii) commercial operation under any Infrastructure
Contracts shall have occurred and been accepted under such Infrastructure
Contracts, that all work necessary to achieve completion under such
Infrastructure Contracts shall have been performed in accordance with such
Infrastructure Contracts and the requirements of all applicable Governmental
Approvals; (iii) the
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Commercial Operation Date shall have occurred; and (iv) the Independent Engineer
shall have confirmed each of the events described in clauses (i) through (iii)
above.
"Completion Date" shall mean the date on which the Project achieves
Completion.
"Consents" shall mean, collectively, the VEPCO Consent, the Aquila
Consent, the Entergy Consent, the TVA Consent, the ANR Consent, the Tennessee
Gas Consent, the BVZ Consent, the Black & Veatch Consent, the Westinghouse
Consent, the Operator Consent, the Infrastructure Construction Consents, the
Other Construction Consents, any other third party consents to the assignments
contemplated by the Senior Security Documents, and with respect to any material
Additional Project Document (other than the Infrastructure Financing Documents),
a consent and agreement of each such party to such Additional Project Document
(other than the Partnership) substantially in the form of Exhibit A-1, and, with
respect to the Infrastructure Financing Documents, a consent and agreement
substantially in the form of Exhibit A-2.
"Construction Account" shall have the meaning given to such term in
the Common Agreement.
"Corporate Trust Office" shall mean, with respect to the Trustee,
the principal office of the Trustee at which at any particular time corporate
trust business of the Trustee shall be administered, which at the time of the
execution of the Transaction Documents to which the Trustee is a party is 101
Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate
Trust Trustee Administration, or such other office as may be designated by the
Trustee to the Partnership, the Funding Corporation, the Administrative Agent,
the Collateral Agent, the Intercreditor Agent and each Holder.
"County" shall mean Panola County, Mississippi.
"Covenant Defeasance" shall have the meaning set forth in Section
13.1.
"Custodian" shall have the meaning set forth in Section 2.5.
"Date Certain" shall mean June 1, 2001.
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"Debt Service Payment Account" shall have the meaning given to such
term in the Common Agreement.
"Debt Service Reserve Account" shall have the meaning given to such
term in the Common Agreement.
"Debt Service Reserve Requirement" shall have the meaning given to
such term in the Common Agreement.
"Deed of Trust" shall mean the Deed of Trust, Security Agreement,
Assignment of Leases and Rents and Fixture Filing, dated as of the Closing Date,
by the Partnership, as trustor, to James W. O'Mara, as trustee, for the benefit
of the Collateral Agent, as beneficiary.
"Default" shall mean any occurrence, circumstance or event, or any
combination thereof, which, with the lapse of time and/or the giving of notice,
would constitute an Event of Default.
"Default Equity Contributions" shall have the meaning given to such
term in the Equity Contribution Agreement.
"Definitive Bond" shall mean a certificated Bond registered in the
name of the Holder thereof and issued in accordance with Section 2.9 hereof,
substantially in the form of Exhibit G hereto except that such Bond shall not
bear the Global Bond Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Bond" attached thereto.
"Distribution Conditions" shall have the meaning given to such term
in the Common Agreement.
"Distribution Suspense Account" shall have the meaning given to such
term in the Common Agreement.
"Dollars" and "$" shall mean United States dollars or such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts in the United States of
America.
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"DSR LOC Payment Account" shall have the meaning given to such term
in the Common Agreement.
"Easements" shall mean the easements appurtenant, easements in
gross, license agreements and other rights running in favor of the Partnership
and/or appurtenant to the Site, including, without limitation, those certain
easements and licenses described in the Title Policy.
"Electric Interconnection Agreements" shall mean the Entergy
Interconnection Agreement and the TVA Interconnection Agreement.
"Eligible Facility" shall mean an "eligible facility", as that term
is defined in 15 U.S.C. ss. 79z-5a(a-2).
"Engineering Services Agreement shall mean the Off-Site
Infrastructure Engineering Services Agreement, dated July 28, 1998, by and
between the Partnership and Black & Veatch.
"Entergy Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among Entergy Mississippi, the Partnership and IBJ
Schroder Bank & Trust Company as collateral agent.
"Entergy Interconnection Agreement" shall mean the Interconnection
and Operating Agreement, dated May 18, 1998, as amended by a Letter Agreement
dated August 18, 1998, by and between the Partnership and Entergy Mississippi.
"Entergy Mississippi" shall mean Entergy Mississippi, Inc., a
Mississippi corporation.
"Environmental Claim(s)" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law, including, without limitation (i) by any
Governmental Authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (ii)
by any third party seeking damages, contribution, indemnification, cost,
recovery, compensation or injunctive relief resulting from hazardous materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
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"Environmental Law" shall mean any and all Applicable Laws relating
to: (i) noise, emissions, discharges, spills, releases or threatened releases of
Environmentally Regulated Materials into ambient air, surface water,
groundwater, water courses, publicly or privately-owned treatment works, drains,
sewer systems, wetlands, septic systems or onto land surface or subsurface
strata; (ii) the use, treatment, storage, disposal, handling, manufacture,
processing, distribution, transportation, or shipment of Environmentally
Regulated Materials; or (iii) pollution or the protection of human health, the
environment or natural resources.
"Environmentally Regulated Materials" shall mean (i) hazardous
materials, hazardous wastes, hazardous substances, extremely hazardous wastes,
restricted hazardous wastes, toxic substances, toxic pollutants, contaminants,
pollutants or words of similar import as used under Environmental Laws,
including but not limited to the following: the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq.,
the Clean Water Act, 33 U.S.C. ss. 1231 et seq., the Clean Air Act, 42 U.S.C.
ss. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
the Safe Drinking Water Act. 42 U.S.C. ss. 3808 et seq., and the Oil Pollution
Act, 33 U.S.C. ss. 2701 et seq., and their state and local counterparts or
equivalents; (ii) petroleum and petroleum products including crude oil and any
fractions thereof; (iii) natural gas, synthetic gas and any mixtures thereof;
(iv) radon; (v) any other hazardous, radioactive, toxic or noxious substance,
material, pollutant, solid, liquid or gaseous waste; and (vi) any substance
that, whether by its nature or its use, is now or hereafter subject to
regulation under any Environmental Law or with respect to which any United
States federal, state or local Environmental Law or governmental agency requires
environmental investigation, monitoring or remediation.
"EPC Agreements" shall mean the EPC Contract and the EPC Guarantee.
"EPC Contract" shall mean the Turnkey Engineering, Procurement and
Construction Agreement, dated as of July 22, 1998, between the Partnership and
the EPC Contractor, as amended by the notice to proceed delivered thereunder and
by Change Order 001 effective as of October 22, 1998, Change Order 002 effective
November 2, 1998, Change Order 003 effective November 5, 1998, Change Order 004
effective November 5, 1998, Change Order 005 effective December 10, 1998, Change
Order 006 effective February 1, 1999 and Change Order 007 effective April 12,
1999.
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"EPC Contractor" shall mean BVZ Power Partners--Batesville, a
Mississippi joint venture between Black & Veatch Construction, Inc, a Missouri
corporation, and H.B. Zachry Company, a Delaware corporation.
"EPC Guarantee" shall mean the Guaranty Agreement, dated as of July
22, 1998, by Black & Veatch in favor of the Partnership.
"Equity Contribution Agreement" shall mean the Second Amended and
Restated Equity Contribution Agreement, dated as of the Closing Date, among
Holding, the Partnership and the Collateral Agent.
"Equity Documents" shall mean the Equity Contribution Agreement and
the Equity L/C.
"Equity L/C" shall have the meaning given to such term in the Equity
Contribution Agreement.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA as in effect on the
date of this Indenture and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"Euroclear" shall mean Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System, or any successor to Morgan
Guaranty Trust Company of New York, Brussels office, as operator thereof.
"Event of Abandonment" shall mean: (i) prior to the Completion Date,
(a) the cessation or deferral of all or substantially all construction or
completion of the Project for more than 120 consecutive days (as such period may
be extended on a day for day basis corresponding with the occurrence and
continuance of any event of force majeure (as defined in any of the Project
Documents) so long as the Partnership is diligently proceeding to mitigate the
consequences of such event) other than by reason of a Casualty Event or an
Expropriation Event or (b) the announcement by the Partnership of a decision to
permanently cease or indefinitely defer the construction or completion of the
Project; or (ii) after the Completion Date, (a) the suspension for more than 120
consecutive days (as such period may be extended on a day for day basis
corresponding with the occurrence and
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continuance of any event of force majeure (as defined in any of the Project
Documents) so long as the Partnership is diligently proceeding to mitigate the
consequences of such event) of all or substantially all operation of the Project
(other than (1) by reason of the failure to be dispatched or (2) by reason of
the occurrence of a Casualty Event or an Expropriation Event) or (b) the
announcement by the Partnership of a decision to permanently cease operation of
the Project.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Exchange Act" shall mean the United States Securities Exchange Act
of 1934, amended.
"Exchange Bonds" shall mean the Bonds issued in the Exchange Offer
pursuant to Section 2.9(f) hereof.
"Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Exchange Offer Registration Statement" shall have the meaning set
forth in the Registration Rights Agreement.
"Exempt Wholesale Generator" shall mean an "exempt wholesale
generator", as that term is defined in 15 U.S.C. ss. 79z-5a(a-1).
"Expansion" shall mean the improvements resulting from an Expansion
Modification.
"Expansion Modifications" shall have the meaning set forth in
Section 5.1(c)(ix).
"Expansion Party" shall mean any third Person owning and otherwise
responsible for the development, construction and operation of an Expansion.
"Expropriation Event" shall mean any compulsory transfer or taking
or transfer under threat of compulsory transfer or taking of a material part of
the Collateral by any Governmental Authority unless such transfer or taking is
the subject of a Good Faith Contest.
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"Expropriation Proceeds" shall mean all insurance proceeds or other
amounts (including instruments) actually received on account of an Expropriation
Event (after deducting all reasonable expenses incurred in litigating,
arbitrating, compromising, settling or consenting to the settlement of any
claims against the appropriate Governmental Authority).
"Final Maturity Date" shall mean the latest stated maturity date of
the Bonds of a particular series.
"Financing Documents" shall mean, collectively, this Indenture, the
First Series Supplemental Indenture, the Second Series Supplemental Indenture,
the Bonds, the VEPCO L/C Agreement, any Working Capital Agreement (when entered
into by the Partnership or the Funding Corporation), any Reserve Account L/C
Agreement (when entered into by the Partnership or the Funding Corporation), any
Additional Indebtedness Agreement (when entered into by the Partnership or the
Funding Corporation), the Senior Security Documents and the Equity Documents.
"First Series Supplemental Indenture" shall mean the First Supple
mental Indenture, dated as of the Closing Date, among the Trustee, the
Partnership and the Funding Corporation.
"Fiscal Year" shall mean the accounting year of the Partnership
commencing each year on January 1 and ending on December 31 or such other period
adopted as such by the Partnership.
"Fuel Interconnection Agreements" shall mean the ANR Interconnection
Agreement and the Tennessee Gas Interconnection Agreement.
"Funding Corporation" shall have the meaning set forth in the
Preamble.
"Funding Corporation Request" and "Funding Corporation Order" shall
mean, respectively, a written request or order signed by an Authorized Officer
of the Funding Corporation.
"Funding Corporation Security Agreement" shall mean the Security
Agreement, dated as of the Closing Date, by the Funding Corporation in favor of
the Collateral Agent.
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"Funding Corporation Stock Pledge Agreement" shall mean the Pledge
and Security Agreement (Funding Corporation Stock), dated as of the Closing
Date, by Holding in favor of the Collateral Agent.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Gas Pipeline" shall mean that certain pipeline and related
equipment and systems connecting the Project to the pipelines owned by Tennessee
Gas and ANR.
"Global Bonds" shall mean, individually and collectively, each of
the Restricted Global Bonds and the Unrestricted Global Bonds, substantially in
the form of Exhibit G hereto issued in accordance with Section 2.5, 2.9(b)(iv),
2.9(d)(ii) or 2.9(f) hereof.
"Global Bond Legend" shall mean the legend set forth in Section
2.9(g)(ii), which is required to be placed on all Global Bonds issued under this
Indenture.
"Good Faith Contest" shall mean the contest of an item if (i) the
item is diligently being contested in good faith by appropriate proceedings
timely instituted, (ii) adequate reserves are established in accordance with
GAAP with respect to the contested item and held in cash or Permitted
Investments, if the contested item individually or when taken together with all
other contested items for which reserves are not at the time being held in cash
or Permitted Investments could reasonably be expected to result in liability of
the Partnership and the Funding Corporation in excess of $1,000,000, (iii)
during the period of such contest, the enforcement of any contested item is
effectively stayed, unless such enforcement would not reasonably be expected to
result in a Material Adverse Effect, (iv) any Lien filed in connection therewith
shall have been removed from the record by Bonding Arrangements by a reputable
surety company, or title insurance or cash deposits are otherwise provided to
assure the discharge of the Funding Corporation's or the Partnership's
obligation in connection therewith, provided that such cash deposits, in the
aggregate, shall not exceed $2,000,000, (v) such payment in respect of any Tax,
Lien or claim shall have been made as is necessary to prevent the recordation of
a tax deed or other similar instrument conveying the property of the Partnership
or any portion thereof, (vi) the failure to pay or comply with the contested
item during the period of such Good Faith Contest would not reasonably be
expected to result in a Material Adverse Effect and (vii) the Partnership or the
Funding Corporation has no Knowledge of any actual or
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proposed deficiency or additional assessment in connection therewith not
otherwise satisfying the requirements of clauses (i) through (vi).
"Governmental Approval" shall mean any consent, license, approval,
registration, permit or other authorization of any nature which is required to
be granted by any Governmental Authority (i) for the formation of the
Partnership and the Funding Corporation, (ii) for the enforceability of any
Transaction Documents and the making of any payments contemplated thereunder,
(iii) for the construction, ownership, operation and maintenance of the Project
and (iv) for all such other matters as may be necessary in connection with the
Project or the performance of any Person's obligations under any Transaction
Document.
"Governmental Authority" shall mean any government, governmental
department, ministry, commission, board, bureau, agency, regulatory authority,
instrumentality of any government (central or state), judicial, legislative or
administrative body, federal, state or local, having jurisdiction over the
matter or matters in question.
"GP Interests Pledge Agreement" shall mean the Second Amended and
Restated Pledge and Security Agreement (GP Interests), dated as of the Closing
Date, by LSP Energy in favor of the Collateral Agent.
"GP Stock Pledge Agreement" shall mean the Second Amended and
Restated Pledge and Security Agreement (GP Stock), dated as of the Closing Date,
by Holding in favor of the Collateral Agent.
"Granite" shall mean Granite Power Partners II, L.P., a Delaware
limited partnership.
"Guaranty" shall mean, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing in
any manner any Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, bonds or services, to take-or-pay or to
maintain financial statement conditions or otherwise), (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other
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obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) or (iii) to reimburse any Person for the
payment by such Person under any letter of credit, surety, bond or other
guaranty issued for the benefit of such other Person, provided that the term
"Guaranty " shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guaranty" or "Guaranteed" used as a verb
has a correlative meaning.
"Holder" shall mean a Person in whose name a Bond is registered in
the Security Register.
"Holding" shall mean LSP Batesville Holding, LLC, a Delaware limited
liability company.
"Indebtedness" of any Person at any date shall mean, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person under
leases which are or should be, in accordance with GAAP, recorded as Capital
Leases in respect of which such Person is liable, (v) all obligations of such
Person under interest rate or currency protection agreements or other hedging
instruments, (vi) all obligations of such Person to purchase securities (or
other property) which arise out of or in connection with the sale of the same or
substantially similar securities (or property), (vii) all deferred obligations
of such Person to reimburse any bank or other Person in respect of amounts paid
or advanced under a letter of credit or other instrument, (viii) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person, and (ix) all Indebtedness of
others Guaranteed directly or indirectly by such Person or as to which such
Person has an obligation substantially the economic equivalent of a Guarantee or
other arrangement to assure a creditor against loss.
"Indenture" shall have the meaning set forth in the Preamble.
"Indenture Collateral" shall have the meaning set forth in the
recitals to this Indenture.
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"Indenture Funds" shall mean the Bond Fund (and each sub-fund
thereof) created pursuant to Section 3.1 and any Sinking Fund created pursuant
to Section 7.2.
"Independent Consultants" shall mean the Independent Engineer, the
Market Consultant and the Insurance Consultant.
"Independent Engineer" shall mean R.W. Beck, Inc. or another
nationally recognized independent engineer selected by the Partnership.
"Indirect Participant" shall mean a Person who holds a beneficial
interest in a Global Bond through a Participant.
"Inducement Agreement" shall mean the Inducement Agreement, to be
entered into by and among the Authority, the County, the Industrial Development
Authority of the Second Judicial Authority of Panola County, Mississippi, and
the Partnership, substantially in the form of Exhibit C-1.
"Infrastructure" shall mean the Water System and the Gas Pipeline.
"Infrastructure Construction Consents" shall mean, collectively:
(i) the Consent and Agreement, dated as of January 13, 1999,
by and among Robinson Mechanical Contractors, Inc., the Partnership and
Credit Suisse First Boston as collateral agent;
(v) the Consent and Agreement, dated as of March 11, 1999, by
and among Big Warrior Corporation, the Partnership and Credit Suisse First
Boston as collateral agent; and
(vi) the Consent and Agreement, dated as of March 11, 1999, by
and among Garney Companies, Inc., the Partnership and Credit Suisse First
Boston as collateral agent.
"Infrastructure Contracts" shall mean, collectively, (i) the
Contract Agreement for Design and Construction of Water Intake System, dated as
of January 13, 1999, between the Partnership and Robinson Mechanical
Contractors, Inc., (ii) the Contract Agreement, Specifications and Documents and
related change orders for Design
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and Construction of a Gas Pipeline System, dated as of February 4, 1999, between
the Partnership and Big Warrior Corporation, and (iii) the Contract, Agreement,
Specifications and Documents and related change orders for Design and
Construction of a Water Pipeline System, dated as of March 1, 1999, between the
Partnership and Garney Companies, Inc.
"Infrastructure Financing Documents" shall mean the Use Agreements
and the Inducement Agreement.
"Initial Bonds" shall mean (i) the $150,000,000 7.164% Senior
Secured Bonds due January 15, 2014 issued by the Funding Corporation and the
Partnership on the Closing Date under the First Series Supplemental Indenture
and (ii) the $176,000,000 8.160% Senior Secured Bonds due July 15, 2025 issued
by the Funding Corporation and the Partnership on the Closing Date under the
Second Series Supplemental Indenture.
"Institutional Accredited Investor" shall mean an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who is not also a QIB.
"Insurance Consultant" shall mean Aon Risk Services, Inc., or
another nationally recognized insurance consultant selected by the Partnership.
"Intercreditor Agent" shall mean, initially, The Bank of New York, a
New York banking corporation, and any Person appointed as a substitute or
replacement Intercreditor Agent under the Intercreditor Agreement.
"Intercreditor Agreement" shall mean the Intercreditor Agreement,
dated as of the Closing Date, by and among the Partnership, the Funding
Corporation, the Trustee, the VEPCO L/C Agent, the Collateral Agent, the
Intercreditor Agent, the Administrative Agent and any other Secured Party that
becomes a party thereto pursuant to the terms thereof.
"Interest Sub-Fund" shall mean the Interest Sub-Fund established
pursuant to Section 3.1.
"Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as amended, and the regulations promulgated and rulings
issued thereun-
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der. Section references to the Internal Revenue Code are to the Internal Revenue
Code, as in effect at the date of this Indenture and any subsequent provisions
of the Internal Revenue Code, amendatory thereof, supplemental thereto or
substituted therefor.
"Involuntary Buy-Out" shall mean any Buy-Out of a Power Purchase
Agreement that is not voluntarily sought by the Partnership, but into which the
Partnership is legally or practically required to enter by force of law or
regulation, or by an actual or threatened Expropriation Event, or by an actual
or threatened bankruptcy proceeding or other action adverse to the material
rights and benefits granted to the Partnership under such Power Purchase
Agreement on the part of, or an actual or threatened termination of such Power
Purchase Agreement by, the purchaser of electricity under such Power Purchase
Agreement.
"Issuers" shall mean the Partnership and the Funding Corporation.
"Knowledge" shall mean, with respect to the Partnership or the
Funding Corporation, the actual knowledge of any officer or manager of a general
partner of the Partnership (or an officer or manager of the Partnership in the
event that the Partnership has officers or managers) or any officer of the
Funding Corporation, as the case may be, that has day-to-day responsibility for
the operation or finances of the Project.
"Legal Defeasance" shall have the meaning set forth in Section 13.1.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Issuers and sent to all Holders of the Bonds for use by such
Holders in connection with the Exchange Offer.
"Lien", with respect to any asset, shall mean any mortgage, deed of
trust, lien, pledge, charge, security interest or easement or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected or effective under Applicable Law, as well as the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loss Event" shall mean a Casualty Event, an Expropriation Event or
a Title Event.
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"Loss Proceeds" shall mean Casualty Proceeds, Expropriation Proceeds
and Title Proceeds.
"LP Interests Pledge Agreement" shall mean the Second Amended and
Restated Pledge and Security Agreement (LP Interests), dated as of the Closing
Date, by Holding in favor of the Collateral Agent.
"LS Power" shall mean LS Power, LLC, a Delaware limited liability
company.
"LSP Energy" shall mean LSP Energy, Inc., a Delaware corporation.
"Make-Whole Premium" shall have the meaning given to such term in
the First Series Supplemental Indenture or the Second Series Supplemental
Indenture, as applicable.
"Management Services Agreement" shall mean the Management Services
Agreement, dated as of August 24, 1998, between the Partnership and LS Power
Management, LLC.
"Major Maintenance Expenditures" shall mean labor, materials and
other direct expenses for any overhaul of, or major maintenance procedure for,
the turbines which requires significant disassembly or shutdown of the Project
pursuant to manufacturers' guidelines or recommendations, engineering or
operating considerations or the requirements of any Applicable Law.
"Major Maintenance Reserve Account" shall have the meaning given to
such term in the Common Agreement.
"Major Maintenance Reserve Requirement" shall have the meaning given
to such term in the Common Agreement.
"Market Consultant" shall mean C.C. Pace Consulting L.L.C., or
another nationally recognized electricity market consultant selected by the
Partner ship.
"Material Adverse Effect" shall mean: (i) a material adverse change
in the status of the business, operations, property or financial condition of
the Partnership or the
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Funding Corporation; or (ii) any event or occurrence of whatever nature which
materially adversely affects (a) the Partnership's or the Funding Corporation's
ability to perform its obligations under any Transaction Document or (b) the
perfection, validity or priority of the Senior Secured Parties' security
interests in the Senior Collateral.
"Merchant Period" shall mean any period during which less than
thirty-three percent (33%) of the then current capacity of the Facility (as
defined in the EPC Contract) is to be sold or otherwise disposed of under an
Acceptable PPA.
"Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation.
"Mortgage Estate" shall have the meaning given to the term "Trust
Property" in the Deed of Trust.
"MW" shall mean a unit of electrical energy equal to one million
watts of power.
"Non-U.S. Person" shall mean a Person who is not a U.S. Person.
"O&M Account" shall have the meaning given to such term in the
Common Agreement.
"O&M Agreement" shall mean the Operation and Maintenance Agreement,
dated as of August 24, 1998, by and between the Operator and the Partnership.
"O&M Costs" shall mean all actual cash maintenance and operation
costs incurred and paid for the Project in any particular calendar or fiscal
year or period to which said term is applicable (provided that if the
Partnership elects to accrue property taxes or any other annual cost on a
monthly basis and such property taxes and/or such other annual costs are shown
as a separate line item in the Annual Operating Budget, such property taxes
and/or such other annual costs shall be factored into the calculation of Cash
Available for Debt Service as accrued instead of according to when such property
taxes and/or such other annual costs are actually paid), including payments for
fuel and/or tracking account payments made by the Partnership under the Power
Purchase Agreements, fuel costs incurred under Power Purchase Agreements other
than the VEPCO
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Power Purchase Agreement or the Aquila Power Purchase Agreement or when no Power
Purchase Agreements are in effect, additives or chemicals and transportation
costs related thereto, Taxes (other than those based upon the Partnership's
income), insurance, consumables, payments under any lease, payments pursuant to
the O&M Agreement (other than the Operator Fee), the Parts Agreement and the
Management Services Agreement, legal fees and expenses paid by the Partnership
in connection with the management, maintenance or operation of the Project, fees
paid in connection with obtaining, transferring, maintaining or amending any
Governmental Approvals and reasonable general and administrative expenses, but
exclusive in all cases of non-cash charges, including depreciation or
obsolescence charges or reserves therefor, amortization of intangibles or other
bookkeeping entries of a similar nature, and also exclusive of all interest
charges and charges for the payment or amortization of principal of indebtedness
of the Partnership; provided that O&M Costs shall not include (i) the Operator
Fee, (ii) Major Maintenance Expenditures to the extent paid with funds on
deposit in the Major Maintenance Reserve Account, (iii) distributions of any
kind to the Partner ship or its Affiliates (other than payments under the
Management Services Agreement and the O&M Agreement (except for the Operator
Fee)), (iv) depreciation, (v) capital expenditures, other than those included in
and approved as part of the Annual Operating Budget or (vi) payments made for
Restoration of the Project in accordance with the provisions of Section 3.10 of
the Common Agreement.
"Officer's Certificate" shall mean a certificate executed by an
Authorized Officer of the Partnership or the Funding Corporation, as
applicable.
"144A Global Bond" shall mean a global bond substantially in the
form of Exhibit G hereto bearing the Global Bond Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Bonds sold in reliance on Rule 144A.
"100% PPA Period" shall mean any period during which 100% of the
then current capacity of the Facility (as defined in the EPC Contract) is to be
sold or otherwise disposed of under an Acceptable PPA.
"One-Third PPA Period" shall mean any period during which at least
33% but less than 66 2/3% of the then current capacity of the Facility (as
defined in the EPC Contract) is to be sold or otherwise disposed of under an
Acceptable PPA.
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"Operating Revenues" shall mean all of the following, without
duplication, received by the Partnership: (i) all payments received by the
Partnership under the Power Purchase Agreements (including with respect to
fuel); (ii) proceeds of any business interruption insurance; (iii) income
derived from the sale or use of electric capacity or energy produced,
transmitted or distributed by the Project; (iv) all other revenues from the
operation of the Project together with any receipts derived from the sale of any
property pertaining to the Project or incidental to the operation of the
Project, including, without limitation, transmission upgrade credits; (v) the
investment income on amounts in the Accounts (but solely to the extent deposited
from time to time in the Revenue Account); all as determined in conformity with
cash accounting principles and excluding any payments received in connection
with any Buy-Out and (vi) all other deposits into the Revenue Account not
included in clauses (i) through (v) above, including transfers from the Debt
Service Reserve Account.
"Operator" shall mean Cogentrix Batesville Operations, LLC, a
Delaware limited liability company.
"Operator Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among the Operator, the Partnership and IBJ Schroder
Bank & Trust Company as collateral agent.
"Operator Fee" shall mean the Management Fee (as defined in the O&M
Agreement) due and payable to the Operator pursuant to Section 6.3 of the O&M
Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel for any
Person either expressly referred to herein or otherwise reasonably satisfactory
to the Trustee which may include, without limitation, counsel for the Funding
Corporation or the Partnership, whether or not such counsel is an employee of
the Funding Corporation or the Partnership.
"Optional Modifications" shall have the meaning set forth in Section
5.1(c)(ix).
"Ordinary Equity Contributions" shall have the meaning given to such
term in the Equity Contribution Agreement.
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"Organizational Documents" shall mean, as to any Person, the
articles of incorporation, bylaws, partnership agreement, limited liability
company agreement or other organizational or governing documents of such Person
including, in the case of the Partnership, the Partnership Agreement.
"Other Construction Consents" shall mean, collectively:
(i) the Consent and Agreement, dated as of January 13, 1999,
by and among Lauren Constructors, Inc., the Partnership and Credit Suisse
First Boston as collateral agent;
(ii) the Consent and Agreement, dated as of January 13, 1999,
by and among North American Transformer, the Partnership and Credit Suisse
First Boston as collateral agent; and
(iii) the Consent and Agreement, dated as of January 13, 1999,
by and among Siemens Power Transmission & Distribution, LLC, the
Partnership and Credit Suisse First Boston as collateral agent.
"Other Construction Contracts" shall mean, collectively:
(i) the Specifications and Documents for Design and
Construction of Substation and Transmission Line System, dated as of January 13,
1999, between the Partnership and Lauren Constructors, Inc.;
(ii) the Specifications and Documents for 230/161 kV Power
Transformer, dated as of January 13, 1999, between the Partnership and North
American Transformer, Inc.; and
(iii) the Specifications and Documents for 161 kV Circuit
Breakers, dated as of January 13, 1999, between the Partnership and Siemens
Power Transmission and Distribution.
"Outstanding," when used with respect to Bonds, shall mean, as of
the date of determination, all Bonds theretofore authenticated and delivered
under this Indenture, except:
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(i) Bonds theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Bonds for whose redemption money in the necessary amount has
been theretofore deposited with the Trustee; provided that pursuant to Article
VI notice of such redemption has been duly given pursuant to Article VI or
provision therefor satisfactory to the Trustee has been made;
(iii) Bonds or portions thereof deemed to have been paid within the
meaning of Section 13.1;
(iv) Bonds as to which defeasance has been effected pursuant to
Article XIII; and
(v) Bonds which have been paid pursuant to Section 2.9 or that have
been exchanged for other Bonds or Bonds in lieu of which other Bonds have been
authenticated and delivered pursuant to this Indenture other than any Bonds in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Bonds are held by a bona fide purchaser in whose
hands such Bonds constitute valid obligations of the Funding Corporation and the
Partnership;
provided, however, that in determining whether the Holders of the requisite
principal of Bonds outstanding have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or whether or not a quorum is
present at a meeting of Holders, Bonds owned by any of the Funding Corporation,
the Partner ship, any partner of the Partnership or an Affiliate of any thereof
shall be disregarded and deemed not to be outstanding as provided in Section
10.2, except that in deter mining whether the Trustee shall be protected in
making such a determination or relying on any quorum, consent or vote, only
Bonds which a Responsible Officer of the Trustee actually knows to be so owned
shall be so disregarded.
"Overdue Interest" shall mean, as of any Payment Date, all interest
on any Bond which has become due and payable and not been punctually paid or
duly provided for when and as due and payable, whether as a result of
insufficient Available Funds or otherwise.
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"Overdue Principal" shall mean, as of any Payment Date, all
principal of any Bond which has become due and payable and not been punctually
paid or duly provided for when and as due and payable, whether as a result of
insufficient Available Funds or otherwise.
"Panola County Account" shall mean any account established by the
Partnership in favor of the County pursuant to the terms of the Infrastructure
Financing Documents.
"Participant" shall mean, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Partner" shall mean any limited partner or general partner of the
Partnership.
"Partnership" shall have the meaning set forth in the Preamble.
"Partnership Agreement" shall mean the Second Amended and Restated
Agreement of Limited Partnership of LSP Energy Limited Partnership, dated as of
May 19, 1999, by and between Holding and LSP Energy.
"Partnership Request" and "Partnership Order" shall mean,
respectively, a written request or order signed in the name of the Partnership
by an Authorized Representative.
"Partnership Security Agreement" shall mean the Second Amended and
Restated Security Agreement, dated as of the Closing Date, by the Partnership in
favor of the Collateral Agent.
"Parts" shall mean any part, appliance, instrument, appurtenance or
accessory necessary or useful to the operation, maintenance, service or repair
of the Project.
"Parts Agreement" shall mean the Letter Agreement/Blanket Purchase
Order, dated as of July 23, 1998, by and between Westinghouse and the
Partnership.
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"Paying Agent" shall mean any Person acting as Paying Agent
hereunder pursuant to Section 9.11.
"Payment Date" shall mean (i) any Scheduled Payment Date, (ii) any
Redemption Date or (iii) any other date specified for the payment of Overdue
Interest or Overdue Principal pursuant to Section 2.11.
"Performance Liquidated Damages" shall mean the performance
liquidated damages payable by the EPC Contractor pursuant to Section 12.4(c) of
the EPC Contract, in the amount and to the extent payable pursuant to the EPC
Contract.
"Permitted Indebtedness" shall have the meaning given to such term
in Section 5.1(c).
"Permitted Investments" shall mean: (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having a maturity
not exceeding (x) 180 days (prior to the Completion Date) or (y) 364 days (after
the Completion Date) from the date of issuance; (ii) time deposits and
certificates of deposit having a maturity not exceeding (x) 180 days (prior to
the Completion Date) or (y) 364 days (after the Completion Date) of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$100,000,000; (iii) commercial paper issued by the parent corporation of any
domestic commercial bank of recognized standing having capital and surplus in
excess of $100,000,000 and commercial paper of any domestic corporation rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's and, in each case, having a maturity not exceeding (x) 180
days (prior to the Completion Date) or (y) 364 days (after the Completion Date)
from the date of acquisition; (iv) fully secured repurchase obligations for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications established in clause (ii) above or any
financial institution having long-term unsecured debt securities rated "A" or
better by S&P or "A2" or better by Moody's, in connection with which such
underlying securities are held in trust by a third-party custodian; (v)
high-grade corporate bonds rated at least "A" or the equivalent thereof by S&P
or at least "Aa3" or the equivalent thereof by Moody's and, in each case, having
a maturity not exceeding (x) 180 days (prior to the Completion Date) or (y) 364
days (after the Completion Date); and (vi) money market funds having a rating in
the highest investment category granted thereby by a Rating Agency at the time
of
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acquisition, including any fund for which the Trustee or an Affiliate of the
Trustee serves as an investment advisor, administrator, shareholder, servicing
agent, custodian or subcustodian, notwithstanding that (a) the Trustee or an
Affiliate of the Trustee charges and collects fees and expenses from such funds
for services rendered (provided that such charges, fees and expenses are on
terms consistent with terms negotiated at arm's-length) and (b) the Trustee
charges and collects fees and expenses for services rendered pursuant to this
Indenture.
"Permitted Liens" shall have the meaning set forth in Section
5.1(d).
"Person" shall mean any natural person, corporation, partnership,
limited liability company, firm, association, Governmental Authority or any
other entity whether acting in an individual, fiduciary or other capacity.
"Place of Payment", when used with respect to the Bonds of any
series, shall mean the office or agency maintained pursuant to Section 9.11 and
such other place, or places, if any, where the principal of and interest on the
Bonds of such series are payable as specified in the Series Supplemental
Indenture setting forth the terms of the Bonds of such series.
"Post Default Rate" shall mean the rate of interest on the
applicable Bonds at the time of determination (determined without reference to
the Post Default Rate) plus 2%.
"Power Purchase Agreements" shall mean the Aquila Power Purchase
Agreement, the VEPCO Power Purchase Agreement and any other agreement for the
sale of all or a portion of the net electric capacity and generation from the
Project entered into by the Partnership from time to time.
"Power Purchaser" shall mean any purchaser of electricity under a
Power Purchase Agreement or any Additional Project Document providing for the
sale of electricity from the Project.
"Predecessor Bonds," with respect to any particular Bond, shall mean
any previous Bond evidencing all or a portion of the same debt as that evidenced
by such particular Bond; for the purposes of this definition, any Bond
authenticated and delivered
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under Section 2.9 in lieu of a lost, destroyed or stolen Bond shall be deemed to
evidence the same debt as the lost, destroyed or stolen Bond.
"Principal Sub-Fund" shall mean the Principal Sub-Fund established
pursuant to Section 3.1.
"Private Placement Legend" shall mean the legend set forth in
Section 2.9(g)(i) to be placed on all Bonds issued under this Indenture except
where other wise permitted by the provisions of this Indenture.
"Proceeds Account" shall have the meaning given to such term in the
Common Agreement.
"Project" shall mean the approximately 837 MW gas fired combined
cycle electric generating facility to be constructed by the EPC Contractor under
the EPC Contract, together with all buildings, structures or improvements
erected on the Site and the Easements (to the extent owned by the Partnership),
all alterations thereto or replacements thereof, all fixtures, attachments,
appliances, equipment, machinery and other articles attached thereto or used in
connection therewith (to the extent owned by the Partnership) and all Parts
which may from time to time be incorporated or installed in or attached thereto,
all contracts and agreements for the purchase or sale of commodities or other
personal property related thereto, all leases of real or personal property
related thereto, all other real and tangible and intangible personal property
owned by the Partnership and placed upon or used in connection with the electric
generation plant to be built upon the Site and the Easements, the Site, the
Easements, the Governmental Approvals relating to the Project, any transmission
lines owned by the Partnership and the Infrastructure (to the extent owned by
the Partnership).
"Project Costs" shall mean the costs associated with the
development, financing, design, engineering, acquisition, equipping,
construction, assembly, inspection, testing, completion and start-up of the
Project (including the Infrastructure). Project Costs include, without
limitation, amounts advanced or payable under the Infrastructure Financing
Documents (including any retention or security deposit relating to construction
costs paid or payable by the Partnership whenever due), interest, reimbursement
obligations and other financing costs payable prior to Completion, management
fees (including under the Management Services Agreement) and Operator Fees
payable prior to the commercial
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operation of the Project and a development fee in the amount of $3,000,000
payable to an Affiliate of the Partner ship on the Closing Date.
"Project Documents" shall mean the EPC Agreements, the
Infrastructure Contracts (until any such contract is transferred by the
Partnership), the Other Construction Contracts, the Power Purchase Agreements,
the Fuel Interconnection Agreements, the Electric Interconnection Agreements,
the Water Supply Agreement, the O&M Agreement, the Partnership Agreement, the
Consents, the Engineering Services Agreement, the Parts Agreement, the
Management Services Agreement, the Ad Valorem Tax Agreement and, when entered
into, any Additional Project Document.
"Project Party" shall mean any party to any Project Document other
than the Partnership.
"Projected Senior Debt Service Coverage Ratio" shall mean, for any
period, the ratio of (a) the aggregate of all Cash Available for Debt Service
for such period to (b) the aggregate of all Senior Debt Service for such period,
in each case calculated on a projected basis (using, (i) if the period in
question is the 100% PPA Period, projections of Cash Available for Debt Service
based on projected sales under the Power Purchase Agreements or Replacement
PPAs, as applicable, (ii) if the period in question is the Merchant Period,
projections of Cash Available for Debt Service based on projected merchant
sales, and (iii) if the period in question is the One-Third PPA Period or the
Two-Thirds PPA Period, projections of Cash Available for Debt Service based on
the appropriate combination of projected sales under the Power Purchase
Agreements or Replacement PPAs, as applicable, and projected merchant sales) and
confirmed by the Independent Engineer.
"Purchase Agreement" shall mean the Purchase Agreement, dated May
13, 1999, among the Partnership, the Funding Corporation and the Purchasers.
"Purchasers" shall mean Credit Suisse First Boston Corporation,
Scotia Capital Markets (USA) Inc. and TD Securities (USA) Inc.
"QIB" shall mean a "qualified institutional buyer" as defined in
Rule 144A.
"Qualified Transferee" shall mean any Person that shall acquire
after the Closing Date interests in the Partnership or the general partner of
the Partnership so long
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as (i) such person is, or is controlled by a person that is, reasonably
experienced in the business of owning and operating facilities similar to the
Project, (ii) such acquisition shall be in compliance with law and after giving
effect to such acquisition (a) the Partnership will not as a result of such
acquisition be in violation of any Applicable Laws (including, without
limitation, all Governmental Approvals) the compliance with which is necessary
to permit the Partnership to conduct its business in accordance with the Project
Documents and to maintain its status as an Exempt Wholesale Generator and the
Project's status as an Eligible Facility (if the Project and the Partnership
were certified as such at the time of such acquisition) and the Trustee shall
have received opinions of counsel to such person and counsel to the Partnership
to such effect, (b) no Default or Event of Default shall have occurred and be
continuing and (c) such acquisition would not reasonably be expected to result
in a Material Adverse Effect, and (iii) to the extent relevant to such
acquisition, the Collateral Agent shall have received a pledge of and lien on
the general partnership interests in the Partnership or shares of capital stock
of LSP Energy so acquired and the Partnership shall have furnished to the
Trustee, the Collateral Agent and the Administrative Agent such documents,
certificates and opinions from counsel to such person and the Partnership as the
Trustee, the Collateral Agent and the Administrative Agent shall have reasonably
required.
"Rating Agency" shall mean Moody's or S&P.
"Rating Downgrade" shall mean a downgrade in the then current
ratings of the Bonds by a Rating Agency either within a particular category or
from one category to another.
"Redemption Date" shall have the meaning set forth in Section 6.2.
"Redemption Price" shall mean, with respect to any Outstanding Bond
for any Redemption Date, an amount equal to the principal amount, premium, if
any, and interest accrued to but not including the Redemption Date of such
Outstanding Bond to be paid for Bonds to be redeemed prior to maturity as
specified in a notice of redemption given pursuant to Section 6.4.
"Redemption Sub-Fund" shall mean the Redemption Sub-Fund established
pursuant to Section 3.1.
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"Registered Depositary" shall mean The Depository Trust Company,
having a principal office at 55 Water Street, New York, New York 10041-0099,
together with any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including substantially
all of its securities payment and transfer operations.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of May 21, 1999, by and among the Issuers and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time, and, with respect to any Additional
Bonds, one or more registration rights agreements between the Issuers and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Issuers to the
purchasers of Additional Bonds to register such Additional Bonds under the
Securities Act.
"Regular Record Date", for any Bond of a series, for the Scheduled
Payment Date of any installment of principal thereof or payment of interest
thereon, shall mean the 15th day (whether or not a Business Day) preceding such
Scheduled Payment Date, or any other date specified for such purpose in the form
of Bond of such series attached to the Series Supplemental Indenture relating to
the Bonds of such series.
"Regulation S" shall mean Regulation S promulgated under the
Securities Act.
"Regulation S Global Bond" shall mean a Regulation S Temporary
Global Bond or Regulation S Permanent Global Bond, as appropriate.
"Regulation S Permanent Global Bond" shall mean a permanent Global
Bond in the form of Exhibit G hereto bearing the Global Bond Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Bond upon
expiration of the Restricted Period.
"Regulation S Temporary Global Bond" shall mean a temporary Global
Bond in the form of Exhibit G hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a
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denomination equal to the outstanding principal amount of the Bonds initially
sold in reliance on Rule 903 of Regulation S.
"Regulation S Temporary Global Bond Legend" shall mean the legend
set forth in Section 2.9(g)(iii) which is required to be placed on all
Regulation S Temporary Global Bonds issued under this Indenture.
"Replacement Power" shall have the meaning given to such term in the
Power Purchase Agreements.
"Replacement PPA" shall mean a power purchase agreement in respect
of which or that (i) the Rating Agencies confirm in writing that no downgrade of
the ratings for the Bonds will occur solely as a result of such Replacement PPA,
or (ii) (a) the counterparty of which or the credit support provider for such
counterparty (including any parent of such counterparty which guarantees such
counterparty's obligations) shall be rated at least "BBB-" by S&P and at least
"Baa3" by Moody's, (b) has a minimum term of one year and (c) the pricing and
commercial terms of which are, as a whole, equivalent to or better than the
pricing and commercial terms under the Power Purchase Agreement being replaced
(as confirmed by the Independent Engineer).
"Replacement Project Document" shall mean any Additional Project
Document, other than a Replacement PPA, entered into in replacement of a Project
Document (i) with substantially similar economic effect on the Partnership as
the Project Document being replaced and (ii) with a counterparty having
substantially similar creditworthiness and experience as the counterparty to the
Project Document being replaced.
"Required Modifications" shall have the meaning set forth in Section
5.1(c)(ix).
"Reserve Account L/C Agent" shall mean any agent for the Reserve
Account L/C Issuer and the Reserve Account L/C Banks under a Reserve Account L/C
Agreement.
"Reserve Account L/C Banks" shall mean the financial institutions
from time to time party to a Reserve Account L/C Agreement.
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"Reserve Account L/C Issuer" shall mean any issuer of a Reserve
Account Letter of Credit.
"Reserve Account L/C Agreement" shall mean an agreement among the
Partnership and/or the Funding Corporation, and, as applicable, the Reserve
Account L/C Agent, the Reserve Account L/C Issuer and the Reserve Account L/C
Banks pursuant to which the Reserve Account L/C Issuer agrees to issue Reserve
Account Letters of Credit for the account of the Partnership on the terms and
conditions set forth therein and in accordance with the Financing Documents,
including, without limitation, Section 5.1(c)(viii).
"Reserve Account Letter of Credit" shall have the meaning set forth
in Section 5.1(c)(viii).
"Responsible Officer" shall mean, with respect to the Trustee, any
officer assigned to the Corporate Trust Office, including any vice president,
assistant vice president, assistant treasurer or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of the Financing Documents to which the Trustee is a party, and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restoration", "Restoring" or "Restore(d)" shall mean repairing,
rebuilding or otherwise restoring the Project due to the occurrence of a
Casualty Event or a Loss Event, or, upon the occurrence of any Title Event,
curing such Title Event.
"Restricted Definitive Bond" shall mean a Definitive Bond bearing
the Private Placement Legend.
"Restricted Global Bond" shall mean a Global Bond bearing the
Private Placement Legend.
"Restricted Period" shall mean the 40-day restricted period as
defined in Regulation S.
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"Revenue Account" shall have the meaning given to such term in the
Common Agreement.
"Rule 144" shall mean Rule 144 under the Securities Act.
"Rule 144A" shall mean Rule 144A under the Securities Act.
"Rule 903" shall mean Rule 903 promulgated under the Securities Act.
"Rule 904" shall mean Rule 904 promulgated the Securities Act.
"S&P" shall mean Standard & Poor's Ratings Group, a New York
corporation.
"Scheduled Payment Date" shall mean (a) with respect to any Bond or
Additional Bond, January 15 and July 15, and (b) with respect to any other
amortizing Senior Secured Obligation, the date on which any principal is
scheduled to become due, which shall be on April 15, July 15, October 15 and
January 15.
"SEC" shall mean the Securities and Exchange Commission.
"Second Series Supplemental Indenture" shall mean the Second
Supplemental Indenture, dated as of the Closing Date, among the Trustee, the
Partnership and the Funding Corporation.
"Secured Parties" shall mean the Senior Secured Parties.
"Securities Account Control Agreement" shall mean the Second Amended
and Restated Securities Account Control Agreement, dated as of the Closing Date,
by and among the Partnership, the Funding Corporation, the Collateral Agent and
The Bank of New York, as securities intermediary.
"Securities Act" shall mean the United States Securities Act of
1933, as amended.
"Securities Intermediary" shall have the meaning set forth in
Section 1.13(a).
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"Security Register" shall have the meaning set forth in Section 2.8.
"Security Registrar" shall mean any Person acting as Security
Registrar pursuant to Section 9.11.
"Senior Collateral" shall mean all assets, rights, interests and
other property in or upon which a security interest or Lien is or is purported
to be granted to the Collateral Agent for the benefit of the Senior Secured
Parties pursuant to the Senior Security Documents.
"Senior Debt Service" shall mean, for any period, without
duplication, (i) the aggregate of all fees payable to the Senior Secured Parties
during such period plus (ii) the aggregate of all interest, principal and other
amounts payable in respect of the Senior Secured Obligations during such period
(but not including any interest during construction or other similar payments
which are pre-funded with proceeds of a debt issuance or otherwise).
"Senior Debt Service Coverage Ratio" shall mean, for any period, the
ratio of (i) the aggregate of all Cash Available for Debt Service for such
period to (ii) all Senior Debt Service for such period.
"Senior Indebtedness" shall mean the Senior Secured Obligations,
together with such other Permitted Indebtedness, other than subordinated
Indebtedness, of the Partnership or the Funding Corporation.
"Senior Secured Obligations" shall mean, collectively, without
duplication: (i) all Indebtedness, financial liabilities and obligations of the
Partner ship and the Funding Corporation, of whatsoever nature and howsoever
evidenced (including, but not limited to, principal, interest, fees,
reimbursement obligations, penalties, indemnities and legal and other expenses,
whether due after acceleration or otherwise) to the Senior Secured Parties under
or pursuant to this Indenture, the Bonds, the VEPCO L/C Agreement, any Working
Capital Agreement, any Reserve L/C Agreement, any Additional Indebtedness
Agreement, the Senior Security Documents, the Equity Documents, any other
Financing Document or any other agreement, document or instrument evidencing,
securing or relating to such indebtedness, financial liabilities or
obligations, in each case, direct or indirect, primary or secondary, fixed or
contingent, now or hereafter arising out of or relating to any such agreements;
(ii) any and all sums advanced by the Collateral Agent in order to
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preserve the Senior Collateral or preserve its security interest in the Senior
Collateral; and (iii) in the event of any proceeding for the collection or
enforcement of the obligations described in clauses (i) and (ii) above, after an
Event of Default shall have occurred and be continuing and unwaived, the
expenses of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Senior Collateral, or of any exercise by the
Collateral Agent of its rights under the Senior Security Documents, together
with reasonable attorneys' fees and court costs.
"Senior Secured Parties" shall mean the Holders, the Trustee, the
Securities Intermediary, the VEPCO L/C Banks, the VEPCO L/C Issuer, the VEPCO
L/C Agent, any Working Capital Bank, any Working Capital Agent, any Reserve
Account L/C Bank, any Reserve Account L/C Issuer, any Reserve Account L/C Agent,
any Additional Indebtedness Holder, any Additional Indebtedness Agent, the
Collateral Agent, the Intercreditor Agent and the Administrative Agent, in each
case to the extent such party is, or pursuant to the Intercreditor Agreement (or
an agent on its behalf) becomes, a party to the Intercreditor Agreement.
"Senior Security Documents" shall mean, collectively, the Deed of
Trust, the Partnership Security Agreement, the Funding Corporation Security
Agreement, the LP Interest Pledge Agreement, the GP Interest Pledge Agreement,
the GP Stock Pledge Agreement, the Funding Corporation Stock Pledge Agreement,
the Common Agreement, the Collateral Agency Agreement and the Intercreditor
Agreement.
"Series Supplemental Indenture" shall mean an indenture supplemental
to this Indenture entered into by the Funding Corporation, the Partnership and
the Trustee for the purpose of establishing, in accordance with Article II of
this Indenture, the title, form and terms of the Bonds of any series; "Series
Supplemental Indentures" shall mean each and every Series Supplemental
Indenture.
"Shelf Registration Statement" shall mean the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Site" shall mean the approximately 60 acre parcel of land located
near Batesville, Mississippi on which the Facility (as defined in the EPC
Contract) will be located.
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"Special Record Date" for the payment of any Overdue Interest or
Overdue Principal shall mean a date fixed by the Trustee pursuant to Section
2.11.
"Taxes" shall mean all taxes of every kind (including without
limitation, gross and net income, gross and net receipts, capital gains, excess
profits and minimum taxes, taxes on tax preferences, capital, net worth,
franchise, sales, use, rental, value-added, stamp, documentary, excise, property
and other similar taxes), charges and withholdings, levies, imposts, duties,
fees and deductions imposed by any government or political subdivision thereof,
quasi-governmental authority or taxing jurisdiction or authority, together with
all interest, additions to tax, penalties and similar add-ons payable with
respect thereto, enacted or imposed with respect to: (i) the Project or any part
or component thereof; (ii) the Transaction Documents (including any payment made
pursuant thereto or any activity or act in connection therewith or pursuant
thereto); (iii) the execution, issue, delivery, registration, notarization,
assignment or transfer or transfer of any interest in, or for the legality,
validity or enforceability of the Transaction Documents and any documents
related to the Transaction Documents; (iv) the manufacture, financing,
refinancing, construction, acceptance, rejection, transfer, control, operation,
condition, occupancy, servicing, maintenance, repair, abandonment, replacement,
purchase, sale, owner ship, delivery, nondelivery, registration, reregistration,
leasing, subleasing, mortgaging, pledging, insuring, possession, repossession,
use, improvement, transfer of title, return or other disposition of the Project,
or any indebtedness with respect thereto; (v) the rental, receipts or earnings
arising from the Project or payments with respect to principal or interest or
premium on the debt instruments evidencing the Senior Secured Obligations; (vi)
the income or other proceeds received with respect to the Project or any part
thereof upon the disposition thereof, any contract relating to the manufacture,
construction, acquisition or delivery of the Project or any part thereof, in
each case as supplemented or amended; or (vii) otherwise in connection with the
transactions contemplated by the Transaction Documents.
"Tennessee Gas" shall mean Tennessee Gas Pipeline Company.
"Tennessee Gas Consent" shall mean the Consent and Agreement, dated
as of August 28, 1998, by and among Tennessee Gas, the Partnership and IBJ
Schroder Bank & Trust Company as collateral agent.
"Tennessee Interconnection Agreement" shall mean the Facilities
Agreement, dated June 23, 1998, between Tennessee Gas and the Partnership.
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"Title Event" shall mean the existence of any defect of title or
lien or encumbrance on the Mortgage Estate (other than Permitted Liens in effect
on the Closing Date) that entitles the Collateral Agent to make a claim under
the Title Policy.
"Title Insurer" shall mean First American Title Insurance Company.
"Title Policy" shall mean that certain policy of title insurance
insuring the Deed of Trust issued by the Title Insurer dated as of the Closing
Date, including all amendments thereto, endorsements thereof and substitutions
or replacements therefor.
"Title Proceeds" shall mean all amounts and proceeds actually
received, including instruments, under the Title Policy or any other title
insurance policy on account of a title event.
"Total Equity Amount" shall have the meaning given to such term in
the Equity Contribution Agreement.
"Transaction Documents" shall mean the Project Documents and the
Financing Documents.
"Trust Indenture Act" shall mean the United States Trust Indenture
Act of 1939, as amended, as in force at the date as of which this Indenture was
executed (or, with respect to any supplemental indenture, the date as of which
such supplemental indenture was executed).
"Trustee" shall mean the Person named as the "Trustee" in the
Preamble of this Indenture and its successors, and any corporation resulting
from or surviving any consolidation or merger to which it or its successors may
be a party, or any successor to all or substantially all of its corporate trust
business, provided that any such successor or surviving corporation shall be
eligible for appointment as trustee pursuant to Section 9.7 until a successor
Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"TVA" shall mean Tennessee Valley Authority, a corporation created
by and existing under and by virtue of the Tennessee Valley Authority Act of
1933, as amended.
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"TVA Consent" means the Consent and Agreement, dated as of August
28, 1998, by and among TVA, the Partnership and IBJ Schroder Bank & Trust
Company as collateral agent.
"TVA Interconnection Agreement" means the Interconnection Agreement,
dated as of July 22, 1998, by and between TVA and the Partnership.
"Two-Thirds PPA Period" shall mean any period during which at least
66 2/3% but less than 100% of the then current capacity of the Facility (as
defined in the EPC Contract) is to be sold or otherwise disposed of under an
Acceptable PPA.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York and any other
jurisdiction the laws of which control the creation or perfection of security
interests under this Indenture and the Senior Security Documents.
"Unrestricted Global Bond" shall mean a permanent Global Bond
substantially in the form of Exhibit G attached hereto that bears the Global
Bond Legend and that has the "Schedule of Exchanges of Interests in the Global
Bond" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Bonds that do
not bear the Private Placement Legend.
"Unrestricted Definitive Bond" shall mean one or more Definitive
Bonds that do not bear and are not required to bear the Private Placement
Legend.
"Use Agreements" shall mean, collectively, (i) the Infrastructure
Use Agreement (Water Supply System and Wastewater Disposal System), to be
entered into by and among the Authority, the Mississippi Department of Economic
and Community Development, the County, the Industrial Development Authority of
the Second Judicial Authority of Panola County, Mississippi, and the
Partnership, substantially in the form attached hereto as Exhibit C-2, and (ii)
the Infrastructure Use Agreement (Lateral Pipeline) to be entered into by and
among the Authority, the Mississippi Department of Economic and Community
Development, the County, the Industrial Development Authority of the Second
Judicial Authority of Panola County, Mississippi, and the Partnership,
substantially in the form attached hereto as Exhibit C-3, and (iii) the
agreement to be entered into by and between Panola Partnership, Inc. and the
Partnership, and (iv)
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any other agreements that may be entered into by the Partnership pursuant to the
terms of the agreements described in clauses (i), (ii) and (iii).
"UtiliCorp" shall mean UtiliCorp United Inc., a Delaware
corporation.
"VEPCO" shall mean Virginia Electric and Power Company, a Virginia
public service corporation.
"VEPCO Consent" shall mean the Consent and Agreement, dated as of
August 28, 1998, by and among VEPCO, the Partnership and IBJ Schroder Bank &
Trust Company as collateral agent.
"VEPCO Extended Term" shall mean the "Extended Term", as such term
is defined in the VEPCO Power Purchase Agreement.
"VEPCO Initial Term" shall mean the "Initial Term", as such term is
defined in the VEPCO Power Purchase Agreement.
"VEPCO L/C Agent" shall mean, initially, Credit Suisse First Boston,
and any Person appointed as a substitute or replacement facility agent under the
VEPCO L/C Agreement.
"VEPCO L/C Agreement" shall mean the Letter of Credit Agreement,
dated as of August 28, 1998, as amended, among the Partnership, the VEPCO L/C
Agent, the VEPCO L/C Issuer and the VEPCO L/C Banks.
"VEPCO L/C Banks" shall mean the financial institutions from time to
time party to the VEPCO L/C Agreement.
"VEPCO L/C Issuer" shall mean Credit Suisse First Boston and any
other issuer of a VEPCO Letter of Credit.
"VEPCO Letter of Credit" shall mean any letter of credit issued
under the VEPCO L/C Agreement.
"VEPCO Power Purchase Agreement" shall mean the Power Purchase
Agreement, dated as of May 18, 1998, between the Partnership and VEPCO, as
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amended by (i) the First Amendment to Power Purchase Agreement, dated as of July
22, 1998, and (ii) the Second Amendment to Power Purchase Agreement, dated as of
August 11, 1998, between the Partnership and VEPCO.
"Voluntary Buy-Out" shall mean any buy-out of a Power Purchase
Agreement that is not an Involuntary Buy-Out.
"Water System" shall mean (i) that certain water intake system,
pipeline and other related equipment and systems connecting the Project to its
water supply at Enid Lake, and (ii) that certain waste water pipeline and other
related equipment and systems connecting the Project to its wastewater discharge
point in the Little Tallahatchie River.
"Water Supply Agreement" shall mean Agreement No. ELLSP-1-1, dated
June 8, 1998, between the Partnership and the United States of America, as
amended by the amendment dated as of March 15, 1999 between the Partnership and
the United States of America.
"Westinghouse" shall mean Siemens Westinghouse Power Corporation, a
Division of CBS Corporation, a Pennsylvania corporation.
"Westinghouse Consent" shall mean the Consent and Agreement, dated
as of August 28, 1998, by and among Westinghouse, the Partnership and IBJ
Schroder Bank & Trust Company as collateral agent.
"Working Capital Agent" shall mean any agent for the Working Capital
Banks under a Working Capital Agreement.
"Working Capital Banks" shall mean the financial institutions from
time to time party to a Working Capital Agreement.
"Working Capital Agreement" shall mean an agreement among the
Partnership, the Working Capital Agent and the Working Capital Banks pursuant to
which the Working Capital Banks agree to make Working Capital Loans to the
Partnership on the terms and conditions set forth therein and in accordance with
the Financing Documents, including, without limitation, Section 5.1(c)(vii).
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"Working Capital Loans" shall have the meaning set forth in Section
5.1(c)(vii).
Section 1.2 Compliance Certificates and Opinions. Except as
otherwise expressly provided by this Indenture, upon any application or request
by the Funding Corporation or the Partnership to the Trustee that the Trustee
take any action under any provision of this Indenture, the Funding Corporation
or the Partner ship shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any
particular application or request as to which the furnishing of documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished. The Trustee may conclusively rely, and shall be fully protected in
relying, on any such Officer's Certificate.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, such
examination or investigation has been made as is necessary to enable such
individual to express an informed opinion as to whether or not such covenant or
condition has been complied with;
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with; and
(e) in the case of an Officer's Certificate of the Funding
Corporation or the Partnership, a statement that no Event of Default under this
Indenture has occurred and is continuing (unless such Officer's Certificate
relates to an Event of Default).
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Section 1.3 Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
by only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate of an officer of the Funding Corporation or the
Partnership may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows or has reason to believe that the certificate or opinion or
representations with respect to the matters upon which such Officer's
Certificate is based are erroneous. Any such certificate or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate of,
or representations by, an Authorized Representative of the Funding Corporation
or the Partnership, as the case may be, stating that the information with
respect to such factual matters is in the possession of the Funding Corporation
or the Partnership, respectively, unless such counsel knows that the certificate
or representations with respect to such matters are erroneous.
Any Opinion of Counsel stated to be based on the opinion of other
counsel shall be accompanied by a copy of such other opinion.
Where any Person is required to give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Notices, Etc. to Trustee, Funding Corporation and
Partnership. Any Act of Holders or other document provided or permitted by this
Indenture shall be deemed to have been given only if such notice is in writing
and delivered personally, or by registered or certified first-class mail with
postage prepaid, or made, given or furnished in writing by confirmed telecopy or
facsimile transmission, or by prepaid courier service to the appropriate party
as set forth below:
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Trustee: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Funding Corporation: LSP Batesville Funding Corporation
c/o LS Power Management, LLC
Two Tower Center
20th Floor
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-1736
Telecopy No.: (732) 249-7290
Partnership: LSP Energy Limited Partnership
c/o LS Power Management, LLC
Two Tower Center
20th Floor
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-6750
Telecopy No.: (732) 249-7290
With copies to, as applicable:
Collateral Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
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Intercreditor Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Administrative Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
S&P: Standard & Poor's Ratings Group
25 Broadway
New York, New York 10004
Any party may change its address by giving notice of such change in the manner
set forth herein. Any notice given to a party by mail or by courier shall be
deemed delivered upon receipt thereof (unless the party refuses to accept
delivery, in which case the party shall be deemed to have accepted delivery upon
presentation). Any notice given to a party by telecopy or facsimile transmission
shall be deemed effective on the date it is actually sent to the intended
recipient by confirmed telecopy or facsimile transmission to the telecopier
number specified above.
Section 1.5 Notices to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to
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each Holder, at its address as it appears in the Security Register, not later
than the latest date, if any, and not earlier than the earliest date, if any,
prescribed for the giving of such notice. Where this Indenture provides for
notice, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders, and any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given.
Section 1.6 Effect of Heading and Table of Contents. The Article and
Section headings herein and in the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 1.7 Successors and Assigns. All covenants, agreements,
representations and warranties contained or incorporated by reference in this
Indenture by the Trustee, the Partnership and the Funding Corporation shall
bind and, to the extent permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether so expressed or
not.
Section 1.8 Severability Clause. In case any provision in this
Indenture or in the Bonds shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 1.9 Benefits of Indenture. Nothing in this Indenture or in
the Bonds, expressed or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and the Holders of Bonds, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 1.10 Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial.
(a) THIS INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW
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YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE LIEN AND SECURITY INTEREST HEREUNDER, OR THE
REMEDIES HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN THE
STATE Of NEW YORK. REGARDLESS OF ANY PROVISION IN ANY OTHER AGREEMENT, FOR
PURPOSES OF THE NEW YORK UCC, THE "SECURITIES INTERMEDIARY'S JURISDICTION" OF
THE TRUSTEE WITH RESPECT TO THE INDENTURE FUNDS IS THE STATE OF NEW YORK.
(b) Any legal action or proceeding by or against the Partnership or
the Funding Corporation with respect to or arising out of this Indenture may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Indenture, each of the
Partnership or the Funding Corporation accepts, for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts for legal proceedings arising out of or in connection with this Indenture
and irrevocably consents to the appointment of CT Corporation System, with
offices on the date hereof at 1633 Broadway, New York, New York 10019 as its
agent to receive service of process in New York, New York. If for any reason
such agent shall cease to be available to act as such, each of the Partnership
and the Funding Corporation agrees to appoint a new agent on the terms and for
the purposes of this provision. Nothing herein shall affect the right to serve
process in any other manner permitted by law or any right to bring legal action
or proceedings in any other competent jurisdiction. Each of the Partnership and
the Funding Corporation further agrees that the aforesaid courts of the State of
New York and of the United States of America for the Southern District of New
York shall have exclusive jurisdiction with respect to any claim or counterclaim
of the Partnership or the Funding Corporation, as the case may be, based upon
the assertion that the rate of interest charged by or under this Indenture or
under the other Financing Documents is usurious. Each of the Partnership and the
Funding Corporation hereby waives any right to stay or dismiss any action or
proceeding under or in connection with the Project, this Indenture or any other
Transaction Document brought before the foregoing courts on the basis of forum
non-conveniens or improper venue.
(c) EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE
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TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS INDENTURE, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE OTHER
PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO
TO ENTER INTO THIS AGREEMENT.
Section 1.11 Legal Holidays. In any case where the Redemption Date
or the Scheduled Payment Date of any Bond or of any installment of principal
thereof or payment of interest thereon, or any date on which any Overdue
Interest or Overdue Principal is proposed to be paid, shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or such Bond)
payment of interest, principal, Overdue Interest or Overdue Principal, if any,
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Redemption Date or on the
Scheduled Payment Date, or on the date on which the Overdue Interest or Overdue
Principal is proposed to be paid, and, except as provided in the Series
Supplemental Indenture setting forth the terms of such Bond, no interest shall
accrue for the period from and after such Redemption Date or Scheduled Payment
Date, or date for the payment of Overdue Interest or Overdue Principal, as the
case may be, to the date of such payment.
Section 1.12 Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 1.13 Securities Intermediary.
(a) Acceptance of Appointment of Securities Intermediary. The Bank
of New York hereby agrees to act as securities intermediary (in such capacity,
the "Securities Intermediary") under this Indenture. Each of the Trustee, the
Partner ship and the Funding Corporation hereby acknowledges that the Securities
Intermediary shall act as securities intermediary under this Indenture.
(b) Confirmation and Agreement. The Securities Intermediary
acknowledges, confirms and agrees, as of the Closing Date, that (i) the
Securities Intermediary has established the Indenture Funds as set forth in
Section 3.1 (including,
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without limitation, as special, segregated and irrevocable cash collateral
accounts, in the form of noninterest bearing accounts, which shall be maintained
at all times until the termination of this Indenture), (ii) each Indenture Fund
is and will be maintained as a "securities account" (within the meaning of
Section 8501 of the New York UCC), (iii) the Partnership and the Funding
Corporation are the "entitlement holders" (within the meaning of Section
8102(a)(7) of the New York UCC) in respect of the "financial assets" (within the
meaning of Section 8102(a)(9) of the New York UCC) carried in or credited to the
Indenture Funds, but the Indenture Funds shall be under the exclusive control of
the Securities Intermediary, (iv) all property delivered to the Securities
Intermediary pursuant to this Indenture or the Senior Security Documents will be
promptly credited to an Indenture Fund, (v) all financial assets in registered
form or payable to or to the order of and credited to any Indenture Fund shall
be registered in the name of, payable to or to the order of, or specially
indorsed to, the Securities Intermediary or in blank, or credited to another
securities account maintained in the name of the Securities Intermediary, and in
no case will any financial asset credited to any Indenture Fund be registered in
the name of, payable to or to the order of, or specially indorsed to, the
Partnership or the Funding Corporation except to the extent the foregoing have
been specially indorsed by the Partnership or the Funding Corporation, as the
case may be, to the Securities Intermediary or in blank, (vi) the Securities
Intermediary shall promptly comply with all instructions of the Trustee, and, to
the limited extent set forth in this Indenture, the Partnership, and (vii) the
Securities Intermediary shall not change the name or account number of any
Indenture Fund without the prior written consent of the Trustee and the
Partnership.
(c) Financial Assets Election. The Securities Intermediary agrees
that each item of property (whether cash, a security, an instrument or
obligation, share, participation, interest or other property whatsoever)
credited to any Indenture Fund shall be treated as a financial asset under
Article 8 of the New York UCC.
(d) Entitlement Orders; No Other Control Agreements; No Other Liens.
Each of the Partnership and the Funding Corporation agrees that the Securities
Intermediary may, and the Securities Intermediary agrees that it shall, comply
with orders purporting to be entitlement orders if originated by the Trustee and
relating to any security entitlements carried in or credited to any Indenture
Fund without further consent by the Partnership, the Funding Corporation or any
other Person. In the event that the Securities Intermediary receives conflicting
entitlement orders from the Trustee and the Partnership or any other Person, the
Securities Intermediary shall comply with the entitlement orders originated by
the Trustee. The Securities Intermediary shall not execute and deliver, or
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<PAGE>
otherwise become bound by, any agreement (a "Control Agreement") under which the
Securities Intermediary agrees with any Person other than the Trustee to comply
with entitlement orders originated by such Person relating to any of the
Indenture Funds or the security entitlements that are the subject of this
Indenture. The Securities Intermediary shall not grant any lien or security
interest in any financial asset that is the subject of any security entitlement
that is the subject of this Indenture.
(e) Subordination of Lien; Waiver of Set-Off. In the event that the
Securities Intermediary has or subsequently obtains by agreement, operation of
law or otherwise a lien or security interest in any Indenture Fund, any security
entitlement carried therein or credited thereto or any financial asset that is
the subject of any such security entitlement, the Securities Intermediary agrees
that such lien or security interest shall (except to the extent provided in the
last sentence of this Section 1.13(e)) be subordinate to the Lien and security
interest of the Trustee. The financial assets standing to the credit of the
Indenture Funds will not be subject to deduction, set-off, banker's lien or any
other right in favor of any Person other than the Trustee (except to the extent
of returned items and chargebacks either for uncollected checks or other items
of payment and transfers previously credited to one or more of the Indenture
Funds, and the Partnership, the Funding Corporation and the Trustee hereby
authorize the Securities Intermediary to debit the relevant Indenture Fund or
Indenture Funds for such amounts).
(f) No Other Agreements. Neither the Securities Intermediary, the
Partnership nor the Funding Corporation have entered into any agreement with
respect to the Indenture Funds or any security entitlements or any financial
assets carried in or credited to any Indenture Fund other than this Indenture,
the Senior Security Documents and agreements with respect to the making of
Permitted Investments. The Securities Intermediary has not entered into any
agreement with the Partnership, the Funding Corporation or any other Person
purporting to limit or condition the obligation of the Securities Intermediary
to comply with entitlement orders originated by the Trustee in accordance with
Section 1.13(d). In the event of any conflict between this Section 1.13 (or any
portion thereof) and any other agreement now existing or hereafter entered into,
the terms of this Section shall prevail.
(g) Notice of Adverse Changes. Except for the claim and interest of
the Trustee, the Funding Corporation and the Partnership in each of the
Indenture Funds, the Securities Intermediary does not know (without independent
investigation), as of the Closing Date, of any claim to, or interest in, any
Indenture Fund or in any security
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entitlement or financial asset carried therein or credited thereto. If any
officer of the Securities Intermediary charged with administering the Indenture
Funds on a day-to-day basis obtains actual knowledge that any Person has
asserted any lien, encumbrance or adverse claim (including any writ,
garnishment, judgment, warrant of attachment, execution or similar process)
against any Indenture Fund or in any security entitlement or financial asset
carried therein or credited thereto, the Securities Intermediary will promptly
notify the Partnership, the Funding Corporation and the Trustee thereof.
(h) Rights and Powers of the Trustee. The rights and powers granted
to the Trustee by the Securities Intermediary have been granted in order to
perfect its Lien and security interest in the Indenture Funds and the security
entitlements and financial assets carried therein or credited thereto, are
powers coupled with an interest and will neither be affected by the bankruptcy
of the Partnership or the Funding Corporation nor the lapse of time.
(i) Limited Rights of Partnership. Until the payment in full of all
outstanding Bonds, neither the Partnership nor the Funding Corporation shall
have any rights against or to monies held in the Indenture Funds, as third party
beneficiary or otherwise, except to the extent the Partnership has the right to
direct the investment of monies held in the Indenture Funds, as permitted by
Section 3.7. In no event shall any amounts or Permitted Investments deposited in
or credited to any Indenture Fund be registered in the name of the Partnership
or the Funding Corporation, payable to the order of the Partnership or the
Funding Corporation or specially indorsed to the Partnership or the Funding
Corporation except to the extent that the foregoing have been specially indorsed
by the Partnership or the Funding Corporation, as the case may be, to the
Securities Intermediary or in blank.
(j) No Rights of Funding Corporation. The Funding Corporation
acknowledges, confirms and agrees that it shall have no rights against or to
monies held in the Indenture Funds, as third party beneficiary or otherwise. The
Funding Corporation further acknowledges, confirms and agrees that, as between
the Funding Corporation and the Partnership, (i) all monies held in the
Indenture Funds are the sole property of the Partnership and (ii) the
Partnership has full authority to exercise all rights and powers reserved to the
Partnership hereunder with respect to the Indenture Funds and all monies held
therein.
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ARTICLE II
THE BONDS
Section 2.1 Form of Bond to Be Established by Series Supplemental
Indenture. The Bonds of each series shall be substantially in the form (not
inconsistent with this Indenture, including Section 2.5) established in the
Series Supplemental Indenture relating to the Bonds of such series.
Section 2.2 Form of Trustee's Authentication. The Trustee's
certificate of authentication on all Bonds shall be in substantially the
following form:
Dated:
This Bond is one of the Bonds referred to in the within-mentioned
Indenture.
The Bank of New York,
as Trustee
By: _______________________________
Authorized Signatory
Section 2.3 Amount; Issuable in Series. The aggregate principal
amount of Bonds that may be authenticated and delivered under this Indenture is
unlimited.
The Bonds may be issued in one or more series. There shall be
established in one or more Series Supplemental Indentures, prior to the issuance
of Bonds of any series:
(a) the title of the Bonds of such series (which shall distinguish
the Bonds of such series from all other Bonds) and the form or forms of Bonds of
such series;
(b) any limit upon the aggregate principal amount of the Bonds of
such series that may be authenticated and delivered under this Indenture (except
for Bonds authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Bonds of such series pursuant to Section 2.7,
2.8, 2.10, 6.6 or 12.6 and except for
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Bonds that, pursuant to the last paragraph of Section 2.4, are deemed never to
have been authenticated and delivered hereunder);
(c) the date or dates on which the principal of the Bonds of such
series is payable, the amounts of principal payable on such date or dates and
the Regular Record Date for the determination of Holders to whom principal is
payable; and the date or dates on or as of which the Bonds of such series shall
be dated, if other than as provided in Section 2.14(a);
(d) the rate or rates at which the Bonds of such series shall bear
interest, or the method by which such rate or rates shall be determined, the
date or dates from which such interest shall accrue, the interest payment dates
on which such interest shall be payable and the Regular Record Date for the
determination of Holders to whom interest is payable; and the basis of
computation of interest, if other than as provided in Section 2.14(b);
(e) if other than as provided in Section 9.11, the place or places
where (i) the principal of and interest on Bonds of such series shall be
payable, (ii) Bonds of such series may be surrendered for registration of
transfer or exchange and (iii) notices and demands to or upon the Funding
Corporation or the Partnership in respect of the Bonds of such series and this
Indenture may be served;
(f) the price or prices at which, the period or periods within which
and the terms and conditions upon which Bonds of such series may be redeemed, in
whole or in part, at the option of the Funding Corporation or the Partnership;
(g) the obligation, if any, of the Funding Corporation or the
Partnership to redeem, purchase or repay Bonds of such series pursuant to any
sinking fund or analogous provision or at the option of a Holder thereof and the
price or prices at which and the period or periods within which and the term and
conditions upon which Bonds of such series shall be redeemed, purchased or
repaid, in whole or in part, pursuant to such obligations;
(h) if other than minimum denominations of $100,000 and any integral
multiple of $1,000 in excess thereof, the denominations in which Bonds of such
series shall be issuable;
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(i) any other terms of such series (which terms shall not be
inconsistent with the provisions of this Indenture);
(j) any trustees, authenticating or paying agents, warrant agents,
transfer agents or registrars with respect to the Bonds of such series if
different than those provided for herein; and
(k) CUSIP numbers, if any.
Section 2.4 Authentication and Delivery of Bonds. Subject to Section
2.3, at any time and from time to time after the execution and delivery of this
Indenture, the Funding Corporation and the Partnership may deliver Bonds of any
series executed by the Funding Corporation and the Partnership to the Trustee
for authentication, together with a Funding Corporation Order and a Partnership
Order for the authentication and delivery of such Bonds, and the Trustee shall
thereupon authenticate and make available for delivery such Bonds in accordance
with such Funding Corporation Order and Partnership Order, without any further
action by the Funding Corporation or the Partnership. No Bond shall be secured
by or entitled to any benefit under this Indenture or be valid or obligatory for
any purpose unless there appears on such Bond a certificate of authentication,
in the form provided for herein, executed by the Trustee by the manual signature
of any Responsible Officer thereof, and such certificate upon any Bond shall be
conclusive evidence, and the only evidence, that such Bond has been duly
authenticated and delivered thereunder. In authenticating such Bonds and
accepting the additional responsibilities under this Indenture in relation to
such Bonds, the Trustee shall be entitled to receive, and (subject to Section
9.1) shall be fully protected in relying upon:
(a) an executed Series Supplemental Indenture with respect to the
Bonds of such series;
(b) an Officer's Certificate of the Funding Corporation (i)
certifying as to resolutions of the Board of Directors of the Funding
Corporation by or pursuant to which the terms of the Bonds of such series were
established and (ii) certifying that all conditions precedent under this
Indenture to the Trustee's authentication and delivery of such Bonds have been
complied with;
(c) an Officer's Certificate of the Partnership to the affect of
clauses (b)(i) (with respect to resolutions of the Partnership) and (b)(ii)
above; and
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(d) an Opinion of Counsel to the effect that (i) the form or forms
and the terms of such Bonds have been established by a Series Supplemental
Indenture as permitted by Sections 2.1 and 2.3 in conformity with the provisions
of this Indenture, (ii) all conditions precedent to the Trustee's authentication
and delivery of such Bonds and the execution and delivery by the Trustee of such
Series Supplemental Indenture set forth in this Indenture have been complied
with and (iii) the Bonds of such series, when authenticated and made available
for delivery by the Trustee and issued by the Funding Corporation and the
Partnership in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute legal, valid and binding obligations of the
Funding Corporation and the Partnership, enforceable against the Funding
Corporation and the Partnership in accordance with their terms, except as
enforceability (A) may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights and remedies generally and (B) is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
Notwithstanding the foregoing, if any Bond shall have been
authenticated and delivered hereunder but never issued and sold by the Funding
Corporation and the Partnership, and the Funding Corporation and the Partnership
shall deliver such Bond to the Trustee for cancellation as provided in Section
2.13(a) together with a written statement (which need not comply with Section
1.2 and need not be accompanied by an Opinion of Counsel) stating that such Bond
has never been issued and sold by the Funding Corporation and the Partnership,
for all purposes of this Indenture such Bond shall be deemed never to have been
authenticated and delivered hereunder and shall never have been or be entitled
to the benefits hereof.
Section 2.5 Form.
(a) General. The Bonds of each series shall be in registered form
and may have such letters, numbers or other marks of identification and such
legends or endorsements printed, lithographed, engraved, typewritten or
photocopied thereon, as may be required to comply with the rules of any
securities exchange upon which the Bonds of any such series are to be listed, if
any, or to conform to any usage in respect thereof, or as may, consistently
herewith, be prescribed by Board Resolution of the Funding Corporation or of the
Partnership or by the officers of the Funding Corporation or the Partnership
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executing such Bonds, such determination by said officers to be evidenced by
their signing the Bonds.
The terms and provisions contained in the Bonds shall constitute,
and are hereby expressly made, a part of this Indenture and the Issuers and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Bond conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
The Bonds shall be printed, lithographed, engraved, typewritten,
photocopied or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange upon which
the Bonds of any such series are to be listed, if any, all as determined by the
officers executing such Bonds, as evidenced by their execution of such Bonds.
(b) Global and Definitive Bonds. The Bonds may be issued in the form
of (a) definitive Bonds or (b) one or more Global Bonds. Bonds issued in
definitive form shall be registered in the name or names of such Persons and for
such principal amounts as the Funding Corporation and the Partnership may
request. Bonds issued in the form of a Global Bond shall be registered in the
name of the Registered Depositary or its nominee and shall represent the
beneficial interests of Persons purchasing the Bonds. In the event any of the
Bonds are issued in a transaction under Rule 144A, any such Person shall
purchase such Bonds in transactions complying with Rule 144A. In the event any
of the Bonds are issued in a transaction under Regulation S, any such Person
shall purchase such Bonds in transactions complying with Regulation S. Bonds
issued in global form in reliance on Regulation S (the "Regulation S Global
Bonds") and Bonds issued in global form in reliance on Rule 144A shall not be
represented by the same Global Bond. Beneficial interests in each Regulation S
Global Bond may be held through Euroclear or Cedel, as participants in the
Registered Depositary. The Trustee, as custodian ("Custodian"), shall act as
custodian of each Global Bond for the Registered Depositary or appoint a
subcustodian to act in such capacity. So long as the Registered Depositary or
its nominee is the registered owner of a Global Bond, it shall be considered the
Holder of the Bonds represented thereby for all purposes hereunder and under
such Global Bond. None of the Funding Corporation, the Partnership, the Trustee
or any Paying Agent shall have any responsibility or liability for any aspect of
the records relating to or payments made by the Registered Depositary on account
of beneficial interests in any Global Bond.
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Interests in the Global Bonds shall be transferred on the Registered
Depositary's book-entry settlement system.
Bonds issued in global form shall be substantially in the form of
Exhibit G attached hereto (including the Global Bond Legend thereon and the
"Schedule of Exchanges of Interests in the Global Bond" attached thereto). Bonds
issued in definitive form shall be substantially in the form of Exhibit A
attached hereto Supplemental Indenture (but without the Global Bond Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Bond"
attached thereto). Each Global Bond and Definitive Bond shall represent such of
the outstanding Bonds as shall be specified therein and each shall provide that
it shall represent the aggregate principal amount of outstanding Bonds from time
to time endorsed thereon and that the aggregate principal amount of outstanding
Bonds represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Bond to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Bonds represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.9 hereof.
(c) Temporary Global Bonds. Bonds offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Bond, which shall be deposited on behalf of the purchasers of the Bonds
represented thereby with the Trustee, at its New York office, as custodian for
the Registered Depositary, and registered in the name of the Registered
Depositary or the nominee of the Registered Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel, duly executed by the
Issuers and authenticated by the Trustee as hereinafter provided. The Restricted
Period shall be terminated upon the receipt by the Trustee of a written
certificate from the Registered Depositary, together with copies of certificates
from Euroclear and Cedel certifying that they have received certification of
nonUnited States beneficial ownership of 100% of the aggregate principal amount
of the Regulation S Temporary Global Bond (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Bond or an IAI Global Bond bearing a Private Placement Legend, all as
contemplated by Section 2.9(a)(ii) hereof). Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Bond shall be exchanged for beneficial interests in Regulation S Permanent
Global
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Bonds pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Bonds, the Trustee shall cancel
the Regulation S Temporary Global Bond. The aggregate principal amount of the
Regulation S Temporary Global Bond and the Regulation S Permanent Global Bonds
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Registered Depositary or its nominee, as the case
may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial
interests in the Regulation S Temporary Global Bond and the Regulation S
Permanent Global Bonds that are held by Participants through Euroclear or Cedel.
Section 2.6 Execution of Bonds. The Partnership and the Funding
Corporation shall execute the Bonds as co-obligors and the Bonds shall be
executed (a) on behalf of the Funding Corporation by the President or one of the
Vice Presidents of the Funding Corporation with or without the Funding
Corporation's corporate seal reproduced thereon and (b) on behalf of the
Partnership by an Authorized Representative. The signature of any such officers
on the Bonds may be manual or facsimile.
Bonds bearing the manual or facsimile signatures of individuals who
were, at the time such signatures were affixed, the proper officers of the
Funding Corporation or the Partnership, respectively, shall bind the Funding
Corporation and the Partnership, respectively, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Bonds or did not hold such offices at the
date of such Bonds.
Section 2.7 Temporary Bonds. Pending the preparation of permanent
Bonds of any series pursuant to Section 2.10, the Funding Corporation and the
Partnership may execute, and upon receipt of a Funding Corporation Order and
Partnership Order, the Trustee shall authenticate and make available for
delivery, temporary Bonds of such series that are printed, lithographed,
typewritten, photocopied or otherwise produced, in any denomination,
substantially of the tenor of the permanent Bonds in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers of the Funding Corporation and the
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Partnership executing such Bonds may determine, as evidenced by their execution
of such Bonds.
If temporary Bonds of any series are issued, the Funding Corporation
and the Partnership shall cause permanent Bonds of such series to be prepared
without unreasonable delay. After the preparation of permanent Bonds of such
series, the temporary Bonds of such series shall be exchangeable for permanent
Bonds of such series upon surrender of the temporary Bonds of such series at the
Place of Payment, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Bonds of any series, the Funding Corporation and
the Partnership shall execute, and the Trustee shall authenticate and make
available for delivery, in exchange therefor, permanent Bonds of such series of
authorized denominations and of like tenor and aggregate principal amount. Until
so exchanged, such temporary Bonds of any series shall in all respects be
entitled to the same benefits under this Indenture as permanent Bonds of such
series.
Section 2.8 Registration; General Restrictions on Transfer and
Exchange. The Funding Corporation and the Partnership shall cause to be kept at
the Corporate Trust Office of the Security Registrar a register which, subject
to such reasonable regulations as the Funding Corporation and the Partnership
may prescribe, shall provide for the registration of Bonds and for the
registration of transfers and exchanges of Bonds. This register and, if there
shall be more than one Security Registrar, the combined registers maintained by
all such Security Registrars, are herein sometimes referred to as the "Security
Register". The Trustee is hereby appointed Security Registrar for the purpose of
so keeping the Security Register and registering Bonds and transfers and
exchanges of Bonds as herein provided.
The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Bond other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by the terms of, this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
If a Person other than the Trustee is appointed by the Funding
Corporation and the Partnership as Security Registrar, the Funding Corporation
and the Partnership shall give the Trustee prompt written notice of the
appointment of a Security Registrar and
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of the location, and any change in the location, of the Security Register, and
the Trustee shall have the right to inspect the Security Register at all
reasonable times and to obtain copies thereof, and the Trustee shall have the
right to rely upon such Security Register as to the names and addresses of the
Holders of the Bonds and the principal amounts and numbers of such Bonds.
Subject to the other restrictions on transfers and exchanges set
forth herein, at the option of the Holder, Bonds of any series may be exchanged
for other Bonds of the same series to be registered in the name of such Holder,
of authorized denominations and of like tenor, maturity, interest rate and
aggregate principal amount, upon surrender of the Bonds to be exchanged at any
office or agency maintained for such purpose pursuant to Section 9.11. Whenever
any Bonds are so surrendered for exchange, the Funding Corporation and the
Partnership shall execute, and the Trustee shall authenticate and make available
for delivery, the Bonds which the Holder making the exchange is entitled to
receive. The Funding Corporation and the Partnership shall execute and deliver
to the Trustee from time to time, for safekeeping and subsequent authentication,
a stock of definitive registered Bonds of each series in such quantities as the
Partnership, after consultation with the Trustee, determines to be sufficient to
permit the issuance of definitive Bonds and the exchanges contemplated by this
Section.
Every Bond presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Partnership and the Security Registrar or
any transfer agent, duly executed by the Holder thereof or such Holder's
attorney duly authorized in writing.
Section 2.9 Transfer and Exchange.
(a) Transfer and Exchange of Global Bonds. A Global Bond may not be
transferred as a whole except by the Registered Depositary to a nominee of the
Registered Depositary, by a nominee of the Registered Depositary to the
Registered Depositary or to another nominee of the Registered Depositary, or by
the Registered Depositary or any such nominee to a successor Registered
Depositary or a nominee of such successor Registered Depositary. All Global
Bonds will be exchanged by the Issuers for Definitive Bonds if (i) the Issuers
deliver to the Trustee notice from the Registered Depositary that it is
unwilling or unable to continue to act as Registered Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Registered Depositary is not appointed by the Issuers within 120
days after the
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date of such notice from the Registered Depositary, (ii) the Issuers in their
sole discretion determine that the Global Bonds (in whole but not in part)
should be exchanged for Definitive Bonds and delivers a written notice to such
effect to the Trustee or (iii) after the occurrence of an Event of Default,
beneficial owners holding interests requesting an aggregate principal amount of
Bonds of not less than 51% of the Bonds requested by the Global Bonds advise the
Trustee through the Registered Depositary in writing that the continuation of a
book-entry system through the Registered Depositary with respect to the Bonds is
no longer in such owner's best interests; provided that in no event shall the
Regulation S Temporary Global Bond be exchanged by the Issuer for Definitive
Bonds prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Security Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of any of the
events in clauses (i) through (iii) of the preceding paragraph, the Trustee
shall, by forwarding any notice received by the Trustee from the Funding
Corporation or the Partnership, be deemed to have notified all Persons who hold
a beneficial interest in the Global Bond through participants in the Registered
Depositary or indirect participants through participants in the Registered
Depositary of the availability of definitive Bonds. Upon surrender by the
Registered Depositary of the Global Bond and receipt of instructions for
reregistration, the Security Registrar will exchange the Global Bond for an
equal aggregate principal amount of definitive Bonds. Global Bonds also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.7 and 2.10
hereof. Every Bond authenticated and delivered in exchange for, or in lieu of, a
Global Bond or any portion thereof, pursuant to this Section 2.9 or Sections 2.7
or 2.10 hereof, shall be authenticated and delivered in the form of, and shall
be, a Global Bond. A Global Bond may not be exchanged for another Bond other
than as provided in this Section 2.9(a); however, beneficial interests in a
Global Bond may be transferred and exchanged as provided in Section 2.9(b), (c)
or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Bonds. The transfer and exchange of beneficial interests in the Global Bonds
shall be effected through the Registered Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Bonds shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Bonds also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
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(i) Transfer of Beneficial Interests in the Same Global Bond.
Beneficial interests in any Restricted Global Bond may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in the same
Restricted Global Bond in accordance with the transfer restrictions set forth in
the Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Bond may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than a Purchaser). Beneficial interests in any
Unrestricted Global Bond may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Bond. No written
orders or instructions shall be required to be delivered to the Security
Registrar to effect the transfers described in this Section 2.9(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Bonds. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.9(b)(i) above, the transferor of
such beneficial interest must deliver to the Security Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Registered Depositary in accordance with the Applicable Procedures directing the
Registered Depositary to credit or cause to be credited a beneficial interest in
another Global Bond in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant account
to be credited with such increase or (B) (1) a written order from a Participant
or an Indirect Participant given to the Registered Depositary in accordance with
the Applicable Procedures directing the Registered Depositary to cause to be
issued a Definitive Bond in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Registered Depositary
to the Security Registrar containing information regarding the Person in whose
name such Definitive Bond shall be registered to effect the transfer or exchange
referred to in (1) above; provided that in no event shall Definitive Bonds be
issued upon the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Bond prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Security Registrar of any certificates required pursuant
to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by
the Issuers in accordance with Section 2.9(f) hereof, the requirements of this
Section 2.9(b)(ii) shall be deemed to have been satisfied upon receipt by the
Security Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Bonds. Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Bonds contained in this Indenture and the Bonds
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or otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Bond(s) pursuant to Section 2.9(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Bond. A beneficial interest in any Restricted Global Bond may be
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in another Restricted Global Bond if the transfer complies with the
requirements of Section 2.9(b)(ii) above and the Security Registrar receives the
following:
(A) if the transferee will take delivery in the form of
a beneficial interest in the 144A Global Bond, then the transferor must
deliver a certificate in the form of Exhibit D hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of
a beneficial interest in the Regulation S Temporary Global Bond or the
Regulation S Global Bond, then the transferor must deliver a certificate
in the form of Exhibit D hereto, including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in the form of
a beneficial interest in the IAI Global Bond, then the transferor must
deliver a certificate in the form of Exhibit D hereto, including the
certifications and certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Bond for Beneficial Interests in the Unrestricted Global Bond.
A beneficial interest in any Restricted Global Bond may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Bond or
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Bond if the exchange or transfer complies
with the requirements of Section 2.9(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the case
of an exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a broker-dealer,
(2) a Person participating in the distribution of the
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Exchange Bonds or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Bond, a
certificate from such holder in the form of Exhibit E hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Bond proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Bond, a certificate
from such holder in the form of Exhibit D hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Security
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Security Registrar
to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Bond has not yet been issued,
the Issuers shall issue and, upon receipt of an authentication order in
accordance with Section 2.4 hereof, the Trustee shall authenticate one or more
Unrestricted Global Bonds in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
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Beneficial interests in an Unrestricted Global Bond cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Bond.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Bonds.
(i) Beneficial Interests in Restricted Global Bonds to
Restricted Definitive Bonds. If any holder of a beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial interest for a
Restricted Definitive Bond or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Restricted Definitive Bond, then,
upon receipt by the Security Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial interest for a
Restricted Definitive Bond, a certificate from such holder in the form of
Exhibit E hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit D hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit D hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit D hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit D hereto, including
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the certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such beneficial interest is being transferred to
the Issuers or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit D hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit D hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Bond to be reduced accordingly pursuant to Section 2.9(h) hereof,
and the Issuers shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Bond in
the appropriate principal amount. Any Definitive Bond issued in exchange
for a beneficial interest in a Restricted Global Bond pursuant to this
Section 2.9(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions from
the Registered Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Bonds to the Persons in whose names
such Bonds are so registered. Any Definitive Bond issued in exchange for a
beneficial interest in a Restricted Global Bond pursuant to this Section
2.9(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global
Bond to Definitive Bonds. Notwithstanding Sections 2.9(c)(i)(A) and (C) hereof,
a beneficial interest in the Regulation S Temporary Global Bond may not be
exchanged for a Definitive Bond or transferred to a Person who takes delivery
thereof in the form of a Definitive Bond prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Security Registrar of any
certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act, except in the case of a transfer pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule 904.
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(iii) Beneficial Interests in Restricted Global Bonds to
Unrestricted Definitive Bonds. A holder of a beneficial interest in a Restricted
Global Bond may exchange such beneficial interest for an Unrestricted Definitive
Bond or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Bond only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an exchange, or
the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Bonds or (3) a Person
who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial interest
for a Definitive Bond that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit E
hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Bond proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Bond that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit D hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Security
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in
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form reasonably acceptable to the Security Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Bonds to
Unrestricted Definitive Bonds. If any holder of a beneficial interest in an
Unrestricted Global Bond proposes to exchange such beneficial interest for a
Definitive Bond or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Bond, then, upon satisfaction of
the conditions set forth in Section 2.9(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Bond to be reduced
accordingly pursuant to Section 2.9(h) hereof, and the Issuers shall execute and
the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Bond in the appropriate principal amount. Any
Definitive Bond issued in exchange for a beneficial interest pursuant to this
Section 2.9(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions from the
Registered Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Bonds to the Persons in whose names such Bonds are
so registered. Any Definitive Bond issued in exchange for a beneficial interest
pursuant to this Section 2.9(c)(iii) shall not bear the Private Placement
Legend.
(d) Transfer and Exchange of Definitive Bonds for Beneficial
Interests.
(i) Restricted Definitive Bonds to Beneficial Interests in
Restricted Global Bonds. If any Holder of a Restricted Definitive Bond proposes
to exchange such Bond for a beneficial interest in a Restricted Global Bond or
to transfer such Restricted Definitive Bonds to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Bond, then,
upon receipt by the Security Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Bond
proposes to exchange such Bond for a beneficial interest in a Restricted
Global Bond, a certificate from such Holder in the form of Exhibit E
hereto, including the certifications in item (2)(b) thereof;
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(B) if such Restricted Definitive Bond is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit D hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Bond is being
transferred to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit D hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Bond is being
transferred pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit D hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Bond is being
transferred to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit D hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Bond is being
transferred to either Issuer or any of its subsidiaries, a certificate to
the effect set forth in Exhibit D hereto, including the certifications in
item (3)(b) thereof; or
(G) if such Restricted Definitive Bond is being
transferred pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit D hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Bond, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Bond, in the case of clause
(B) above, the 144A Global Bond, in the case of clause (C) above, the
Regulation S Global Bond, and in all other cases, the IAI Global Bond.
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(ii) Restricted Definitive Bonds to Beneficial Interests in
Unrestricted Global Bonds. A Holder of a Restricted Definitive Bond may exchange
such Bond for a beneficial interest in an Unrestricted Global Bond or transfer
such Restricted Definitive Bond to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Bond only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of Transmittal that it
is not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Bonds or (3) a Person who is an affiliate (as defined in
Rule 144) of either Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the Holder of such Definitive Bonds proposes to
exchange such Bonds for a beneficial interest in the Unrestricted
Global Bond, a certificate from such Holder in the form of Exhibit E
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Bonds proposes to
transfer such Bonds to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Bond, a
certificate from such Holder in the form of Exhibit D hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Security
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Security Registrar
to the effect that such exchange or transfer is in compliance with the
Securities Act and that the
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restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.9(d)(ii), the Trustee shall cancel the
Definitive Bonds and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Bond.
(iii) Unrestricted Definitive Bonds to Beneficial Interests in
Unrestricted Global Bonds. A Holder of an Unrestricted Definitive Bond may
exchange such Bond for a beneficial interest in an Unrestricted Global Bond or
transfer such Definitive Bonds to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Bond at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Bond and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Bonds.
If any such exchange or transfer from a Definitive Bond to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Bond has not yet been issued,
the Issuer shall issue and, upon receipt of an authentication order in
accordance with Section 2.4 hereof, the Trustee shall authenticate one or more
Unrestricted Global Bonds in an aggregate principal amount equal to the
principal amount of Definitive Bonds so transferred.
(e) Transfer and Exchange of Definitive Bonds for Definitive Bonds.
Upon request by a Holder of Definitive Bonds and such Holder's compliance with
the provisions of this Section 2.9(e), the Registrar shall register the transfer
or exchange of Definitive Bonds. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Security
Registrar the Definitive Bonds duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Security Registrar duly
executed by such Holder or by its attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.9(e).
(i) Restricted Definitive Bonds to Restricted Definitive
Bonds. Any Restricted Definitive Bond may be transferred to and registered in
the name
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of Persons who take delivery thereof in the form of a Restricted Definitive Bond
if the Security Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit D hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the form of
Exhibit D hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit D hereto,
including the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Bonds to Unrestricted Definitive
Bonds. Any Restricted Definitive Bond may be exchanged by the Holder thereof for
an Unrestricted Definitive Bond or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Bond if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of Transmittal that it
is not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Bonds or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
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(1) if the Holder of such Restricted Definitive Bonds
proposes to exchange such Bonds for an Unrestricted Definitive Bond,
a certificate from such Holder in the form of Exhibit E hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Bonds
proposes to transfer such Bonds to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Bond, a
certificate from such Holder in the form of Exhibit D hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Security
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Issuers to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Bonds to Unrestricted Definitive
Bonds. A Holder of Unrestricted Definitive Bonds may transfer such Bonds to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Bond. Upon receipt of a request to register such a transfer, the Security
Registrar shall register the Unrestricted Definitive Bonds pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue and,
upon receipt of an authentication order in accordance with Section 2.4, the
Trustee shall authenticate (i) one or more Unrestricted Global Bonds in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Bonds tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Bonds and (z) they are not affiliates (as defined in Rule 144) of the Issuers,
and accepted for exchange in the Exchange Offer and (ii) Definitive Bonds in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Bonds accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Bonds, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global
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Bonds to be reduced accordingly, and the Issuers shall execute and the Trustee
shall authenticate and deliver to the Persons designated by the Holders of
Definitive Bonds so accepted Definitive Bonds in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all
Global Bonds and Definitive Bonds issued under this Indenture or a Supplemental
Indenture unless specifically stated otherwise in the applicable provisions of
this Indenture or a Supplemental Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Bond and each Definitive Bond (and all Bonds issued in exchange
therefor or substitution thereof) shall bear the legend in substantially
the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, EACH OF THE HOLDERS OF THIS SECURITY AND ANY
OWNERS OF INTERESTS HEREIN AGREES UNLESS THIS SECURITY HAS SOONER BEEN
REGISTERED UNDER THE SECURITIES ACT THAT BEGINNING FROM TWO YEARS AFTER
THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST
DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL
OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD
REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) (1) TO THE ISSUERS OR ANY
AFFILIATE THEREOF, (2) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN THE
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RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (4)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (2) THROUGH (5) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES, AND (B) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. UNLESS THE ISSUERS DETERMINE OTHERWISE IN
ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE ISSUES
UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD
REFEREED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE
LATER OR (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST
DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF WERE THE BENEFICIAL
OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF)"
(B) Notwithstanding the foregoing, any Global Bond or
Definitive Bond issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.9
(and all Bonds issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Bond Legend. Each Global Bond shall bear a legend
in substantially the following form:
"THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT
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THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE
INDENTURE, (III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS
GLOBAL BOND MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUERS."
(iii) Regulation S Temporary Global Bond Legend. The
Regulation S Temporary Global Bond shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL BOND, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED BONDS,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL BOND SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Bonds. At such time as
all beneficial interests in a particular Global Bond have been exchanged for
Definitive Bonds or a particular Global Bond has been redeemed, repurchased or
canceled in whole and not in part, each such Global Bond shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.13 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Bond
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Bond or for Definitive
Bonds, the principal amount of Bonds represented by such Global Bond shall be
reduced accordingly and an endorsement shall be made on such Global Bond by the
Trustee or by the Registered Depositary at the direction of the Trustee to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Bond, such other Global Bond shall be
increased accordingly and an endorsement shall be
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made on such Global Bond by the Trustee or by the Registered Depositary at
the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Bonds and
Definitive Bonds upon the Issuers' order or at the Security Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Bond or to a Holder of a Definitive Bond for any
registration of transfer or exchange, but the Security Registrar and the Issuers
may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.7, 6.6, or 12.6 hereof).
(iii) The Security Registrar shall not be required to register
the transfer of or exchange any Bond selected for redemption in whole or in
part, except the unredeemed portion of any Bond being redeemed in part.
(iv) All Global Bonds and Definitive Bonds issued upon any
registration of transfer or exchange of Global Bonds or Definitive Bonds shall
be the valid obligations of the Issuers, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Global Bonds or Definitive
Bonds surrendered upon such registration of transfer or exchange.
(v) The Security Registrar and the Issuers shall not be
required (A) to issue, to register the transfer of or to exchange any Bonds
during a period beginning at the opening of business 15 days before the day of
any selection of Bonds for redemption under Section 6.2 hereof and ending at the
close of business on the day of selection, (B) to register the transfer of or to
exchange any Bond so selected for redemption in whole or in part, except the
unredeemed portion of any Bond being redeemed in part or (C) to register the
transfer of or to exchange a Bond between a record date and the next succeeding
Scheduled Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Bond, the Trustee, any Agent and the Issuers may deem and treat
the Person in whose
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name any Bond is registered as the absolute owner of such Bond for the purpose
of receiving payment of principal of and interest on such Bonds and for all
other purposes, and none of the Trustee, any Authorized Agent or the Issuers
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Bonds and
Definitive Bonds in accordance with the provisions of Sections 2.2 and 2.4
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Security Registrar pursuant to this
Section 2.9 to effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.10 Mutilated, Destroyed Lost and Stolen Bonds. If (a) any
mutilated Bond is surrendered to the Trustee, the Partnership or the Security
Registrar, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Bond, and (b) there is delivered to the
Partnership, the Security Registrar and the Trustee evidence to their
satisfaction of the ownership and authenticity of such mutilated, destroyed,
lost or stolen Bond, and such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the
Partnership, the Security Registrar or the Trustee that such Bond has been
acquired by a bona fide purchaser, the Funding Corporation and the Partnership
shall execute and upon the Funding Corporation's and the Partnership's request
the Trustee shall authenticate and make available for delivery, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of
the same series and of like tenor and principal amount, bearing a number not
then outstanding. If, after the delivery of such new Bond, a bona fide purchaser
of the original Bond in lieu of which such new Bond was issued presents for
payment such original Bond, the Funding Corporation, the Partnership and the
Trustee shall be entitled to recover such new Bond from the Person to whom it
was delivered or any Person taking therefrom, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expense incurred by the Funding
Corporation, the Partnership or the Trustee in connection therewith.
Notwithstanding the foregoing, in case any such mutilated,
destroyed, lost or stolen Bond has become or is about to become due and payable,
the Funding Corporation and the Partnership, upon satisfaction of the conditions
set forth in clauses (a) and (b) of the preceding paragraph, may, instead of
issuing a new Bond, pay such Bond.
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Upon the issuance of any new Bond under this Section 2.10, the
Funding Corporation or the Partnership may require the payment of a sum
sufficient to cover any Tax that may be imposed in relation thereto and any
other expenses connected therewith.
Every new Bond issued pursuant to this Section 2.10 in lieu of any
mutilated, destroyed, lost or stolen Bond shall constitute an original
additional contractual obligation of the Funding Corporation and the
Partnership, whether or not the mutilated, destroyed, lost or stolen Bond shall
be at any time enforceable by anyone, and shall be entitled to all the security
and benefits of this Indenture and the Senior Security Documents equally and
proportionately with any and all other Bonds duly issued hereunder.
The provisions of this Section 2.10 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Bonds.
Section 2.11 Payment of Principal and Interest; Principal and
Interest Rights Preserved. Principal of or interest on any Bond that is payable,
and punctually paid or duly provided for, on any Scheduled Payment Date shall be
paid to the Person in whose name such Bond (or one or more Predecessor Bonds) is
registered at the close of business on the Regular Record Date for such
principal or interest. Payment of principal of and interest on the Bonds of any
series shall (to the extent there are sufficient Available Funds) be made at the
Place of Payment (or, if such office is not in the Borough of Manhattan, The
City of New York, at either such office or an office to be maintained in such
Borough), or by check or in another manner or manners if so provided in the
Series Supplemental Indenture creating the Bonds of such series, except for the
final installment of principal payable with respect to a Bond, which shall (to
the extent there are sufficient Available Funds) be payable as provided in
Section 6.5 (in the case of Bonds redeemed) or payable upon presentation and
surrender of such Bond at the Place of Payment.
Any principal of or interest on any Bond of any series that is
payable, but is not punctually paid or duly provided for, on any Scheduled
Payment Date for an installment of principal or payment of interest shall
forthwith cease to be payable to the Holder on the relevant Regular Record Date
and such Overdue Interest or Overdue Principal may be paid, except as otherwise
provided in Article III, by the Funding Corporation or the Partnership, at its
election, in each case as provided in paragraph (a) or paragraph (b) below:
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(a) The Funding Corporation or the Partnership may elect to make
payment of all or any portion of such Overdue Interest or Overdue Principal, to
the extent there are sufficient Available Funds, to the Persons in whose names
the Bonds of such series (or their respective Predecessor Bonds) in respect of
which Overdue Interest or Overdue Principal is outstanding are registered at the
close of business on a Special Record Date for the payment of such Overdue
Interest or Overdue Principal, which shall be fixed in the following manner. The
Funding Corporation or the Partnership shall notify the Trustee and the Paying
Agent in writing of the amount of Overdue Interest or Overdue Principal proposed
to be paid on each Bond of such series and the date of the proposed payment, and
concurrently there shall be deposited with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Overdue Interest
or Overdue Principal or there shall be made arrangements acknowledged by the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Overdue Interest or Overdue Principal as provided in this paragraph.
Thereupon, the Trustee shall fix a Special Record Date for the payment of such
Overdue Interest or Overdue Principal (together with other amounts payable with
respect to such Overdue Interest or Overdue Principal) which shall not be more
than 15 nor less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Funding Corporation, the
Partnership and the Security Registrar of such Special Record Date and, in the
name and at the expense of the Partnership, shall cause notice of the proposed
payment of such Overdue Interest or Overdue Principal and the Special Record
Date therefor to be mailed, first class postage prepaid, to each Holder of a
Bond of such series at such Holder's address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Overdue Interest or Overdue Principal and the Special
Record Date therefor having been mailed as aforesaid, such Overdue Interest or
Overdue Principal shall be paid to the Persons in whose names the Bonds of such
series (or their respective Predecessor Bonds) are registered on such Special
Record Date and shall no longer be payable pursuant to the following paragraph
(b).
(b) Subject to the provisions of the other Financing Documents, the
Funding Corporation or the Partnership may make, or cause to be made, payment of
any Overdue Interest or Overdue Principal (together with other amounts payable
with respect to such Overdue Interest or Overdue Principal) in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Bonds in respect of which Overdue Interest or Overdue Principal is
outstanding may be listed, and, upon such notice
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as may be required by such exchange, if, after notice given by the Funding
Corporation or the Partnership to the Trustee of the proposed payment pursuant
to this paragraph, such payment shall be deemed reasonable by the Trustee.
Subject to the foregoing provisions of this Section 2.11, each Bond
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Bond shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Bond.
Section 2.12 Persons Deemed Owners. Subject to Section 2.11, prior
to due presentment of a Bond for registration of transfer, the Person in whose
name any Bond is registered shall be deemed to be the owner of such Bond for the
purpose of receiving payment of principal of and interest on such Bond and for
all other purposes whatsoever, whether or not such Bond be overdue, regardless
of any notice to anyone to the contrary.
Section 2.13 Cancellation; Purchase by the Funding Corporation or
the Partnership. (a) All Bonds surrendered for payment, redemption, credit
against any sinking fund payment or registration of transfer or exchange shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
for cancellation. The Funding Corporation or the Partnership may at any time
deliver to the Trustee for cancellation (i) any Bonds previously authenticated
and delivered hereunder which the Funding Corporation or the Partnership may
have acquired in any manner whatsoever or (ii) any Bond to be replaced by a Bond
identical to the Bond to be cancelled, other than with respect to provisions
thereof amended in accordance with the terms of this Indenture, and all Bonds so
delivered shall be promptly cancelled by the Trustee. No Bonds shall be
authenticated in lieu of or in exchange for any Bonds cancelled as provided in
this Section, except as expressly permitted by this Indenture. All cancelled
Bonds held by the Trustee shall be disposed of by the Trustee in accordance with
its policy of disposal.
(b) The Funding Corporation or the Partnership may at any time
purchase any Bond in the open market or otherwise at any price and any Bond so
purchased by the Funding Corporation or the Partnership will not be deemed to
have been redeemed or cancelled until that Bond has been surrendered to the
Trustee for cancellation in accordance with Section 2.13(a) and may not be
reissued or resold.
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Section 2.14 Dating of Bonds; Computation of Interest. (a) Except as
otherwise provided in the Series Supplemental Indenture relating to the Bonds of
a series, each Bond of such series shall be dated the date of its
authentication.
(b) Except as otherwise provided in the Series Supplemental
Indenture relating to the Bonds of a series, interest on the Bonds of such
series shall be computed on the basis of a 360day year consisting of twelve
30day months.
Section 2.15 Source of Payments Limited; Rights and Liabilities of
the Funding Corporation and the Partnership. Except as otherwise specifically
provided in this Indenture or the other Financing Documents, all payments of
principal, premium, if any, and interest to be made in respect of the Bonds and
this Indenture shall be made only from the assets of the Funding Corporation and
the Partnership and the income and proceeds received by the Trustee or the
Administrative Agent pursuant to the Financing Documents and allocable to the
Trustee therefrom. Each Holder, by its acceptance of a Bond, agrees that (a) it
will look solely to the assets of the Funding Corporation and the Partnership
and the income and proceeds received by the Trustee or the Administrative Agent
pursuant to the Financing Documents and allocable to the Trustee therefrom to
the extent available for distribution to such Holder as herein provided or as
provided in the Senior Security Documents and (b) recourse shall be otherwise
limited in accordance with Section 14.1.
Section 2.16 Parity of Bonds. All Bonds of a series issued and
Outstanding hereunder rank on a parity with each other Bond of the same series
and with all Bonds of each other series, and each Bond of a series shall be
secured equally and ratably by this Indenture and the Senior Security Documents
with each other Bond of the same series and with all Bonds of each other series,
without preference, priority or distinction of any one thereof over any other by
reason of difference in time of issuance or otherwise, and each Bond of a series
shall be entitled to the same benefits and security in this Indenture and the
Senior Security Documents as each other Bond of the same series and with all
Bonds of each other series.
ARTICLE III
ESTABLISHMENT OF FUNDS
Section 3.1 Establishment of Indenture Funds and Sub-Funds. The
Securities Intermediary hereby establishes the following special, segregated and
irrevocable cash collateral funds and sub-funds in the form of noninterest
bearing accounts
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(each such Indenture Fund being (or to be, when established) a "securities
account" as such term is defined in Section 8501(a) of the New York UCC), which
shall be maintained at all times until the termination of this Indenture:
(i) Bond Fund; and
(ii) an Interest Sub-Fund, a Principal Sub-Fund and a Redemption
Sub-Fund created within the Bond Fund.
Certain additional sub-funds within certain of the Indenture Funds
may be established and created from time to time in accordance with this Article
III.
All such amounts shall constitute a part of the Indenture Collateral
and shall not constitute payment of any Indebtedness or any other obligation of
the Funding Corporation or the Partnership until applied as hereinafter
provided.
Section 3.2 Security Interest. As collateral security for the prompt
and complete payment and performance when due of all the Bonds, the Funding
Corporation and the Partnership have pledged, assigned, hypothecated and
transferred to the Trustee for the benefit of the Trustee and the Holders, and
have granted to the Trustee for the benefit of the Trustee and the Holders, a
Lien on and security interest in and to, (a) each Indenture Fund and (b) all
cash, investments and securities at any time on deposit in any Indenture Fund,
including all income or gain earned thereon.
Section 3.3 Bond Fund. The following amounts received by the Trustee
shall be deposited as promptly as practicable into the Bond Fund directly upon
receipt from the Administrative Agent or as soon as practicable after receipt,
in each case in accordance with this Section 3.3: (i) all payments received from
the Administrative Agent in respect of interest payable on the Bonds; (ii) all
payments received from the Administrative Agent in respect of principal payable
of the Bonds; (iii) all payments received from the Administrative Agent in
respect of any redemption, in whole or in part, of the Bonds; (iv) all payments
received from the Administrative Agent in respect of any withdrawal from the
Debt Service Reserve Account pursuant to Section 3.6 of the Common Agreement;
(v) any amounts earned from the investment of the moneys in any of the Bond
Fund, Interest Sub-Fund, Principal Sub-Fund or Redemption Sub-Fund pursuant to
Section 3.7; and (vi) all other amounts (howsoever earned) and proceeds of any
nature whatsoever received from the Administrative Agent in respect of the
Bonds.
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The Funding Corporation and the Partnership hereby agree and confirm (x) that
they have irrevocably instructed each of the Collateral Agent and the
Administrative Agent and (y) that each of the Collateral Agent and the
Administrative Agent has received such instruction, to make all such payments
directly to the Trustee for deposit in the Bond Fund in accordance with the
terms of this Section 3.3. If, notwithstanding the foregoing, any such amounts
are remitted directly to the Funding Corporation or the Partnership (or any
Affiliate of the Funding Corporation or the Partnership), the Funding
Corporation or the Partnership shall (or shall cause any such Affiliate to) hold
such payments in trust for the Trustee and shall promptly remit such payments to
the Trustee for deposit in the Bond Fund, in the form received, with any
necessary endorsements.
(i) Upon the deposit into the Bond Fund of any payment in
respect of interest on the Bonds pursuant to the Common Agreement (other than as
described in clause (iii) immediately below), the Trustee shall separately
segregate such payments in the Interest Sub-Fund of the Bond Fund until
application of such amounts pursuant to Section 3.4.
(ii) Upon the deposit into the Bond Fund of any payment in
respect of principal of the Bonds pursuant to the Common Agreement (other than
as described in clause (iii) immediately below), the Trustee shall separately
segregate such payments in the Principal Sub-Fund of the Bond Fund until
application of such amounts pursuant to Section 3.5.
(iii) Upon the deposit into the Bond Fund of the proceeds of
any payment in respect of any redemption pursuant to the Common Agreement, the
Trustee shall separately segregate such payments in the Redemption Sub-Fund of
the Bond Fund until application of such amounts pursuant to Section 3.6 and
Article VI.
(iv) In the event the Trustee receives moneys in respect of
Bonds without adequate written instruction with respect to the proper sub-fund
into which such moneys are to be deposited, the Trustee shall deposit such
moneys into the Bond Fund and segregate such moneys from all other amounts on
deposit in the Bond Fund and notify the Funding Corporation and the Partnership
of the receipt of such moneys. Upon receipt of' written instructions from the
Funding Corporation or the Partnership, the Trustee shall transfer such moneys
to the Interest Sub-Fund, the Principal Sub-Fund or the Redemption Sub-Fund of
the Bond Fund as specified by the Funding Corporation or the Partnership.
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Section 3.4 Interest Sub-Fund; Application of Moneys in Interest
Sub-Fund. Subject to the provisions of Section 2.11, The Funding Corporation and
the Partnership hereby irrevocably authorize the Trustee on each Payment Date to
make withdrawals of moneys to the extent then available in the Interest Sub-Fund
of the Bond Fund and not segregated for any specific purpose and to apply such
moneys in the following order:
(i) First: to the payment of all Overdue Interest on the Bonds
Outstanding, among all Bonds as to which there is Overdue Interest without
any preference or priority as to series or maturity, pro rata as to the
amount of interest due; and
(ii) Second: after making the payment specified in clause (i),
to the payment of all interest then due and payable on the Bonds
Outstanding, without any preference or priority as to series or maturity,
pro rata as to the amount of interest due.
Section 3.5 Principal Sub-Fund; Application of Moneys in Principal
Sub-Fund. Subject to the provisions of Section 2.11, the Funding Corporation and
the Partnership hereby irrevocably authorize the Trustee on each Payment Date to
make withdrawals of moneys to the extent then available in the Principal
Sub-Fund of the Bond Fund and not segregated for any specific purpose and to
apply such monies in the following order:
(i) First: to the payment of all Overdue Principal of the
Bonds Outstanding among all Bonds as to which there is Overdue Principal
without any preference or priority as to series or maturity, pro rata as
to the amount of principal due; and
(ii) Second: after making the payment specified in clause (i),
to the payment of all principal then due and payable on the Bonds
Outstanding, without any preference or priority as to series or maturity,
pro rata as to the amount of principal due.
Section 3.6 Redemption Sub-Fund; Application of Moneys in Redemption
Sub-Fund. The Funding Corporation and the Partnership hereby irrevocably
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authorize the Trustee, on each Redemption Date, to make withdrawals of moneys to
the extent then available in the Redemption Sub-Fund of the Bond Fund and not
segregated for any specific purpose and to apply such moneys in the following
order:
(i) First: to the payment of all Overdue Principal of the
Bonds Outstanding among all Bonds as to which there is Overdue Principal
without any preference or priority as to series or maturity, pro rata as
to the amount of principal due; and
(ii) Second: after making the payment specified in clause (i),
to the payment of principal of the Bonds Outstanding, without any
preference or priority as to series or maturity, pro rata as to the amount
of principal due.
Section 3.7 Investment of Funds. Moneys held in any Indenture Fund
created by and held under this Indenture shall be invested and reinvested in
Permitted Investments at the written direction (which may be in the form of a
standing instruction) of an Authorized Representative of the Partnership;
provided however, that at any time when (a) a Responsible Officer of the Trustee
has received written notice that an Event of Default shall have occurred and be
continuing or (b) an Authorized Representative of the Partnership has not timely
furnished such a written direction or, after a request by the Trustee, has not
so confirmed a standing instruction to the Trustee, the Trustee shall invest
such moneys only in Permitted Investments of the type specified in clause (vi)
of the definition of Permitted Investments, provided that the Trustee shall have
no obligation to obtain the highest yield. Such investments shall mature in such
amounts and have maturity dates or be subject to redemption at the option of the
holder thereof on or prior to maturity as needed for the purposes of such
Indenture Funds, but in no event shall such investments mature more than 180
days after the date acquired. The Trustee may at any time and from time to time
liquidate any or all of such investments prior to their maturity as needed in
order to effect the withdrawals contemplated by this Article III. In the event
any such investments are redeemed prior to the maturity thereof or at any other
time, the Trustee shall not be liable for any loss or penalties relating
thereto. Any income or gain realized from such investments shall be deposited
into the Indenture Fund from which such moneys came. Any loss shall be charged
to the applicable Indenture Fund. The Trustee shall not be liable for any such
loss other than by reason of its willful misconduct or gross negligence. For
purposes of any income tax payable on account of any income or gain on an
investment, such income or gain shall be for the account of the Partnership.
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Section 3.8 Disposition of Indenture Funds Upon Retirement of Bonds.
Upon the payment in full of the principal of and interest on all series of Bonds
such that no Bonds are Outstanding, and after payment to the Trustee of all
amounts, if any, due to the Trustee in respect of this Indenture and the other
Transaction Documents, all amounts held in the Indenture Funds shall be
transferred to the Partnership upon its written request.
Section 3.9 Fund Balance Statements. The Trustee shall, on a monthly
basis and at such other times as the Partnership may from time to time
reasonably request, provide to the Partnership and the Funding Corporation fund
balance statements in respect of each of the Indenture Funds, sub-funds and
amounts segregated in any of the Indenture Funds. Such balance statements shall
also include deposits, withdrawals and transfers from and to any Indenture Fund,
sub-fund or segregated amount.
ARTICLE IV
AFFIRMATIVE COVENANTS
Section 4.1 Affirmative Covenants of the Partnership. The
Partnership hereby covenants and agrees, for so long as any Bonds are
Outstanding hereunder or under any Series Supplemental Indenture, as follows:
(a) Maintenance of Existence and Properties. The Partnership shall
at all times (i) preserve and maintain in full force and effect (A) its
existence and its good standing under the laws of the State of Delaware and (B)
its qualification to do business in each other jurisdiction in which the
character of its properties or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to result in a Material Adverse Effect, and (ii) preserve
and maintain (A) good and marketable title to or valid leasehold or other rights
to or in the Project and all other Senior Collateral owned or leased by it
(subject only to Permitted Liens and to the Partnership's ability to sell,
lease, transfer or otherwise dispose of any such property in accordance with the
terms hereof) and (B) a valid and subsisting grant of the Easements (subject
only to Permitted Liens and to the Partnership's ability to sell, lease,
transfer or otherwise dispose of any such property in accordance with the terms
hereof), except in the case of clauses (ii)(A) and (ii)(B) where the failure to
so preserve and maintain would not reasonably be expected to result in a
Material Adverse Effect.
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(b) Maintenance of Government Approvals. The Partnership shall
obtain and maintain, or cause to be obtained and maintained, in full force and
effect all Governmental Approvals required to be obtained in the name of the
Partnership from time to time in connection with (i) the ownership,
construction, operation and maintenance of the Project as contemplated by the
Project Documents and (ii) the issuance of the Bonds, the borrowing by the
Partnership under the Financing Documents and the execution, delivery and
performance by the Partnership of the Transaction Documents to which it is a
party, except, in either case, where failure to so obtain or maintain any such
Governmental Approval would not reasonably be expected to result in a Material
Adverse Effect. The Partnership shall furnish copies of any material
Governmental Approvals obtained or made after the Closing Date to the Trustee,
the Collateral Agent and the Independent Engineer promptly upon receipt.
(c) Compliance with Laws and Governmental Approvals. The Partnership
shall comply with all Applicable Laws and Governmental Approvals, except where
noncompliance would not reasonably be expected to result in a Material Adverse
Effect.
(d) Insurance. Subject to the last sentence of this Section 4.1(d),
the Partnership shall maintain or cause to be maintained the insurance required
by the Project Documents and as set forth in Appendix I that is specified as
insurance to be maintained by the Partnership. All policies of insurance shall
name the Collateral Agent as an additional insured or loss payee pursuant to a
loss payee endorsement in the form set forth in Appendix I, as appropriate. If
at any time any of the required insurance shall no longer be available on
commercially reasonable terms, the Partnership shall procure substitute
insurance coverage satisfactory to the Insurance Consultant that is then the
most equivalent to the required coverage and that is then available on
commercially reasonable terms.
(e) Pari Passu. The Partnership will cause its payment obligations
with respect to the Bonds to constitute direct senior secured obligations of the
Partnership and to rank senior in priority of payment, in right of security and
in all other respects to all other Indebtedness of the Partnership, except for
(i) other Senior Secured Obligations as to which the Intercreditor Agreement and
the Common Agreement establish the priority of payment, right of security and
other rights and (ii) Liens with respect to Bonding Arrangements and Capital
Lease obligations or "purchase money" Liens which may rank senior as to the
assets subject to such Liens in right of security to the Bonds and the other
Senior Secured Obligations.
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(f) Information: The Partnership shall deliver to the Trustee, the
Collateral Agent, the Rating Agencies and, with respect to clauses (i) and (ii),
any Holder or owner of a beneficial interest in a Global Bond upon request
(which request may indicate that it is a continuing request for such information
until further notice from such Holder or such owner of a beneficial interest in
a Global Bond to the contrary) and, with respect to clause (vi), the Independent
Engineer:
(i) As soon as available but, in any event, within 45 days
after the close of each of the first three quarterly accounting periods in
each Fiscal Year (commencing with the quarter ending June 30, 1999), a
complete unaudited balance sheet of the Partnership as at the end of such
quarterly period with related statements of income and partners' capital
and statements of cash flows for such quarterly period and for the elapsed
portion of the Fiscal Year ended with the last day of such quarterly
period, prepared in accordance with GAAP, consistently applied and,
commencing with the quarter ending June 30, 2000, setting forth
comparative unaudited figures for the related periods in the prior Fiscal
Year, all of which shall be accompanied by a certificate of an Authorized
Representative of the Partnership to the effect that such financial
statements present fairly the financial condition and results of operation
of the Partnership on the dates and for the periods indicated, subject to
normal year-end audit adjustments;
(ii) As soon as available but, in any event, within 120 days
after the close of each Fiscal Year (commencing with the Fiscal Year ended
December 31, 1999), the following: (A) a balance sheet of the Partnership
as at the end of such Fiscal Year with the related statements of income
and partners' capital and statements of cash flows for such Fiscal Year,
in each case setting forth comparative figures for the preceding Fiscal
Year and certified by a nationally recognized independent accounting firm
(the "Auditors") (all such statements being in agreement with the
Partnership's books of account and prepared in accordance with GAAP,
consistently applied); and (B) a report or other written communication
from the Auditors indicating whether, in the course of their regular audit
of the financial statements of the Partnership, the Auditors obtained
knowledge of any Default or Event of Default which has occurred and is
continuing (and, in the event the Auditors obtained any such knowledge,
indicating the nature of such Default or Event of Default);
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(iii) Promptly after the Partnership's receipt thereof, a copy
of any management letter or other similar communication received by the
Partnership from the Auditors in relation to the Partnership's financial,
accounting and other systems, management or accounts;
(iv) At the time of the delivery of the financial statements
provided for in clause (i) or (ii) immediately above, a certificate of an
Authorized Officer of the Partnership to the effect that, to such
officer's Knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof and what action the
Partnership is taking or proposes to take in response thereto;
(v) (A) Promptly, but in all cases within 10 Business Days
after the Partnership obtains Knowledge thereof, notice of any event which
constitutes a Default or an Event of Default, specifying the nature of
such Default or Event of Default and any steps the Partnership is taking
or proposes to take to remedy the same, and (B) promptly, and in any event
within 10 Business Days after the Partnership obtains Knowledge thereof,
notice of:
(1) any litigation, arbitration or governmental
proceeding (other than any governmental proceeding in the ordinary
course of business) pending (a) against the Partnership or the
Funding Corporation or (b) with respect to any Transaction Document
to which the Partnership or the Funding Corporation is a party,
which, in either case, individually or in the aggregate would, if
adversely determined, reasonably be expected to result in a Material
Adverse Effect;
(2) the occurrence and continuance of any Expropriation
Event that could reasonably be expected to give rise to
Expropriation Proceeds in an amount in excess of $5,000,000 (without
regard to the existence of a Good Faith Contest in respect thereof);
(3) any change in the Authorized Representatives of the
Partnership or the Funding Corporation, accompanied by certified
specimen signatures of any Authorized Representatives so appointed;
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(4) (a) any actual or proposed cure plan, termination,
recission or discharge (otherwise than by performance) under any
Project Document, and (b) any actual amendment of any provision of
any Project Document or actual waiver of any provision of any
Project Document;
(5) (a) any material notice or correspondence received
or initiated by the Partnership or the Funding Corporation (other
than in the ordinary course of business) relating to any
Governmental Approval or any other license or authorization
necessary for the performance by the Partnership or the Funding
Corporation of their respective obligations under the Transaction
Documents and (b) any material report, notice, correspondence or
other document received by the Partnership pursuant to a Project
Document;
(6) any notice received by the Partnership purporting to
cancel or materially alter the terms of any insurance policy which
the Partnership is required to maintain pursuant to clause (d) of
this Section 4.1; or
(7) any pending Environmental Claim against the
Partnership which involves a claim or claims in excess of $3,000,000
or would reasonably be expected to result in a Material Adverse
Effect; and
(vi) Monthly until Completion, a report describing in such
detail as is reasonably acceptable to the Independent Engineer the
progress of the construction of the Project since the last prior report
provided under this clause (vi), identifying issues known to the
Partnership which could affect the cost of the Project and the completion
schedule, and providing information, to the extent known to the
Partnership, regarding (A) construction progress on the gas pipeline
interconnection, (B) the status of the electrical transmission facilities
to be constructed by Entergy and TVA, (C) construction progress on the
transmission lines to be constructed by the Partnership, and (D)
construction progress on the Water System.
(g) Securities Act Information: So long as any of the Bonds are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, unless at the time the Partnership and the Funding Corporation
are subject to and in compliance
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with the reporting requirements of Sections 13 and 15(d) of the Exchange Act,
the Partnership shall provide to any Holder or beneficial owner of an interest
in a Global Bond or any prospective purchaser of Bonds designated by a Holder or
beneficial owner of an interest in a Global Bond, upon the request of such
Holder, beneficial owner or prospective purchaser, the information described in
Rule 144A(d)(4) under the Securities Act.
(h) Construction of the Project. The Partnership shall cause the
construction of the Project to be completed in a timely manner (except for
interruptions provided for or permitted in the EPC Contract or the other supply
or construction contracts relating to the Project or due to force majeure (as
defined in the EPC Contract or any such other contract)), which force majeure
events the Partnership will use commercially reasonable efforts to mitigate),
and in accordance with prudent utility practices, all material Applicable Laws
and Governmental Approvals and the material Project Documents. The Partnership
shall at all times cause a complete set of the current and (when available)
as-built plans (and all supplements thereto) relating to the Project, to the
extent any such plans are required under the EPC Contract to be provided by the
EPC Contractor, to be maintained on the Site or the EPC Contractor's offices and
available for inspection by the Independent Engineer.
(i) Operation and Maintenance. The Partnership shall or shall cause
the Operator and/or one or more other qualified operators to use, maintain and
operate the Project and the Site in compliance with prudent utility practices,
all material Applicable Laws and Governmental Approvals and the material Project
Documents.
(j) Annual Operating Budget. Not less than 60 days prior to (A) the
scheduled Commercial Operation Date, and, thereafter (B) the commencement of
each Fiscal Year, the Partnership shall submit to the Independent Engineer a
proposed annual operating budget, detailed by month (the "Annual Operating
Budget"). The first Annual Operating Budget shall cover the period from the
Commercial Operation Date through the end of the Fiscal Year in which the
Commercial Operation Date occurs or, if such period consists of less than 6
months, through the end of the immediately succeeding Fiscal Year. Each Annual
Operating Budget (other than the first Annual Operating Budget referred to
above) shall be, in all material respects, consistent with the provisions of the
Project Documents and shall specify the Partnership's good faith estimate of the
power sales pursuant to the Power Purchase Agreements and/or sales into the
market, as applicable, the rates and revenues for such sales, all O&M Costs and
working capital requirements, all
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Major Maintenance Expenditures, a forecast of personnel to operate and maintain
the Project and a periodic inspection, maintenance and repair schedule, in each
case, for the applicable year. To the extent the Independent Engineer shall have
provided its comments, if any, to the Partnership within 30 days of the
Independent Engineer's receipt of the proposed Annual Operating Budget, the
Partnership shall reasonably consider such comments in its preparation of a
final Annual Operating Budget, which shall then be provided to the Trustee, the
Collateral Agent, the Independent Engineer and the Rating Agencies.
(k) Major Maintenance Plan. The Partnership shall include in each
Annual Operating Budget a reassessment of (i) the anticipated scheduling and
probable cost of Major Maintenance Expenditures for such year (taking into
account such anticipated Major Maintenance Expenditures as are covered by the
Parts Agreement so long as same shall be in full force and effect), and (ii) the
Major Maintenance Reserve Requirement. The Major Maintenance Reserve Requirement
shall be modified in accordance with Section 3.5 of the Common Agreement.
(l) Insurance Report. Within 120 days after the end of each Fiscal
Year, the Partnership shall submit to the Trustee, the Collateral Agent and the
Rating Agencies an Officer's Certificate of the Partnership (i) confirming that
all insurance policies required pursuant to clause (d) of this Section 4.1 are
in full force and effect on the date thereof, (ii) confirming the names of the
companies issuing such policies, (iii) confirming the amounts and expiration
dates of such policies, (iv) including evidence of payment of all premiums or
other amounts due on such insurance policies during such Fiscal Year and (v)
stating that such policies comply with the requirements of Financing Documents.
(m) Right of Inspections. Subject to requirements of Applicable Law
and safety requirements, and upon reasonable notice, the Partnership shall
permit the Independent Engineer, the Trustee and the Collateral Agent or any
agents or representatives of any of the foregoing, from time to time, as the
Independent Engineer, the Trustee or the Collateral Agent may desire during
normal business hours (i) to conduct reasonable inspections and examinations of
the Project and the records of the Partnership relating to the Project and (ii)
to discuss the affairs, finances and accounts of the Partnership with the
principal officers of LSP Energy and the Auditors.
(n) Contractor Performance Tests. The Independent Engineer, the
Trustee and the Collateral Agent shall have the right to witness performance
tests under the
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EPC Contract scheduled by the EPC Contractor and the Partnership, and the
Independent Engineer shall verify such performance tests under the EPC Contract.
(o) Actions to Maintain EWG Status. The Partnership shall use all
reasonable efforts to maintain its status as an Exempt Wholesale Generator and
to maintain the Project's status as an Eligible Facility, and in the event of a
loss of either such status, shall act diligently to pursue remedies available to
it.
(p) Further Assurances. The Partnership shall take or cause to be
taken all action reasonably required to maintain and preserve the Liens
purported to be provided for in the Senior Security Documents to which it is a
party. The Partnership shall from time to time execute or cause to be executed
any and all further instruments (including financing statements, continuation
statements and similar statements with respect to the Liens granted in such
Senior Security Documents) required to maintain and preserve the Liens purported
to be provided for in such Senior Security Documents.
(q) Project Party Buy-Out. In the event that a Power Purchaser
notifies the Partnership that such Power Purchaser (a "Buy-Out Power Purchaser")
intends to engage in a Buy-Out, the Partnership shall provide a written notice
to the Trustee, the Collateral Agent, the Independent Engineer and the Rating
Agencies disclosing the identity of the Buy-Out Power Purchaser and any relevant
and available details regarding the Buy-Out.
(r) New Owner. The Partnership shall cause each person who becomes a
partner of the Partnership or a shareholder of the Funding Corporation or LSP
Energy to become a party to each Senior Security Document relating to the
interests acquired in the Partnership, LSP Energy or the Funding Corporation, as
applicable (and such Senior Security Documents may be so modified without the
consent of the Holders or any other Senior Secured Party), and to execute such
other documents required to preserve the Liens purported to be granted by the
Senior Security Documents and to furnish to the Trustee and the Collateral Agent
such documents, certificates or legal opinions from counsel to such person and
the Partnership with respect to the foregoing as the Trustee or the Collateral
Agent shall reasonably request (in each case in form and substance substantially
consistent with the correlative documents, certificates and legal opinions from
counsel delivered on the Closing Date).
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(s) Use of Proceeds. The Partnership shall use the proceeds of the
Bonds and the Ordinary Equity Contributions only to pay the Closing Date
Payments, Project Costs and O&M Costs, except to the extent otherwise permitted
under the Financing Documents.
(t) Taxes. The Partnership shall, prior to the time penalties shall
attach thereto, (i) file, or cause to be filed, all tax and information returns
that are required to be, or are required to have been, filed by it in any
jurisdiction, and (ii) pay or cause to be paid all Taxes shown to be, or to have
been, due and payable on such returns and all other Taxes lawfully imposed and
payable by it, to the extent the same shall have become due and payable, except
to the extent there is a Good Faith Contest thereof by the Partnership.
(u) Fuel Plan. The Partnership shall deliver to the Trustee, the
Collateral Agent and the Rating Agencies no later than 6 months prior to the
earlier of (i) the expiration of the VEPCO Initial Term (if the term of such
Power Purchase Agreement is not extended) or the VEPCO Extended Term (if the
term of such Power Purchase Agreement is extended), and (ii) the expiration of
the Aquila Initial Term (if the term of such Power Purchase Agreement is not
extended) or the Aquila Extended Term (if the term of such Power Purchase
Agreement is extended), a fuel plan reasonably acceptable to the Independent
Engineer and the Market Consultant.
(v) Electricity Market Updates. The Partnership shall cause the
Market Consultant to provide updated electricity price projections (i) if the
Partnership reasonably believes that such updated projections are necessary to
allow the Partnership to make certifications for purposes of satisfying the
Distribution Conditions or for determining whether the Partnership is permitted
to incur Additional Indebtedness, and (ii) every three years if required to
support such certifications.
Section 4.2 Affirmative Covenants of the Funding Corporation. The
Funding Corporation hereby covenants and agrees, for so long as any Bonds are
Outstanding hereunder or under any Series Supplemental Indenture, as follows:
(a) Maintenance of Existence. The Funding Corporation shall at all
times preserve and maintain in full force and effect (i) its legal existence and
good standing under the laws of the State of Delaware and (ii) its qualification
to do business in each other jurisdiction in which the character of its
properties or the nature of its activities makes
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such qualification necessary, except where the failure to be so qualified would
not reasonably be expected to result in a Material Adverse Effect.
(b) Maintenance of Government Approvals. The Funding Corporation
shall obtain and maintain, or cause to be obtained and maintained, in full force
and effect, all Governmental Approvals required to be obtained in the name of
the Funding Corporation from time to time in connection with the issuance of the
Bonds, except where failure to so obtain or maintain any such Governmental
Approval would not reasonably be expected to result in a Material Adverse
Effect.
(c) Compliance with Laws. The Funding Corporation shall comply with
all Applicable Laws and Governmental Approvals, except where noncompliance would
not reasonably be expected to result in a Material Adverse Effect.
(d) Taxes. The Funding Corporation shall, prior to the time
penalties attach thereto, (i) file, or cause to be filed, all tax and
information returns that are required to be, or are required to have been, filed
by it in any jurisdiction, and (ii) pay or cause to be paid all Taxes shown to
be, or to have been, due and payable on such returns and all other Taxes
lawfully imposed and payable by it, to the extent the same shall have become due
and payable, except to the extent there is a Good Faith Contest thereof by the
Funding Corporation.
Section 4.3 Information Confidential. Each Person, including
Holders, beneficial owners of Bonds and prospective investors in the Bonds, who
receives information from the Partnership or the Funding Corporation pursuant to
the terms hereof agrees, by their receipt of such information, to keep
confidential such information and not to disclose the same to any other Person
without the prior written consent of the Partnership.
ARTICLE V
NEGATIVE COVENANTS
Section 5.1 Negative Covenants of the Partnership. The Partnership
hereby covenants and agrees, for so long as any Bonds are Outstanding hereunder
or under any Series Supplemental Indenture, as follows:
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(a) Amendments to Project Documents. The Partnership shall not
terminate, amend, waive or modify any of the Project Documents to which it is a
party or exercise any rights it may have to consent to any assignment of any of
the Project Documents by the other Project Party thereto or exercise any option
under any of the Project Documents to which it is a party unless such
termination, amendment, waiver, modification, assignment or exercise: (i) would
not reasonably be expected to result in a Material Adverse Effect, as certified
in an Officer's Certificate of the Partnership delivered to the Trustee and the
Collateral Agent; (ii) is reasonably necessary in order to maintain a Power
Purchase Agreement in full force and effect, as certified in an Officer's
Certificate of the Partnership delivered to the Trustee and the Collateral
Agent; (iii) is necessary in order for the Partnership to be in compliance with
Applicable Law or to be able to obtain or maintain, or comply with the terms and
conditions of, any Governmental Approval necessary for the Partnership to
conduct its business as currently conducted or as proposed to be conducted or to
permit the Project to maintain its certification as an Eligible Facility or the
Partnership to maintain its certification as an Exempt Wholesale Generator, in
each case as certified in an Officer's Certificate of the Partnership delivered
to the Trustee and the Collateral Agent; (iv) is the result of (A) a change in
tariffs or similar publicly promulgated rates approved by any Governmental
Authority which are incorporated by reference into a Project Document or (B)
implementation of provisions requiring adjustments to price or volume under, and
in accordance with, the terms of a Project Document, if the Partnership
exercises good faith and commercially reasonable efforts to negotiate price
changes under such provisions for adjustments to price so as not to result in a
Material Adverse Effect; (v) is reasonably necessary in order to implement an
Expansion Modification in connection with which it has been determined that no
Rating Downgrade will occur; or (vi) is permitted by Section 5.1(b).
(b) Change Orders. The Partnership shall not initiate or consent to
any change order under the EPC Contract unless (i) an Authorized Representative
of the Partnership certifies to the Trustee and the Collateral Agent that (A)
such change order would not reasonably be expected to result in a Material
Adverse Effect, (B) the implementation of such change order is not reasonably
expected to cause the Completion Date to occur after the Date Certain, (C) such
change order is reasonable and is consistent with sound engineering practice and
(D) unless the Independent Engineer has concurred in writing with the
certifications set forth in clauses (A), (B) and (C) above, such change order
does not individually exceed $3,000,000, or when aggregated with all other
change orders that have not been concurred with in writing or otherwise approved
or ratified by the Independent Engineer, exceed $6,000,000; or (ii) (A) such
change order is for an
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Expansion and (1) does not result in a Rating Downgrade or (2) would not
reasonably be expected to result in a Material Adverse Effect, and (B) unless
the Independent Engineer has approved such change order, such change order does
not individually exceed $3,000,000 or, when aggregated with all other change
orders that have not been concurred with in writing or otherwise approved or
ratified by the Independent Engineer, exceed $6,000,000.
(c) Indebtedness. The Partnership shall not create or incur or
suffer to exist any Indebtedness except as follows, without duplication (all
such Indebtedness, whether incurred by the Partnership or the Funding
Corporation, being referred to hereinafter as "Permitted Indebtedness"):
(i) the Senior Secured Obligations;
(ii) purchase money or Capital Lease obligations incurred to
finance assets of the Partnership that are readily replaceable personal property
with a principal amount and capitalized portion not exceeding $5,000,000 in the
aggregate outstanding at any time;
(iii) trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered;
(iv) Guarantees of Permitted Indebtedness;
(v) obligations in respect of replacements for or financings
of any VEPCO Letter of Credit;
(vi) Indebtedness which is (A) issued to the Partnership by a
partner of the Partnership or an Affiliate of the Partnership, (B) used to pay
Project Costs, O&M Costs, costs of Restoration or other costs incurred in
connection with the construction, operation or maintenance of the Project, (C)
fully subordinated in right of payment to the Bonds and (D) not secured by any
of the Senior Collateral (such Indebtedness, "Affiliate Indebtedness");
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(vii) working capital loans ("Working Capital Loans") which
(A) are used solely to pay O&M Costs, (B) do not at any time exceed $10,000,000
in aggregate principal amount and (C) are provided under an agreement which
requires that no working capital loans be outstanding for a period of at least
ten days per year;
(viii) Indebtedness incurred under any agreement providing for
the issuance of one or more irrevocable direct pay letters of credit ("Reserve
Account Letters of Credit") by a bank or other financial institution rated at
least "A" by S&P and at least "A2" by Moody's to the Administrative Agent in
order to satisfy the Partnership's obligation to maintain the Debt Service
Reserve Requirement or the Aquila PPA Reserve Requirement, in each case in
accordance with the Common Agreement; provided that neither the Partnership nor
the Funding Corporation shall be permitted to incur any Indebtedness under this
clause (viii) unless each of the conditions set forth in Section 3.6 or 3.8, as
applicable, of the Common Agreement are satisfied with respect to the incurrence
of such Indebtedness;
(ix) Indebtedness ("Additional Indebtedness") incurred in
respect of Required Modifications, Optional Modifications or Expansion
Modifications, where: (A) "Required Modifications" are (1) those modifications
or improvements reasonably necessary for the Partnership to maintain its status
as an Exempt Wholesale Generator or the Project to maintain its status as an
Eligible Facility or for the Project to remain in compliance with all Applicable
Laws and Governmental Approvals and (2) those modifications or improvements
reasonably necessary to achieve Completion after the application of all Ordinary
Equity Contributions, provided, however, that such Indebtedness for Required
Modifications may be incurred only if (i) the minimum Projected Senior Debt
Service Coverage Ratio for any Fiscal Year for the remaining term of the Bonds
(after taking into account such Indebtedness incurred for Required
Modifications, and provided that for purposes of this calculation Operating
Revenues will be based on the assumption that each Power Purchase Agreement
expires at the end of its Initial Term (as defined in such Power Purchase
Agreement) unless an extension notice has been given pursuant to such Power
Purchase Agreement) is greater than or equal to (x) 1.20/1.00 during the 100%
PPA Period, (y) 1.35/1.00 during the Two-Thirds PPA Period and (z) 1.50/1.00
during the One-Third PPA Period and the Merchant Period, as certified in an
Officer's Certificate of the Partnership and confirmed in writing by the
Independent Engineer or (2) the incurrence of such Indebtedness will not result
in a Rating Downgrade; (B) "Optional Modifications" are discretionary
modifications or improvements to the Project other than Required Modifications
or Expansion Modifications, provided,
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however, that the Partnership may incur Indebtedness for Optional Modifications
only if (1) (a) the minimum Projected Senior Debt Service Coverage Ratio for any
Fiscal Year during the remaining term of the Bonds (after taking into account
such Indebtedness incurred for Optional Modifications, and provided that for
purposes of this calculation Operating Revenues will be based on the assumption
that each Power Purchase Agreement expires at the end of its Initial Term (as
defined in such Power Purchase Agreement) unless an extension notice has been
given pursuant to such Power Purchase Agreement) is greater than or equal to (x)
1.45/1.00 during the 100% PPA Period, (y) 1.70/1.00 during the Two-Thirds PPA
Period and (z) 2.00/1.00 during the Merchant Period, as certified in an
Officer's Certificate of the Partnership and confirmed in writing by the
Independent Engineer, and (b) the average annual Projected Senior Debt Service
Coverage Ratio during the remaining term of the Bonds (after taking into account
such Indebtedness incurred for Optional Modifications, and provided that for
purposes of this calculation Operating Revenues will be based on the assumption
that each Power Purchase Agreement expires at the end of its Initial Term (as
defined in such Power Purchase Agreement) unless an extension notice has been
given pursuant to such Power Purchase Agreement) is greater than or equal to (x)
1.45/1.00 during the 100% PPA Period, (y) 1.75/1.00 during the Two-Thirds PPA
Period and (z) 2.25/1.00 during the One-Third PPA Period and the Merchant
Period, as certified in an Officer's Certificate of the Partnership and
confirmed in writing by the Independent Engineer or (2) the incurrence of such
Indebtedness will not result in a Rating Downgrade; and (C) "Expansion
Modifications" are modifications or improvements to the Project that are
designed to materially increase the net generating capacity of the Facility (as
defined in the EPC Contract), including without limitation the addition of a
fourth combined-cycle generating unit at the Site, and do not include Required
Modifications or Optional Modifications, provided, however, that the Partnership
may incur Indebtedness for Expansion Modifications only if the Partnership shall
have delivered to the Trustee confirmation from each Rating Agency that the
incurrence of such Indebtedness for such Expansion Modifications will not result
in a Rating Downgrade by such Rating Agency;
(x) surety bonds, performance bonds or similar arrangements
with third-party sureties or indemnitors or similar persons ("Bonding
Arrangements") in connection with a Good Faith Contest or otherwise permitted by
this Indenture or any other Transaction Document; and
(xi) indemnities and similar obligations, if any, arising
under the Transaction Documents, to the extent the same constitute Indebtedness.
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(d) Liens. The Partnership shall not create or suffer to exist or
permit any Lien upon or with respect to any of its properties, other than the
following ("Permitted Liens"): (i) Liens specifically created or required to be
created by this Indenture or any other Financing Document; (ii) Liens securing
Senior Secured Obligations; (iii) Liens with respect to Bonding Arrangements
permitted by this Indenture consisting of Liens on cash collateral and related
investments held as cash cover with respect thereto in an aggregate amount not
exceeding $7,000,000 plus monies so furnished from amounts otherwise available
to the partners of the Partnership as a distribution permitted in accordance
with Section 3.9 of the Common Agreement; (iv) Liens for Taxes which are either
not yet due or are due but payable without penalty or are the subject of a Good
Faith Contest by the Partnership; (v) any exceptions to title existing on the
Closing Date and set forth on the Title Policy; (vi) such defects, easements,
rights of way, restrictions, irregularities, encumbrances and clouds on title
and statutory Liens that do not materially impair the property affected thereby
and that do not individually or in the aggregate materially impair the value of
the security interests granted under the Senior Security Documents; (vii)
deposits or pledges to secure (A) statutory obligations or appeals, (B) release
of attachments, stay of execution or injunction, (C) performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases,
or (D) for purposes of like general nature in the ordinary course of business;
(viii) Liens in connection with worker's compensation, unemployment insurance,
or other social security or pension or similar obligations; (ix) legal or
equitable encumbrances deemed to exist by reason of the existence of any
litigation or other legal proceeding if the same are the subject of a Good Faith
Contest; (x) mechanics', workmen's, materialmen's, suppliers', construction or
other similar Liens arising in the ordinary course of business or incident to
the construction, operation, repair, restoration or improvement of any property
in respect of obligations which are not yet due or which are the subject of a
Good Faith Contest; (xi) Liens on assets acquired with the proceeds of
Indebtedness described in clause (c)(ii) of this Section 5.1 and Liens on cash
collateral and related investments held as cash cover with respect to
Indebtedness described in clause (c)(v) or, insofar as such Indebtedness is in
respect of a letter of credit obtained in connection with the Partnership's
obligations to Aquila, clause (c)(viii) of this Section 5.1; (xii) Liens in
favor of Aquila on the Aquila PPA Reserve Account; (xiii) Liens in favor of the
County and/or the State of Mississippi in one or more accounts that the
Partnership may establish in connection with its transfer of the Infrastructure
to the County pursuant to the Infrastructure Financing Documents; (xiv) Liens to
secure any other Permitted Indebtedness, provided that such Liens (A) are not
superior in right to the Liens provided to the Holders under the Senior Security
Documents
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and (B) secure such Permitted Indebtedness equally and ratably with the Bonds or
on a basis fully subordinated to the Bonds and (xv) Liens substantially similar
to any of the foregoing Liens described in clauses (i)(xiv), provided that any
such Lien, if foreclosed upon, would not reasonably be expected to result in a
Material Adverse Effect.
(e) Distributions. The Partnership shall not make any distribution
(including by transfer of assets or assumption or incurrence of any other
Indebtedness or liability) with respect to distributions to its equity holders
other than as permitted under Section 3.9 of the Common Agreement.
(f) Nature of Business. The Partnership shall not engage in any
business other than the construction, ownership, operation, maintenance,
administration, financing and expansion of the Project as contemplated or
permitted by the Transaction Documents.
(g) Prohibition on Fundamental Changes and Disposition of Assets.
The Partnership shall not enter into any transaction of merger or consolidation,
change its form of organization or its business, or liquidate or dissolve itself
(or suffer any liquidation or dissolution) unless contemporaneously
reconstituted with no adverse effect on the Senior Secured Parties. The
Partnership shall not purchase or otherwise acquire all or substantially all of
the assets of any other person except as contemplated by the Transaction
Documents. In addition, except as contemplated by the Transaction Documents, the
Partnership shall not sell, lease (as lessor) or transfer (as transferor) any
property or assets material to the operation of the Project except: (i) in the
ordinary course of business to the extent that (A) such property is worn out or
is no longer useful or necessary in connection with the operation of the Project
or (B) such sale, lease or transfer is required to comply with any Applicable
Law or to obtain, maintain or comply with the terms and conditions of any
Governmental Approval necessary for the Partnership to conduct its business
pursuant to the Project Documents; (ii) pursuant to the Infrastructure Financing
Documents or the Common Facilities Agreement; and (iii) real property and
related personal property and rights to be transferred to an Expansion Party for
purposes of developing an Expansion, provided that such transfer (A) does not
result in a Rating Downgrade or (B) (1) would not reasonably be expected to
result in a Material Adverse Effect (as certified by the Partnership) and (2)
will not have an adverse effect on the operation or technical integrity of the
Project, including without limitation as to availability and anticipated
financial performance (as certified by the Independent Engineer).
Notwithstanding the foregoing, the Partnership may amend or otherwise modify any
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easement agreement in order to substitute easements or specify the location of
an easement; provided that any replacement or substitute easement shall be
subject to the Lien of the Senior Security Documents.
(h) Investments. The Partnership shall not make any investment other
than Permitted Investments.
(i) Transactions with Affiliates. The Partnership shall not enter
into any transaction or agreement with any Affiliate other than (i) the
Financing Documents, the O&M Agreement and the Management Services Agreement,
and (ii) transactions and agreements on fair and reasonable terms no less
favorable to the Partnership than the Partnership would obtain in an
arm's-length transaction with a person that is not an Affiliate of the
Partnership. Prior to entering into any transaction contemplated by clause (ii)
of the preceding sentence, the Partnership shall deliver to the Trustee and the
Collateral Agent an Officer's Certificate stating that the requirements of such
clause (ii) are satisfied.
(j) Employees and Employee Plans. The Partnership shall not adopt,
establish, maintain, sponsor, administer, contribute to or participate in any
employee benefit plan subject to ERISA or the Internal Revenue Code if such plan
could reasonably be expected to give rise to any liability or obligation to
contribute that, either alone or in the aggregate with all other such
liabilities and obligations, would reasonably be expected to result in a
Material Adverse Effect.
(k) Infrastructure Financing Documents. (i) The Partnership shall
not enter into Infrastructure Financing Documents which are not in all material
respects in form and substance the same as the documents attached hereto as
Exhibit C1 and without the certifications in form and substance attached hereto
as Exhibit C2, unless each Rating Agency confirms in writing that such action
would not result in a Rating Downgrade by such Rating Agency.
(ii) The Partnership shall not approve, consent to or agree to
any decision to permit any Person to use the Infrastructure pursuant to the
terms of the Infrastructure Financing Documents, to the extent the Partnership
has the right to withhold such approval, consent or agreement under the
Infrastructure Financing Documents, unless (A) the Partnership is required to so
permit the use of the Infrastructure by such Person pursuant to the
Infrastructure Financing Documents, or (B) such approval, consent or agreement
would not reasonably be expected to result in (1) a Material Adverse Effect (as
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confirmed in writing by the Partnership) or (2) a material adverse effect on the
operation of the Project (as confirmed in writing by the Independent Engineer).
(l) Replacement Power. The Partnership shall not elect to provide
Replacement Power unless (i) it arranges for or enters into an Acceptable
Replacement Power Arrangement, and (ii) the Partnership is physically
constrained from generating and delivering power; provided that if as a result
of providing Replacement Power during any period the Partnership has incurred
cumulative losses during such period of at least $5,000,000 in excess of any
losses the Partnership would have incurred during such period as a result of
electing a derating of capacity of the Project under any Power Purchase
Agreement during such period, the Partnership shall not thereafter continue to
provide Replacement Power unless such provision of Replacement Power would not
reasonably be expected to result in a Material Adverse Effect (as certified by
the Partnership).
(m) Additional Documents. The Partnership shall not enter into any
material agreements, contracts or other arrangements or commitments other than:
(i) the Transaction Documents, (ii) such power purchase agreements, fuel supply
and transportation agreements, transmission agreements and other agreements,
contracts or other arrangements entered into by the Partnership in connection
with the purchase of fuel for or the sale of electricity from the Project,
which, in each case, do not result in the breach of, or conflict with the terms
of, any then-existing Power Purchase Agreement; (iii) Acceptable Replacement
Power Arrangements; (iv) a Common Facilities Agreement, provided that the
execution, delivery and performance by the Partnership of such agreement (a)
does not result in a Rating Downgrade or (b) (1) would not reasonably be
expected to result in a Material Adverse Effect (as certified by the
Partnership) and (2) will not have an adverse effect on the operation or
technical integrity of the Project, including without limitation as to
anticipated financial performance (as certified by the Independent Engineer);
(v) the Infrastructure Financing Documents; and (vi) agreements, contracts or
other arrangements or commitments which are (A) contemplated by the Transaction
Documents, (B) entered into by the Partnership with respect to the disposition
of assets which the Financing Documents permit the Partnership to sell,
transfer, assign, lease or sublease, (C) entered into by the Partnership in the
ordinary course of business and which are included in the construction budget or
the Annual Operating Budget, (D) in substitution for existing agreements,
contracts or other arrangements which are on substantially similar terms and
conditions or (E) entered into in connection with an Expansion and which (1) do
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not result in a Rating Downgrade or (2) would not reasonably be expected to
result in a Material Adverse Effect.
Section 5.2 Negative Covenants of the Funding Corporation. The
Funding Corporation hereby covenants and agrees, for so long as any Bonds are
Outstanding hereunder or under any Series Supplemental Indenture, as follows:
(a) Indebtedness. The Funding Corporation shall not create or incur
or suffer to exist any Indebtedness except for Permitted Indebtedness (which,
for purposes hereof, shall be aggregated with all Permitted Indebtedness
incurred by the Partnership whenever any such Permitted Indebtedness is subject
to an aggregate dollar limitation, but shall not be aggregated with the
Permitted Indebtedness incurred by the Partnership if the Funding Corporation is
the co-issuer, the co-borrower or is otherwise the co-obligor in respect of such
Indebtedness).
(b) Liens. The Funding Corporation shall not create or suffer to
exist or permit any Lien upon or with respect to any of its properties other
than Permitted Liens.
(c) Nature of Business. The Funding Corporation shall not engage in
any business other than in connection with the financing of the Project as
contemplated by the Transaction Documents.
(d) Prohibition on Fundamental Changes and Disposition of Assets.
The Funding Corporation shall not enter into any transaction of merger or
consolidation, change its form of organization or its business, or liquidate or
dissolve itself (or suffer any liquidation or dissolution) unless
contemporaneously reconstituted with no adverse effect on the Senior Secured
Parties. The Funding Corporation shall not purchase or otherwise acquire all or
substantially all of the assets of any other Person.
(e) Transactions with Affiliates. The Funding Corporation shall not
enter into any transaction or agreement with any Affiliate other than (i) the
Financing Documents and Affiliate Indebtedness and (ii) transactions and
agreements in the ordinary course of business on fair and reasonable terms no
less favorable to the Funding Corporation than the Funding Corporation would
obtain in an arm's-length transaction with a person that is not an Affiliate of
the Funding Corporation. Prior to entering into any transaction contemplated by
clause (ii) of the preceding sentence, the Funding Corporation
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shall deliver to the Trustee and the Collateral Agent an Officer's Certificate
stating that the requirements of such clause (ii) are satisfied.
(f) Permitted Investments. The Funding Corporation shall not make
any investment other than Permitted Investments.
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1 Applicability of Article. Bonds of any series that are
subject to redemption before their Final Maturity Date shall be redeemed in
accordance with their terms and (except as otherwise specified in the Series
Supplemental Indenture creating such series) in accordance with this Article VI.
Section 6.2 Election to Redeem; Notice to Trustee. The election of
the Funding Corporation or the Partnership to redeem any Bonds, otherwise than
through a sinking fund, shall be evidenced by a Funding Corporation Order or a
Partnership Order. If the Funding Corporation or the Partnership determines or
is required to redeem any Bonds, the Funding Corporation or the Partnership
shall, at least 15 days prior to the date upon which notice of redemption is
required to be given to the Holders pursuant to Section 6.4, deliver to the
Trustee a Funding Corporation Order or a Partnership Order specifying the date
on which such redemption shall occur (the "Redemption Date") as determined in
accordance with this Article VI, the series and principal amount of Bonds to be
redeemed and evidence that the moneys necessary for such redemption will be
delivered to the Trustee not later than the Business Day prior to the Redemption
Date. In the case of any redemption of Bonds prior to the expiration of any
restriction on or condition to such redemption provided in the terms of such
Bonds, the Series Supplemental Indenture relating thereto or elsewhere in this
Indenture, the Funding Corporation or the Partnership shall furnish the Trustee
with an Officer's Certificate and Opinion of Counsel evidencing compliance with
such restriction or condition.
Section 6.3 Optional Redemption; Extraordinary Mandatory Redemption;
Redemption at the Option of the Holders; Selection of Bonds to be Redeemed. (a)
The Bonds of any series shall be subject to redemption from time to time at the
option of the Funding Corporation or the Partnership only as provided in the
Series Supplemental Indenture relating thereto.
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(b) The Trustee shall apply all funds received by it pursuant to
Section 3.9(c) or Sections 3.10(a) through 3.10(d) of the Common Agreement to
the redemption of the Bonds, pro rata among each series of the Bonds, based upon
the then outstanding principal amounts of each series of Bonds, within 90 days
after the receipt by the Trustee of such funds in accordance with written
allocation instructions from the Partnership provided to the Trustee in
accordance with the notice provisions set forth in this Article VI. The
foregoing provisions of this Section 6.3(b) may be altered in a Series
Supplemental Indenture, but such altered provisions shall not be effective while
any Bonds Outstanding on the date of such Series Supplemental Indenture remain
Outstanding.
(c) If requested by any Holder, the Outstanding Bonds owned by such
Holder shall be redeemed prior to maturity, as a whole or in part, at a
Redemption Price equal to 101% of the principal amount thereof plus accrued and
unpaid interest thereon to but not including the Redemption Date, upon the
occurrence of a Change in Control. Within 5 Business Days after any such request
by a Holder, the Partnership and the Funding Corporation shall pay to the
Trustee for deposit in the Redemption Sub-Fund of the Bond Fund an amount of
funds sufficient to redeem the Outstanding Bonds owned by such Holder. The
Trustee shall apply all such funds received by it to the redemption of the Bonds
pursuant to this Section 6.3(c) as soon as practicable after the receipt by the
Trustee of such funds in accordance with written allocation instructions from
the Partnership provided to the Trustee in accordance with the notice provisions
set forth in Article VI. The foregoing provisions of this Section 6.3(c) may be
altered in a Series Supplemental Indenture, but such altered provisions shall
not be effective while any Bonds Outstanding on the date of such Series
Supplemental Indenture remain Outstanding.
(d) Except as otherwise specified herein or in the Series
Supplemental Indenture relating to the Bonds of a series, if less than all of
the Bonds of such series are to be redeemed or prepaid pursuant to Section
6.3(a), the particular Bonds of such series to be redeemed or prepaid shall be
selected by the Trustee from the Outstanding Bonds of such series not previously
called for redemption or prepayment in whole, by such method (including by lot)
as the Trustee shall deem appropriate.
(e) The Trustee shall promptly notify the Funding Corporation and
the Partnership in writing of the Bonds selected for redemption or prepayment
and, in the case of any Bonds to be redeemed or prepaid in part, the principal
amount thereof to be redeemed or prepaid.
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(f) For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption or prepayment of Bonds shall
relate, in the case of any Bonds redeemed or prepaid or to be redeemed or
prepaid only in part, to the portion of the principal amount of such Bonds that
has been or is to be redeemed or prepaid.
(g) The Funding Corporation and the Partnership shall execute and
deliver to the Trustee from time to time, for safekeeping and subsequent
authentication, a stock of definitive registered Bonds of each series in such
quantities as the Funding Corporation or the Partnership, after consultation
with the Trustee, determines to be sufficient to permit any redemption
contemplated by this Indenture.
Section 6.4 Notice of Redemption. Except as otherwise specified in
the Series Supplemental Indenture relating to the Bonds of a series to be
redeemed, notice of redemption shall be given in the manner provided in Section
1.5 to the Holders of Bonds of such series to be redeemed at least 30 days but
not more than 60 days prior to the Redemption Date. All notices of redemption
shall state:
(a) the Redemption Price (including any applicable Make-Whole
Premium);
(b) the Redemption Date;
(c) if less than all of the Outstanding Bonds of any series are to
be redeemed, the portion of the principal amount of each Bond of such series to
be redeemed in part and a statement that, on and after the Redemption Date, upon
surrender of such Bond, a new Bond or Bonds of such series in principal amount
equal to the remaining unpaid principal amount thereof will be issued;
(d) that on and after the Redemption Date, interest thereon will
cease to accrue;
(e) the Place or Places of Payment where such Bonds are to be
surrendered for payment of the Redemption Price (including any applicable
Make-Whole Premium);
(f) that the redemption is for a sinking fund, if such is the case;
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(g) that the availability in the Redemption Sub-Fund by 10:00 a.m.
New York time on the date of such redemption of an amount of immediately
available funds to pay the Bonds to be redeemed in full is a condition precedent
to the redemption; and
(h) the CUSIP number(s) of the Bonds to be redeemed.
Notice of redemption of Bonds to be redeemed shall be given by the
Funding Corporation or the Partnership or, at the Partnership's request, by the
Trustee in the name and at the expense of the Partnership.
Section 6.5 Bonds Payable on Redemption Date. Notice of redemption
having been given as aforesaid, and the conditions, if any, set forth in such
notice having been satisfied, the Bonds or portions thereof so to be redeemed
shall on the Redemption Date become due and payable, and from and after such
date such Bonds or portions thereof shall cease to bear interest. Upon surrender
of any such Bond for redemption in accordance with such notice, an amount in
respect of such Bond or portion thereof shall be paid as provided therein;
provided, however, that any payment of interest on any Bond the Scheduled
Payment Date of which is on or prior to the Redemption Date shall be payable to
the Holder of such Bond or one or more Predecessor Bonds registered as such at
the close of business on the related Regular Record Date according to the terms
of such Bond and subject to the provisions of Section 2.11.
Section 6.6 Bonds Redeemed in Part. Any Bond that is to be redeemed
only in part shall be surrendered at a Place of Payment therefor (with, if the
Funding Corporation, the Partnership or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Funding
Corporation, the Partnership and the Trustee duly executed by, the Holder
thereof or its attorney duly authorized in writing), and the Funding Corporation
and the Partnership shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Bond without service charge, a new
Bond or Bonds of the same series, of any authorized denomination requested by
such Holder and of like tenor and in aggregate principal amount equal to and in
exchange for the remaining unpaid principal amount of the Bond so surrendered.
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Section 6.7 Cancellation of Bonds. All Bonds redeemed under any
provision of this Indenture or any Series Supplemental Indenture shall forthwith
be cancelled.
ARTICLE VII
SINKING FUNDS
Section 7.1 Applicability of Article. The provisions of this Article
VII shall be applicable to any sinking fund for the retirement of the Bonds of
any series except as otherwise specified in the Series Supplemental Indenture
creating the Bonds of such series.
Section 7.2 Sinking Funds for Bonds. Any Series Supplemental
Indenture may provide for a sinking fund for the retirement of the Bonds of the
series created thereby (a "Sinking Fund") in accordance with which the Funding
Corporation and the Partnership will be required to redeem on the dates set
forth therein ("Sinking Fund Redemption Dates") Bonds of principal amounts set
forth therein ("Sinking Fund Requirements").
Except as otherwise specified in the Series Supplemental Indenture
relating to the Bonds of a series, the particular Bonds of such series, if any,
to be redeemed through a Sinking Fund shall be selected in the manner provided
in Section 6.3(d), and notice of such redemption shall be given in the manner
provided in Section 6.4.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default. The term "Event of Default," whenever
used herein, shall mean any of the following events (whatever the reason for
such event and whether it shall be voluntary or involuntary or come about or be
effected by operation of law, or be pursuant to or in compliance with any
Applicable Law), on and after the Closing Date, and any such event shall
continue to be an Event of Default if and for so long as it shall not have been
remedied:
(a) the Partnership or the Funding Corporation shall fail to pay or
cause to be paid any principal of, premium, if any, or interest on any Bond when
the same
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becomes due and payable, whether by scheduled maturity or required redemption or
by acceleration or otherwise, and such failure shall continue uncured for 15 or
more days; or
(b) any representation or warranty made by the Partnership or the
Funding Corporation herein, or in any certificate furnished to the Senior
Secured Parties or the Independent Consultants in accordance with the terms of
the Financing Documents, shall prove to have been false or misleading in any
respect as of the time made, and the fact, event or circumstance that gave rise
to such misrepresentation has resulted in or is reasonably expected to result in
a Material Adverse Effect and such misrepresentation or such Material Adverse
Effect shall continue uncured for 30 or more days from the date the Partnership
or the Funding Corporation, as applicable, obtains Knowledge thereof; provided
that if the Partnership or the Funding Corporation, as applicable, commences
efforts to cure (or to cause to be cured) such misrepresentation by curing (or
causing to be cured) the factual situation resulting in such misrepresentation
or such Material Adverse Effect within such 30day period, the Partnership or the
Funding Corporation, as applicable, may continue to effect (or cause) such cure,
and such misrepresentation shall not be deemed an Event of Default, for an
additional 90 days so long as an Authorized Representative of the Partnership or
the Funding Corporation, as applicable, certifies to the Trustee and the
Collateral Agent that such misrepresentation or such Material Adverse Effect is
reasonably capable of being cured within such period and that the Partnership or
the Funding Corporation, as applicable, is diligently pursuing (or causing) such
cure; or
(c) the Partnership shall fail to perform or observe any covenant or
agreement described in Section 4.1(d); provided, however, that the Partnership
shall have 5 Business Days grace prior to the occurrence of any Event of Default
under this clause (c) to correct or cause to be corrected any error in any
endorsement (without regard to the date that the Partnership obtained Knowledge
of such error); or
(d) either the Partnership or the Funding Corporation shall, to the
extent applicable to it, fail to perform or observe in any material respect any
covenant or agreement contained in Section 4.1(a)(i) or (s), Section 4.2(a),
Section 5.1(c), (d), (f), (g), (h) or (m) or Section 5.2(a), (b), (c), (d) or
(f), and such failure shall continue uncured for 30 or more days after the
Partnership or the Funding Corporation, as applicable, has Knowledge of such
failure; or
(e) the Partnership or the Funding Corporation shall fail to perform
or observe in any material respect any of its covenants contained in any other
provision of this
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Indenture (other than those referred to in clauses (a), (c) or (d) above) or any
other Financing Document and such failure shall continue uncured for 30 or more
days after the Partnership or the Funding Corporation, as applicable, has
Knowledge of such failure; provided that if the Partnership or the Funding
Corporation, as applicable, commences efforts to cure such default within such
30day period, the Partnership or the Funding Corporation, as applicable, may
continue to effect such cure of the default (and such default shall not be
deemed an Event of Default) for an additional 180 days so long as an Authorized
Representative of the Partnership or the Funding Corporation, as applicable,
provides an Officer's Certificate to the Trustee and the Collateral Agent
stating that such default is reasonably capable of being cured within such
period and that the Partnership or the Funding Corporation, as applicable, is
diligently pursuing the cure; or
(f) the Partnership or the Funding Corporation shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or substantially all of its
property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Bankruptcy Code or any similar or
corresponding insolvency law, (iv) file a petition seeking to take advantage of
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against such
person in an involuntary case under the Bankruptcy Code or any similar or
corresponding insolvency law, (vi) admit in writing its inability, or generally
be unable, to pay its debts as such debts become due (unless, in the case of the
Funding Corporation, another Person also is obligated on such debts), or (vii)
take any corporate or other action for the purpose of effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced with respect to the
Partnership or the Funding Corporation without the application or consent of the
Partnership or the Funding Corporation, as the case may be, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution
winding-up, or the composition or readjustment of debts, or (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of such person under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or any order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
90 or more consecutive days, or any order for relief against such person shall
be entered in an involuntary case under the Bankruptcy Code or any similar or
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corresponding insolvency law (each event described in clause (f) and (g) of this
Section 8.1, a "Bankruptcy Event"); or
(h) any Lien granted in the Senior Security Documents shall cease to
be a perfected Lien in favor of the Collateral Agent on any material portion,
taken individually or in the aggregate, of the Senior Collateral described
therein (other than with respect to property or assets which the terms of the
Financing Documents permit the Partnership to convey or transfer) with the
priority purported to be created by the Senior Security Documents; or
(i) with respect to any Transaction Document, (i) a term of such
Transaction Document (A) ceases to be a valid and binding obligation of the
parties thereto or (B) is declared unenforceable by a Governmental Authority,
(ii) such Transaction Document is terminated (prior to its normal expiration
which, in the case of any Power Purchase Agreement, shall be deemed to be its
initial term, without giving effect to any extension), or (iii) a Project Party
denies its liability with respect to a Project Document or such Project Party
defaults in respect of its obligations under such Project Document (and any
grace or cure period with respect to such failure has expired), and in each case
such event described in clauses (i), (ii) or (iii) would reasonably be expected
to result in a Material Adverse Effect; provided that none of such events
described in clauses (i), (ii) or (iii) shall be deemed an Event of Default with
respect to a Project Document if within 180 days from the occurrence of any such
event, the Partnership shall have (A) cured or caused the relevant Project Party
to cure the circumstances described in clauses (i), (ii) or (iii), as
applicable, and caused the relevant Project Party to resume performance in
accordance with the relevant Project Document, or (B) entered into a Replacement
Project Document or Replacement PPA in substitution of the relevant Project
Document which is reasonably satisfactory to the Independent Engineer; or
(j) the Partnership or the Funding Corporation shall fail to make
any payment in respect of any Indebtedness, including Permitted Indebtedness,
having an outstanding principal amount of more than $10,000,000 (other than any
amount referred to in clause (a) above) when due (subject to any applicable
grace period), and a default and acceleration shall be declared with respect to
such Indebtedness; or
(k) a final and non-appealable judgment or judgments for the payment
of money in excess of $10,000,000 shall be rendered against the Partnership or
the
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Funding Corporation, and the same shall remain unpaid or unstayed for a period
of 90 or more consecutive days after such payment is due and payable;
(l) any portion of the Total Equity Amount shall fail to be paid
when due; or
(m) an Event of Abandonment shall occur.
Section 8.2 Enforcement of Remedies. If one or more Events of
Default shall have occurred and be continuing, then, subject to the terms of the
Intercreditor Agreement:
(i) in the case of an Event of Default described in Section
8.1(f) or (g), the entire principal amount of the Bonds Outstanding, all
interest accrued and unpaid thereon, and all other amounts payable under the
Bonds and this Indenture, if any, shall automatically become due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby waived; or
(ii) in the case of an Event of Default described in:
(A) Section 8.1(a), upon the direction of the Holders of
no less than 33 1/3% in aggregate principal amount of the Outstanding
Bonds; or
(B) Section 8.1(b), (c), (d), (e), (h), (i), (j), (k),
(l) or (m), upon the direction of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Bonds;
the Trustee shall, by notice to the Partnership (with a copy to the Funding
Corporation), declare the entire principal amount of the Bonds Outstanding, all
interest accrued and unpaid thereon, and all other amounts payable under the
Bonds and this Indenture, if any, to be due and payable, whereupon the same
shall become immediately due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby waived. If an Event of
Default occurs and is continuing and if Responsible Officer of the Trustee has
actual knowledge of such Event of Default, the Trustee shall mail to each Holder
notice of the Event of Default within 30 days after receipt by the Trustee of
notice of such Event of Default. Except in the case of an Event of Default in
the payment of principal of or interest on any Bond, the Trustee may (but shall
not be obligated to)
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withhold the notice to the Holders if a committee of Responsible Officers of the
Trustee in good faith determines that withholding the notice is in the interest
of the Holders.
If an Event of Default referred to in clause (ii)(A) above shall
have occurred and be continuing, the Trustee may, but shall not be obligated to,
declare the entire principal amount of the Bonds Outstanding, all interest
accrued and unpaid thereon, and all other amounts payable under the Bonds and
this Indenture, if any, to be due and payable notwithstanding the absence of
direction from the Holders of at least 33 1/3% in aggregate principal amount of
the Bonds Outstanding directing the Trustee to accelerate the maturity of the
Bonds, unless the Holders of more than 66 2/3% of the Bonds Outstanding direct
the Trustee not to accelerate the maturity of the Bonds.
In addition, if one or more of the Events of Default referred to in
clause (ii)(B) above shall have occurred and be continuing, the Trustee may, but
shall not be obligated to, declare the entire principal amount of the Bonds
Outstanding, all interest accrued and unpaid thereon, and all other amounts
payable under the Bonds and this Indenture, if any, to be due and payable
notwithstanding the absence of direction from the Holders of at least a majority
in aggregate principal amount of the Bonds Outstanding directing the Trustee to
accelerate the maturity of the Bonds, unless the Holders of more than 50% of the
Bonds Outstanding direct the Trustee not to accelerate the maturity of the
Bonds.
(a) At any time after the principal of the Bonds shall have become
due and payable upon a declared acceleration as provided herein, and before any
judgment or decree for the payment of the money so due, or any portion thereof,
shall be entered, the Holders of not less than majority in aggregate principal
amount of the Outstanding Bonds, by written notice to the Funding Corporation,
the Partnership and the Trustee, may rescind and annul such declaration and its
consequences if:
(i) there shall have been paid to or deposited with the
Trustee a sum sufficient to pay:
(A) all Overdue Interest on the Bonds;
(B) the principal of any Bonds that have become due
(including Overdue Principal) other than by such declaration of
acceleration and interest thereon at the Post Default Rate;
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(C) to the extent that payment of such interest is
lawful, interest upon Overdue Interest at the Post Default Rate; and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Bonds that has become due solely by such acceleration, have
been cured or waived as provided in Section 8.7.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 8.3 Specific Remedies. If any Event of Default shall have
occurred and be continuing and an acceleration shall have occurred pursuant to
Section 8.2, subject to the provisions of Sections 8.4, 8.5, 8.6 and 8.7, the
Trustee, by such officer or agent as it may appoint, may deliver notice to the
Collateral Agent, in accordance with the Intercreditor Agreement, requesting
that the Collateral Agent sell, without recourse, for cash or credit or for
other property, for immediate or future delivery, and for such price or prices
and on such terms as the Collateral Agent deems necessary, the Senior Collateral
as an entirety, or in any such portions as the Holders of a majority in
aggregate principal amount of the Bonds then Outstanding shall request by an Act
of Holders, or, in the absence of such request, as the Trustee deems necessary
in the interest of the Holders, at public or private sale, provided, however,
that the Collateral Agent shall not be required to so sell any such Senior
Collateral unless it is required to do so pursuant to the terms of the
Intercreditor Agreement.
Section 8.4 Judicial Proceedings Instituted by Trustee. (a) If there
shall exist an Event of Default, then the Trustee, in its own name, and as
trustee of an express trust, subject to the provisions of Sections 2.14, 8.2 and
8.7, shall be entitled and empowered to institute any suits, actions or
proceedings at law, in equity or otherwise, for the collection of the sums so
due and unpaid on the Bonds, and may prosecute any such claim or proceeding to
judgment or final decree, and, subject to the Senior Security Documents, may
enforce any such judgment or final decree and collect the moneys adjudged or
decreed to be payable in any manner provided by law, whether before or
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after or during the pendency of any proceedings for the enforcement of the Lien
of this Indenture, or of any of the Trustee's rights or the rights of the
Holders under this Indenture, and such power of the Trustee shall not be
affected by any sale hereunder or by the exercise of any other right, power or
remedy for the enforcement of the provisions of this Indenture or for the
foreclosure of the Lien hereof.
(b) Trustee May Recover Unpaid Indebtedness after Sale of Senior
Collateral. Subject to Section 2.14, in the case of a sale of the Indenture
Collateral, and of the application of the proceeds of such sale and the moneys
contained in the Indenture Funds to the payment of the Indebtedness secured by
this Indenture, the Trustee in its own name, and as trustee of an express trust,
shall be entitled and empowered by any appropriate means, legal, equitable or
otherwise, to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, all or any of the Bonds, for the benefit of the Holders
thereof, and upon any other portion of such Indebtedness remaining unpaid, with
interest at the rates specified in the respective Bonds on Overdue Principal and
(to the extent that payment of such interest is legally enforceable) on Overdue
Interest.
(c) Recovery of Judgment Does Not Affect Rights. No recovery of any
such judgment or final decree by the Trustee and no levy of any execution under
any such judgment upon any of the Indenture Collateral, or upon any other
property, shall in any manner or to any extent affect the Lien of this Indenture
upon any of the Indenture Collateral, or any rights, powers or remedies of the
Trustee, or any liens, rights, powers or remedies of the Holders, but all such
liens, rights, powers or remedies shall continue unimpaired as before.
(d) Trustee May File Proofs of Claim; Appointment of Trustee as
Attorney-in-Fact in Judicial Proceedings. Subject to Sections 2.14 and 8.2, the
Trustee in its own name, or as trustee of an express trust, or as
attorney-in-fact for the Holders, or in any one or more of such capacities
(irrespective of whether the principal of the Bonds shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand for the payment of Overdue
Principal or Overdue Interest), shall be entitled and empowered to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Holders (whether such
claims be based upon the provisions of the Bonds or of this Indenture) allowed
in any equity, receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or any other judicial proceedings relating to the Funding
Corporation or the Partnership, the creditors of the
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Funding Corporation or the Partnership, the Indenture Collateral or any other
property of the Funding Corporation or the Partnership and any receiver,
assignee, trustee, liquidator or sequestrator (or other similar official) in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel. The Trustee is hereby
irrevocably appointed (and the successive respective Holders of the Bonds, by
taking and holding the same, shall be conclusively deemed to have so appointed
the Trustee) the true and lawful attorney-in-fact of the respective Holders,
with authority to (i) make and file in the respective names of the Holders
(subject to deduction from any such claims of the amounts of any claims filed by
any of the Holders themselves), any claim, proof of claim or amendment thereof,
debt, proof of debt or amendment thereof, petition or other document in any such
proceedings and to receive payment of any amounts distributable on account
thereof, (ii) execute any such other papers and documents and do and perform any
and all such acts and things for and on behalf of such Holders as may be
necessary or advisable in order to have the respective claims of the Indenture
Collateral or any property of the Funding Corporation or the Partnership allowed
in any such proceeding and (iii) receive payment of or on account of such claims
and debt; provided, however, that nothing contained in this Indenture shall be
deemed to give to the Trustee any right to accept or consent to any plan or
reorganization or otherwise by action of any character in any such proceeding to
waive or change in any way any right of any Holder. Any moneys collected by the
Trustee under this Section shall, subject to the Intercreditor Agreement, be
applied as provided in Section 8.11.
(e) Trustee Need Not Have Possession of Bonds. All proofs of claim,
rights of action and rights to assert claims under this Indenture or under any
of the Bonds may be enforced by the Trustee without the possession of the Bonds
or the production thereof at any trial or other proceedings instituted by the
Trustee. In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture or the Bonds to
which the Trustee shall be a party) the Trustee shall be held to represent all
the Holders of the Bonds and it shall not be necessary to make any such Holders
parties to such proceedings.
(f) Suit to be Brought for Ratable Benefit of Holders. Any suit,
action or other proceeding at law, in equity or otherwise which shall be
instituted by the Trustee
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under any of the provisions of this Indenture or the Bonds shall be for the
equal, ratable and common benefit of all of the Holders, subject to the
provisions of this Indenture.
(f) Trustee May Be Restored to Former Position and Rights in Certain
Circumstances. In case the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Indenture or the Bonds by
foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Trustee, then and in every such case the Funding Corporation, the
Partnership, the Trustee and the Holders shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of the
Trustee shall continue as if no such proceedings had been taken.
Section 8.5 Holders May Demand Enforcement of Rights by Trustee. If
an Event of Default shall have occurred and be continuing, the Trustee shall,
subject to the terms of the Senior Security Documents, upon the written request
of the Holders of a majority in aggregate principal amount of the Bonds then
Outstanding and upon the offering and provision of indemnity as provided in
Section 9.1(d), proceed to institute one or more suits, actions or proceedings
at law, in equity or otherwise, or take any other appropriate remedy, to enforce
payment of the principal of or interest on the Bonds, or to foreclose the Lien
of this Indenture or to sell the Indenture Collateral under a judgment or decree
of a court or courts of competent jurisdiction or under the power of sale
granted herein, or take such other appropriate legal, equitable or other remedy,
as the Trustee, which may be advised by counsel, shall deem most effectual to
protect and enforce any of the rights or powers of the Trustee or the Holders,
or, in case such Holders shall have requested a specific method of enforcement
permitted hereunder, in the manner requested, provided that such action shall
not be otherwise than in accordance with law and the provisions of this
Indenture, and the Trustee, subject to Section 9.1(d), shall have the right to
decline to follow any such request if the Trustee in good faith shall determine
that the suit, proceeding or exercise of the remedy so requested would involve
the Trustee in personal liability or expense.
Section 8.6 Control by Holders. Subject to the Intercreditor
Agreement, the Holders of not less than a majority in aggregate principal amount
of the Outstanding Bonds shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that (a) such
direction shall not be in conflict with any rule of law or with this Indenture,
(b) the Trustee may decline to follow such direction if it
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shall not have been indemnified to its satisfaction pursuant to Section 9.1(d)
and (c) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
Section 8.7 Waiver of Past Defaults or Events of Default. The
Holders of not less than a majority in aggregate principal amount of the Bonds
Outstanding may on behalf of the Holders of all Bonds waive any past Default or
Event of Default and its consequences except that (a) only the Holders of all
Bonds affected thereby may waive a Default or an Event of Default in the payment
of the principal of and interest on or other amounts due under any Bond
Outstanding and (b) except as provided in clause (a), only the Holders of all
Bonds Outstanding may waive a Default or an Event of Default in respect of a
covenant or provision hereof that under Article XII cannot be modified or
amended without the consent of the Holder of each Bond Outstanding affected.
Upon any such waiver, such Default shall cease to exist and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 8.8 Holder May Not Bring Suit Under Certain Conditions. A
Holder shall not have the right to institute any suit, action or proceeding at
law or in equity or otherwise for the appointment of a receiver or for the
enforcement of any other remedy under or upon this Indenture, unless:
(a) such Holder previously shall have given written notice to a
Responsible Officer of the Trustee of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
Outstanding Bonds shall have requested a Responsible Officer of the Trustee in
writing to institute such action, suit or proceeding and shall have offered and
provided to the Trustee an indemnity as provided in Section 9.1(d);
(c) the Trustee shall have refused or neglected to institute any
such action suit or proceeding for 60 days after receipt by a Responsible
Officer of the Trustee of such notice, request and offer and provision of
indemnity; and
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(d) no direction inconsistent with such written request has been
given to the Trustee during such 60day period by the Holders of a majority in
principal amount of Outstanding Bonds.
It is understood and intended that no one or more of the Holders
shall have any right in any manner whatever hereunder or under the Bonds to (i)
surrender, impair, waive, affect, disturb or prejudice the Lien of this
Indenture on any property subject thereto or the rights of the Holders of any
other Bonds, (ii) obtain or seek to obtain priority or preference over any other
such Holder or (iii) enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all the
Holders subject to the provisions of this Indenture
Section 8.9 Undertaking to Pay Court Costs. All parties to this
Indenture, and each Holder by its acceptance of a Bond, shall be deemed to have
agreed that any court may in its discretion require, in any suit, action or
proceeding against the Trustee for any action taken or omitted by it as Trustee
hereunder, the filling by any party litigant in such suit, action or proceeding
of an undertaking to pay the costs of such suit, action or proceeding, and that
such court may, in its discretion, assess reasonable costs, including reasonable
attorney's fees and expenses, against any party litigant in such suit, action or
proceeding having due regard to the merits and good faith of the claim or
defenses made by such party litigant; provided, however, the provisions of this
Section 8.9 shall not apply to (a) any suit, action or proceeding instituted by
the Trustee, (b) any suit, action or proceeding instituted by any Holder or
group of Holders holding in the aggregate more than 10% in aggregate principal
amount of the Outstanding Bonds or (c) any suit, action or proceeding instituted
by any Holder for the enforcement of the payment of the principal of or interest
on any of the Bonds on or after the respective due dates expressed therein.
Section 8.10 Right of Holders to Receive Payment Not to be Impaired.
Anything in this Indenture to the contrary notwithstanding, the right of any
Holder to receive payment of the principal of and interest on any Bond on or
after the respective due dates expressed in such Bond (or, in case of
redemption, on the Redemption Date fixed for such Bond), or to institute suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
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Section 8.11 Application of Moneys Collected by Trustee. Subject to
the Intercreditor Agreement, any money collected or to be applied by the Trustee
pursuant to this Article VIII in respect of the Bonds of a series, together with
any other moneys which may then be held by the Trustee under any of the
provisions of this Indenture as security for the bonds of such series (other
than moneys at the time required to be held for the payment of specific Bonds of
such series) shall be applied in the following order from time to time, on the
date or dates fixed by the Trustee and, in the case of a distribution of such
moneys on account of principal or interest, upon presentation of the Outstanding
Bonds of such series, if only partially paid, and upon presentation and
surrender thereof, if fully paid:
FIRST: to the payment of all amounts due the Trustee or any
predecessor Trustee under Section 9.5;
SECOND: in case the unpaid principal amount of the Outstanding Bonds
of such series or any of them shall not have become due, to the payment of
any Overdue Interest, in the order of the maturity of the payments
thereof, with interest at the rates specified in the Bonds of such series
in respect of Overdue Interest (to the extent that payment of such
interest shall be legally enforceable) on such Overdue Interest;
THIRD: in case the unpaid principal amount of a portion of the
Outstanding Bonds of such series shall have become due, first to the
payment of Overdue Interest on all Outstanding Bonds of such series in the
order of the maturity of the payments thereof, together with interest at
the respective rates specified in the Bonds of such series for Overdue
Principal and (to the extent that payment of such interest shall be
legally enforceable) Overdue Interest, and next to the payment of the
Overdue Principal on all Bonds of such series then due;
FOURTH: in case the unpaid principal amount of all the Outstanding
Bonds of such series shall have become due, first to the payment of the
whole amount then due and unpaid upon the Outstanding Bonds of such series
for principal and interest, together with interest at the respective rates
specified in the Bonds of such series for Overdue Principal and (to the
extent that payment of such interest shall be legally enforceable) Overdue
Interest; and
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FIFTH: in case the unpaid principal amount of all the Outstanding
Bonds of such series shall have become due, and all of the Outstanding
Bonds of such series shall have been fully paid, any surplus then
remaining shall be paid to the Partnership;
provided, however, that all payments in respect of the Bonds of a series to be
made pursuant to clauses "SECOND" through "FOURTH" of this Section 8.11 shall be
made (within each such clause) ratably to the Holders of Bonds of such series
entitled thereto, without discrimination or preference, based upon the ratio of
(a) the unpaid principal amount of the Bonds of such series in respect of which
such payments are to be made that are held by each such Holder to (b) the unpaid
principal amount of all Bonds of such series.
Section 8.12 Bonds Held by Certain Persons Not to Share in
Distribution. Any Bonds actually known to a Responsible Officer of the Trustee
to be owned or held by, or for the account or benefit of, the Funding
Corporation, the Partnership or any partner of the Partnership, or an Affiliate
of any of the foregoing, shall not be entitled to share in any payment or
distribution provided for in this Article VIII until all Bonds held by other
Persons have been indefeasibly paid in full in cash or cash equivalents.
Section 8.13 Waiver of Stay or Extension Laws. Each of the Funding
Corporation and the Partnership covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and each of the Funding
Corporation and the Partnership (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 8.14 Remedies Cumulative; Delay or Omission Not a Waiver.
Each and every right, power and remedy herein specifically given to the Trustee
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may
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be exercised from time to time and as often and in such order as may be deemed
expedient by the Trustee and the exercise or the commencement of the exercise of
any right, power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy, and no
delay or omission by the Trustee in the exercise of any right, power or remedy
or in the pursuance of any remedy shall impair any such right, power or remedy
or be construed to be a waiver of any default on the part of the Funding
Corporation or the Partnership or to be an acquiescence therein.
Section 8.15 The Intercreditor Agreement and the Collateral Agency
Agreement. Simultaneously with the execution and delivery of this Indenture, the
Trustee shall enter into the Intercreditor Agreement and the Collateral Agency
Agreement and the other Transaction Documents to which it is or is intended to
be a party on behalf of itself and all Holders of the Outstanding Bonds and all
future Holders of any of the Bonds. Each Holder, by its acceptance of a Bond,
authorizes the Trustee to enter into the Intercreditor Agreement and the
Collateral Agency Agreement and the other Transaction Documents to which it is
or is intended to be a party on its behalf. All rights, powers and remedies
(other than as provided in Section 12.2 hereof) available to the Trustee and the
Holders of the Outstanding Bonds, and all future Holders of any of the Bonds,
with respect to the Senior Collateral, or otherwise pursuant to the
Intercreditor Agreement or the Collateral Agency Agreement and the other
Transaction Documents to which it is or is intended to be a party, shall be
subject to the Intercreditor Agreement and the Collateral Agency Agreement. In
the event of any conflict or inconsistency between the terms and provisions of
this Indenture and the terms and provisions of the Intercreditor Agreement or
the Collateral Agency Agreement, the terms and provisions of the Intercreditor
Agreement and the Collateral Agency Agreement shall govern and control, except
to the extent that such provisions conflict with the Trust Indenture Act. In
acting, or directing the Intercreditor Agent or the Collateral Agent to act,
under the Intercreditor Agreement or the Collateral Agency Agreement, the
Trustee shall rely, and shall be fully protected in relying, on instructions
given by the Holders in accordance with the terms of this Indenture. If the
Trustee is required to vote in any Intercreditor Vote (as defined in the
Intercreditor Agreement) pursuant to the Intercreditor Agreement, the Trustee
shall cast its votes according to the percentage of Holders voting in favor of
or against, as the case may be, the decision which is subject to such
Intercreditor Vote.
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ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.1 Certain Rights and Duties of Trustee.
(a) The Trustee may conclusively rely and shall be fully protected
in acting, or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties or with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it from Holders holding a sufficient percentage of Bonds to give
such direction as permitted by this Indenture.
(b) Any request, direction, order or demand of the Funding
Corporation or the Partnership mentioned herein shall be sufficiently evidenced
by an instrument signed (i) in the name of the Funding Corporation an Authorized
Representative and (ii) in the name of the Partnership by an Authorized
Representative; and any Board Resolution of the Funding Corporation or of the
Partnership shall be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Funding Corporation or the
Partnership.
(c) The Trustee may consult with counsel of its selection and the
advice of counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture, and may refuse to perform any
duty or exercise any such rights or powers unless it shall have been offered and
provided reasonable security or indemnity to its satisfaction against the costs,
expenses and liabilities which may be incurred therein or thereby.
(e) The Trustee shall not be liable for any action taken, suffered
or omitted by it and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture (or any other Transaction
Document) or with respect to any action it takes or omits to take in accordance
with a direction received by it from Holders holding a sufficient percentage of
Bonds to give such direction as permitted by this
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Indenture absent misapplication of monies by the Trustee or gross negligence or
willful misconduct on the part of the Trustee.
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture or other paper or document with respect to such
series of Bonds believed by it to be genuine and to have been signed or
presented by the proper parties unless requested in writing to do so by the
Holders of not less than a majority in aggregate principal amount of the Bonds
of such series then Outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
satisfactory to it against such expenses or liabilities as a condition to so
proceeding.
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any act or omissions on
the part of any agent or attorney appointed with due care by it hereunder or
under any of the other Transaction Documents.
(h) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs in a similar situation.
(i) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties as are
specifically set forth in this Indenture and the other Financing Documents to
which it is a party and no others and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to
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the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall examine such certificates and
opinions to determine whether they conform to the requirements of this Indenture
(but need not confirm or investigate the accuracy of mathematical calculations
or other facts stated therein).
(j) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 9.1.
(k) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(l) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (i) of this Section;
(2) the Trustee shall not be liable for any error of
judgement made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Bonds of any series relating to
the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Bonds of such series.
(m) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the
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Trustee at the Corporate Trust Office of the Trustee, and such notice references
the Bonds and this Indenture; and
(n) The rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
Section 9.2 Trustee Not Responsible for Recitals, Etc. The recitals
contained herein and in the Bonds, except the Trustee's certificate of
authentication, shall be taken as the statements of the Partnership and the
Funding Corporation and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Indenture, the Indenture Collateral or of the Bonds. The
Trustee shall not be accountable for the use or application by the Funding
Corporation or the Partnership of any of the Bonds or of the proceeds of such
Bonds.
Section 9.3 Trustee and Others May Hold Bonds. The Trustee or any
Paying Agent or Security Registrar or any other Authorized Agent of the Trustee,
or any Affiliate thereof, in its individual or any other capacity, may become
the owner or pledgee of Bonds and may otherwise deal with the Funding
Corporation and the Partnership, or any other obligor on the Bonds with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other Authorized Agent.
Section 9.4 Moneys held by Trustee or Paying Agent; Investments. All
moneys received by the Trustee or any Paying Agent shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Neither the Trustee nor any Paying Agent shall be under any liability
for interest on any moneys received by it hereunder except such as it may agree
in writing with the Funding Corporation or the Partnership to pay thereon.
Section 9.5 Compensation of Trustee and Its Lien. For so long as any
of the Bonds shall remain outstanding, the Funding Corporation and the
Partnership jointly and severally covenant and agree to pay to the Trustee (all
references in this Section 9.5 to the Trustee shall be deemed to apply to the
Trustee in its capacities as Trustee, Paying Agent, Securities Intermediary and
Security Registrar) from time to time, and the Trustee shall be entitled to,
compensation for all services rendered by it hereunder (which shall be
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agreed to from time to time by the Funding Corporation, the Partnership and the
Trustee and which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and, except as herein otherwise
expressly provided, the Funding Corporation and the Partnership shall pay or
reimburse the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the reasonable expenses and
disbursements of its counsel and of all Persons not regularly in its employ)
except any such expense or disbursement as may arise from its gross negligence,
willful misconduct or bad faith misapplication of monies. The Funding
Corporation and the Partnership also jointly and severally covenant and agree to
indemnify the Trustee or any predecessor Trustee and their agents for and to
hold them harmless against, any loss, liability, claim, damage or expense
incurred without gross negligence, willful misconduct or bad faith
misapplication of monies on the part of the Trustee or any of its employees,
officers, affiliates or agents, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including
liability which the Trustee may incur as a result of failure to withhold, pay or
report Taxes and including the costs and expenses of defending itself against
any claim or liability in the premises. Nothing in this Indenture shall be
construed to require the Trustee to make advances.
The obligations of the Funding Corporation and the Partnership under
this Section shall survive payment in full of the Bonds, the resignation or
removal of the Trustee and the termination of this Indenture.
When the Trustee or any predecessor Trustee incurs expenses or
renders services in connection with the performance of its obligations hereunder
(including its services as Paying Agent, if so appointed by the Funding
Corporation and the Partnership) after an Event of Default specified in Section
8.1(g) or (h) occurs, the expenses and compensation for such services are
intended to constitute expenses of administration under applicable bankruptcy,
insolvency or other similar United States federal or state law to the extent
provided in Section 503(b)(5) of the Bankruptcy Code.
The Trustee shall have a Lien prior to the Bonds as to all property
and funds held by it hereunder for any amount owing it or any predecessor
Trustee pursuant to this Section 9.5, except with respect to funds held in trust
for the benefit of the Holders of particular Bonds.
Section 9.6 Right of Trustee to Rely on Officer's Certificates and
Opinions of Counsel. Before the Trustee acts or refrains from acting with
respect to any
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matter contemplated by this Indenture, it may require an Officer's Certificate
or an Opinion of Counsel, which shall conform to the provisions of Section 1.3.
The Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion as set forth in Section 9.1(a).
Section 9.7 Persons Eligible for Appointment As Trustee. There shall
at all times be a Trustee hereunder which shall at all times be a corporation
which complies with the eligibility requirements of the Trust Indenture Act,
having a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of a supervising or examining authority referred to in
Section 310(a) of the Trust Indenture Act, then for the purposes of this Section
9.7, the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with this Section 9.7, the Trustee shall resign
immediately in the manner and with the effect specified in Section 9.8.
Section 9.8 Resignation and Removal of Trustee; Appointment of
Successor. The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign with respect to any one or more or all series of Bonds by giving
written notice to the Funding Corporation and the Partnership and by giving
notice of such resignation to the Holders of Bonds in the manner provided in
Section 1.5.
(a) In case at any time any of the following shall occur with
respect to any series of Bonds:
(i) the Trustee shall cease to be eligible under Section 9.7
and shall fail to resign immediately in accordance with Section 9.7 after
written request therefor by the Funding Corporation, the Partnership or by any
Holder of such series, or
(ii) the Trustee shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (A) the Partnership may
remove the Trustee with respect to the applicable series of Bonds and appoint a
successor trustee by written instrument, in duplicate, or (B) subject to the
requirements of Section 8.9, any Holder who has been a
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bona fide Holder of a Bond or Bonds of any such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee with respect to such series of Bonds. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe, remove
the Trustee and appoint a successor Trustee with respect to such series of
Bonds.
(b) The Holders of a majority in aggregate principal amount of the
Bonds at the time Outstanding may at any time remove the Trustee and appoint a
successor Trustee by delivering to the Trustee so removed, to the successor
Trustee so appointed and to the Funding Corporation and the Partnership, the
evidence provided for in Section 10.1 of the action taken by the Holders.
(c) If the Trustee shall resign, be removed or become incapable of
acting or if a vacancy shall occur in the office of Trustee with respect to
Bonds of any series for any cause, the Partnership may promptly appoint a
successor Trustee or Trustees with respect to the applicable series of Bonds by
written instrument, in duplicate, executed by Board Resolution of the
Partnership, one copy each of which instruments shall be delivered to the former
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed with respect to a particular series and have accepted
such appointment pursuant to Section 9.9 within 30 days after the mailing of
such notice of resignation or removal, the former Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee at the sole
cost and expense of the Funding Corporation and the Partnership, or any Holder
who has been a bona fide Holder of a Bond or Bonds of the applicable series for
at least six months may, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor Trustee. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
(d) Any resignation or removal of the Trustee and any appointment of
a successor Trustee pursuant to this Section 9.8 shall become effective only
upon acceptance of appointment by the successor Trustee as provided in Section
9.9.
Section 9.9 Acceptance of Appointment by Successor Trustee. Any
successor Trustee appointed under Section 9.8 shall execute, acknowledge and
deliver to the Funding Corporation and the Partnership and to its predecessor
Trustee with respect to any or all applicable series of Bonds an instrument
accepting such appointment
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hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts, duties
and obligations with respect to such series of its predecessor Trustee
hereunder, with like effect as if originally named as Trustee herein; but,
nevertheless, on the written request of the Funding Corporation, the Partnership
or of the successor Trustee, the Trustee ceasing to act shall, upon payment of
any such amounts then due it pursuant to the provisions of Section 9.5, execute
and deliver an instrument transferring to such successor Trustee all of the
rights, powers and trusts with respect to such series of the Trustee so ceasing
to act. Upon request of any such successor Trustee, the Funding Corporation and
the Partnership shall execute any and all instruments in writing for more fully
and certainly vesting in and confirming to such successor Trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien
upon all property or funds held or collected by such Trustee to secure any
amounts then due it pursuant to Section 9.5.
In the case of the appointment hereunder of a successor Trustee with
respect to the Bonds of one or more (but not all) series, the Funding
Corporation, the Partnership, the predecessor Trustee and each successor Trustee
with respect to the Bonds of any applicable series shall execute and deliver an
indenture supplemental hereto which shall contain such mutually agreeable
provisions as shall be deemed necessary or desirable to confirm that all of the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Bonds of any series as to which the predecessor Trustee is not retiring shall
continue to be vested in the predecessor Trustee, and shall, by mutual
agreement, add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-Trustees of the
same trust and that each such Trustee shall be Trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee.
No successor Trustee with respect to any series of Bonds shall
accept appointment as provided in this Section unless at the time of such
acceptance such successor Trustee shall with respect to such series be eligible
under Section 9.7.
Upon acceptance of appointment by a successor Trustee with respect
to the Bonds of any series, the Funding Corporation and the Partnership shall
give notice of the succession of such Trustee hereunder to the Holders of Bonds
in the manner provided
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in Section 1.5. If the Funding Corporation and the Partnership fail to give such
notice within 10 days after acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be given at the expense of the
Partnership.
Section 9.10 Merger, Conversion or Consolidation of Trustee. Any
Person into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such successor Trustee shall be eligible under the provisions of Section 9.7 and
Section 310(a) of the Trust Indenture Act.
Section 9.11 Maintenance of Offices and Agencies. (a) There shall at
all times be maintained in the City of New York, and in such other Places of
Payment, if any, as shall be specified for the Bonds of any series in the
related Series Supplemental Indenture, an office or agency where Bonds may be
presented or surrendered for registration of transfer or exchange and for
payment of principal and interest. Such office shall be initially the Corporate
Trust Office.
Notices and demands to or upon the Trustee in respect of the Bonds of this
Indenture may be served at the Corporate Trust Office. Written notice of the
location of each of such other office or agency and of any change of location
thereof shall be given by the Funding Corporation or the Partnership to the
Trustee and by the Trustee to the Holders in the manner specified in Section
1.5. In the event that no such office or agency shall be maintained or no such
notice of location or of change of location shall be given, presentation,
surrenders and demands may be made and notices may be served at the Corporate
Trust Office.
(b) There shall at all times be a Security Registrar and a Paying
Agent hereunder. In addition, at any time when any Bonds remain Outstanding, the
Trustee may appoint an Authenticating Agent or Agents with respect to the Bonds
of one or more series which shall be authorized to act on behalf of the Trustee
to authenticate Bonds of such series issued upon original issuance, exchange,
registration of transfer or partial redemption thereof or pursuant to Section
2.9, and Bonds so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder (it being understood that wherever reference is
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made in this Indenture to the authentication and delivery of Bonds by the
Trustee or the Trustee's certification of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent). If an appointment of an Authenticating Agent with respect
to the Bonds of one or more series shall be made pursuant to this Section
9.11(b), the Bonds of such series may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternate certificate of
authentication in the following form:
The Bond is one of the series of Bonds referred to in the
within-mention Indenture.
_______________________________
Trustee
By:____________________________
Authenticating Agent
By:____________________________
Authorized Signatory
Any Authorized Agent shall be a bank or trust company, shall be a
Person organized and doing business under the laws of the United States or any
State thereof, with a combined capital and surplus of at least $50,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by United States federal or state authorities. If such Authorized
Agent publishes reports of its condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 9.11, the combined capital and surplus of such
Authorized Agent shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time an
Authorized Agent shall cease to be eligible in accordance with the provisions of
this Section 9.11, such Authorized Agent shall resign immediately in the manner
and with the effect specified on this Section 9.11.
The Trustee at its office specified in the first paragraph of this
Indenture is hereby appointed as Paying Agent and Security Registrar hereunder.
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(c) Any Paying Agent (other than the Trustee) from time to time
appointed hereunder shall execute and deliver to the Trustee an instrument in
which said Paying Agent shall agree with the Trustee, subject to the provisions
of this Section 9.11, that such Paying Agent will:
(i) hold all sums held by it for the payment of principal of
and interest on Bonds in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided;
(ii) give the Trustee within five days thereafter notice of
any default by any obligor upon the Bonds in the making of any such payment of
principal or interest; and
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
Notwithstanding any other provision of this Indenture, any payment
required to be made to or received or held by the Trustee may, to the extent
authorized by written instructions of the Trustee, be made to or received or
held by a Paying Agent in the Borough of Manhattan, The City of New York, for
the account of the Trustee.
(d) Any Person into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, consolidation or conversion to which any Authorized Agent shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of any Authorized Agent, shall be the successor to such
Authorized Agent hereunder, if such successor Person is otherwise eligible under
this Section 9.11, without the execution or filing of any paper or any further
act on the part of the parties hereto or such Authorized Agent or such successor
Person.
(e) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Funding Corporation and the
Partnership. The Partnership may, and at the request of the Trustee shall, at
any time, terminate the agency of any Authorized Agent by giving written notice
of such termination to the Authorized Agent and the Trustee. Upon the
resignation or termination of an Authorized Agent or in case at any time any
such Authorized Agent shall cease to be eligible under this Section
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9.11 (when, in either case, no other Authorized Agent performing the functions
of such Authorized Agent shall have been appointed), the Partnership shall
promptly appoint one or more qualified successor Authorized Agents approved by
the Trustee to perform the functions of the Authorized Agent which has resigned
or whose agency has been terminated or who shall have ceased to be eligible
under this Section 9.11. The Partnership shall give written notice of any such
appointment to all Holders as their names and addresses appear on the Security
Register.
Section 9.12 Trustee Risk. None of the provisions contained in this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers. Whether or not expressly provided
herein, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to
Section 9.1.
Section 9.13 Appointment of Co-Trustee. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as Trustee in such jurisdiction. It is recognized that in case
of litigation under this Indenture or any other Transaction Document, and in
particular in case of the enforcement of any such document on default, or in
case the Trustee deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies herein
granted to the Trustee or hold title to the properties in trust as herein
granted, or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that the Trustee appoint an additional
individual or institution as a separate or co-trustee. The following provisions
of this Section 9.13 are adopted to these ends.
In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vested
in such separate or co-trustee, but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
co-trustee shall run to and be enforceable by either of them.
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Should any instrument in writing be required by the separate trustee
or co-trustee so appointed by the Trustee for more fully and certainly vesting
in and confirming to him or it such properties, rights, powers, suits, trusts,
duties and obligations, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Funding Corporation and
the Partnership. In case any separate trustee or co-trustee, or a successor to
either, shall die, become incapable of acting, resign or be removed, all the
estates, properties, rights, powers, trusts, duties and obligations of such
separate trustee or co-trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a new trustee or successor to
such separate trustee or co-trustee.
No trustee shall be personally liable by reason of any act or
omission of any other trustee hereunder. The Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
Section 9.14 Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section 9.14, then, within 90 days after ascertaining that it
has such conflicting interest, and if the default (for purposes of this Section
9.14, a default shall mean a default in payment of principal which shall have
continued for 30 days or more and shall not have been cured) to which such
conflicting interest relates has not been cured or duly waived or otherwise
eliminated before the end of such 90-day period, it shall resign in the manner
and with the effect hereinafter specified in this Article IX.
(b) In the event that the Trustee shall fail to comply with the
provisions of subsection (a) of this Section 9.14, the Trustee shall, within 10
days after the expiration of such 90-day period, transmit by mail to all
Holders, as their names and addresses appear in the Security Register, notice of
such failure.
(c) For the purposes of this Section 9.14, the Trustee shall be
deemed to have a conflicting interest if the Bonds are in default and:
(i) the Trustee is trustee under another indenture under which
any other securities, or certificates of interest or participation in any other
securities, of any obligor on the Bonds are outstanding unless (A) the Bonds are
collateral trust notes under which the only collateral consists of securities
issued under such other indenture, (B) such
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other indenture is a collateral trust indenture under which the only collateral
consists of Bonds issued under this Indenture or (C) such obligor has no
substantial unmortgaged assets and is engaged primarily in the business of
owning, or of owning and developing and/or operating, real estate, and this
Indenture and such other indenture are secured by wholly separate and distinct
parcels of real estate, provided that there shall be excluded from the operation
of this paragraph other series under this Indenture;
(ii) the Trustee or any of its directors or executive officers
is an underwriter for an obligor on the Bonds;
(iii) the Trustee or any of its directors or executive
officers is a director, officer, partner, employee, appointee or representative
of any obligor on the Bonds, or of an underwriter (other than the Trustee
itself) for such obligor who is currently engaged in the business of
underwriting, except that (A) one individual may be a director or an executive
officer, or both, of the Trustee and a director or an executive officer, or
both, of an obligor on the Bonds but may not be at the same time an executive
officer of both the Trustee and such obligor, (B) if and so long as the number
of directors of the Trustee in office is more than nine, one additional
individual may be a director or an executive officer, or both, of the Trustee
and a director of an obligor on the Bonds, and (C) the Trustee may be designated
by an obligor on the Bonds or by any underwriter for such obligor to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent or depositary, or in any other similar capacity, or subject to the
provisions of paragraph (i) of this subsection, to act as trustee, whether under
an indenture or otherwise;
(iv) 10% or more of the voting securities of the Trustee are
beneficially owned either by any obligor on the Bonds or by any director,
partner or executive officer thereof, or 20% or more of such voting securities
are beneficially owned, collectively, by any two or more of such Persons; or 10%
or more of the voting securities of the Trustee are beneficially owned either by
an underwriter for any obligor on the Bonds or by any director, partner or
executive officer thereof, or are beneficially owned collectively by any two or
more of such Persons;
(v) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, (A) 5% or more of the
voting securities, or 10% or more of any other class of security, of any obligor
on the Bonds not including the Bonds issued under this Indenture and securities
issued under any other indenture under
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which the Trustee is also trustee, or (B) 10% or more of any class of security
of an underwriter for any obligor on the Bonds;
(vi) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 5% or more of the
voting securities of any person who, to the knowledge of the Trustee, owns 10%
or more of the voting securities of, or controls directly or indirectly or is
under direct or indirect common control with, any obligor on the Bonds;
(vii) the Trustee is the beneficial owner of, or holds
collateral security for an obligation which is in default, 10% or more of any
class of security of any person who, to the knowledge of the Trustee, owns 50%
or more of the voting securities of any obligor on the Bonds;
(viii) the Trustee owns, on the date of default upon the Bonds
or any anniversary of such default while such default upon the Bonds remains
outstanding, in the capacity of executor, administrator, testamentary or inter
vivos trustee, guardian, committee or conservator, or in any other similar
capacity, an aggregate of 25% or more of the voting securities, or of any class
of security, of any person, the beneficial ownership of a specified percentage
of which would have constituted a conflicting interest under paragraphs (v),
(vi) or (vii) of this subsection. As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator or testamentary
trustee of an estate which included them, the provisions of the immediately
preceding sentence shall not apply for a period of not more than two years from
the date of such acquisition to the extent that such securities included in such
estate do not exceed 25% of such voting securities or 25% of any such class of
security. Promptly after the dates of any such default upon the Bonds and
annually in each succeeding year that the Bonds remain in default, the Trustee
shall make a check of its holdings of such securities in any of the
above-mentioned capacities as of such dates. If any obligor on the Bonds fails
to make payment in full of the principal of, premium, if any, or interest on any
of the Bonds when and as the same becomes due and payable and such failure
continues for 30 days thereafter, the Trustee shall make a prompt check of its
holdings of such securities in any of the above-mentioned capacities as of the
date of the expiration of such 30day period, and, after such date,
notwithstanding the foregoing provisions of this paragraph, all such securities
so held by the Trustee, with sole or joint control over such securities vested
in it, shall be considered as though beneficially owned by the Trustee for the
purposes of paragraphs (v), (vi) and (vii) of this subsection; or
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(ix) except under the circumstances described in Section 9.3
or Section 9.5, the Trustee shall be or shall become a creditor of the obligor.
For the purposes of paragraph (i) of this subsection, the term
"series of securities" or "series" means a series, class or group of Bonds
issuable under this Indenture pursuant to whose terms Holders of one such series
may vote to direct the Trustee, or otherwise take action pursuant to a vote of
such Holders, separately from Holders of another such series, provided that
"series of securities" or "series" shall not include any series of Bonds
issuable under this Indenture if all such series rank equally and are wholly
unsecured.
The specification of percentages in paragraphs (iv) to (viii)
inclusive, of this subsection, shall not be construed as indicating that the
ownership of such percentages of the securities of a person is or is not
necessary or sufficient to constitute direct or indirect control for the
purposes of paragraph (iii) or (vi) of this subsection.
For the purposes of paragraphs (v), (vi), (vii) and (viii) of this
subsection only, (A) the terms "security" and "securities" shall include only
such securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys loaned to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness, and (B) the Trustee shall not be
deemed to be the owner or holder of (1) any security that it holds as collateral
security, as trustee or otherwise, for an obligation which is not in default, or
(2) any security which it holds as collateral security under this Indenture,
irrespective of any default hereunder, or (3) any security that it holds as
agent for collection, or as custodian, escrow agent or depositary, or in any
similar representative capacity.
Except as provided in the next preceding paragraph, the word
"security" or "securities" as used in this Indenture shall mean any note, stock,
treasury stock, bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable share,
investment contract, voting trust certificate, certificate of deposit for
security, fractional undivided interest in oil, gas or other mineral rights, any
put, call, straddle, option or privilege on any security, certificate of
deposit, or group or index of securities (including any interest therein or
based on the value thereon) or any put, call,
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straddle, option or privilege entered into on a national securities exchange
relating to foreign currency, or, in general, any interest or instrument
commonly known as a "security," or any certificate or interest or participation
in, temporary or interim certificate for, receipt for, guarantee of, or warrant
or right to subscribe to purchase, any of the foregoing.
(d) For the purposes of this Section:
(i) The term "underwriter" when used with reference to any
obligor on the Bonds, means every person who, within one year prior to the time
as of which the determination is made, has purchased from such obligor with a
view to, or has offered or sold for such obligor in connection with, the
distribution of any security of such obligor outstanding at such time, or has
participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct or
indirect underwriting of any such undertaking; but such term shall not include a
person whose interest was limited to a commission from an underwriter or dealer
not in excess of the usual and customary distributors' or sellers' commission.
(ii) The term "director" means any director of a corporation,
or any individual performing similar functions with respect to any organization
whether incorporated or unincorporated.
(iii) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an unincorporated
organization or a government or political subdivision thereof. As used in this
paragraph, the term "trust" shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a security.
(iv) The term "voting security" means any security presently
entitling the owner or holder thereof to vote in the direction or management of
the affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents for
the owner or holder of such security are presently entitled to vote in the
direction or management of the affairs of a person.
(v) The term "obligor" means the Partnership and the Funding
Corporation.
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(vi) The term "executive officer" means the president, every
vice president, every trust officer, the cashier, the secretary and the
treasurer of a corporation, and any individual customarily performing similar
functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of directors.
(e) The percentage of the voting securities and other securities
specified in this Section shall be calculated in accordance with the following
provisions:
(i) A specified percentage of the voting securities of the
Trustee, any obligor or any other person referred to in this Section 9.14 (each
of whom is referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate votes which the
holders of all the outstanding voting securities of such person are entitled to
cast in the direction or management of the affairs of such person.
(ii) A specified percentage of a class of securities of a
person means such percentage of the aggregate amount of securities of the class
outstanding.
(iii) The term "amount," when used in regard to securities,
means the principal amount if relating to evidences of indebtedness, the number
of shares if relating to capital shares and the number of units if relating to
any other kind of security.
(iv) The term "outstanding" as used in this Section 9.14 means
issued and not held by or for the account of the issuer. The following
securities shall not be deemed outstanding within the meaning of this
definition:
(A) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(B) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the obligation
evidenced by such other class of securities is not in default as to
principal or interest or otherwise;
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(C) securities pledged by the issuer thereof as security
for an obligation of the issuer not in default as to principal or interest
or otherwise; and
(D) securities held in escrow if placed in escrow by the
issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(v) A security shall be deemed to be of the same class as
another security if both securities confer upon the holder or holders
substantially the same rights and privileges; provided, however, that in the
case of secured evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or maturity dates of various
series thereof shall not be deemed sufficient to constitute them securities of
different classes, whether or not they are issued under a single indenture.
Section 9.15 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee
shall, within sixty days after each May 15 following the date of this Indenture,
deliver to Holders a brief report, dated as of such May 15, which complies with
the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange, if
any, upon which the Bonds are listed, with the Commission and with the
Partnership and the Funding Corporation. The Partnership and the Funding
Corporation will promptly notify the Trustee when the Securities are listed on
any stock exchange and of any delisting thereof.
Section 9.16 Limitation on Duty of Trustee in Respect of Senior
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Trustee shall have no duty as to any Senior Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to preservation of rights against prior parties or any other
rights pertaining thereto and the Trustee shall not be
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responsible for filing any financing or continuation statements or recording any
documents or instruments in any public office at any time or times or otherwise
perfecting or maintaining the perfection of any security interest in the Senior
Collateral. The Trustee shall be deemed to have exercised reasonable care in the
custody of the Senior Collateral in its possession if the Senior Collateral is
accorded treatment substantially equal to that which it accords its own property
and shall not be liable or responsible for any loss or diminution in the value
of any of the Senior Collateral, by reason of the act or omission of any
carrier, forwarding agency or other agent or bailee selected by the Trustee in
good faith.
(a) The Trustee shall not be responsible for the existence,
genuineness or value of any of the Senior Collateral or for the validity,
perfection, priority or enforceability of the Liens in any of the Senior
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder, except to the extent such action or
omission constitutes negligence, bad faith or wilful misconduct on the part of
the Trustee, for the validity or sufficiency of the Senior Collateral or any
agreement or assignment contained therein, for the validity of the title of the
Partnership and the Funding Corporation to the Senior Collateral, for insuring
the Senior Collateral or for the payment of taxes, charges, assessments or Liens
upon the Senior Collateral or otherwise as to the maintenance of the Senior
Collateral.
Section 9.17 No Liability for Cleanup of Hazardous Materials. In the
event that the Trustee is required to acquire title to an asset for any reason,
or take any managerial action of any kind in regard thereto, in order to carry
out any fiduciary or trust obligation for the benefit of another, which in the
Trustee's sole discretion may cause the Trustee to be considered an "owner or
operator" under the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 72 U.S.C. ss.9601, et seq., or
otherwise cause the Trustee to incur liability under CERCLA or any other
federal, state or local law, the Trustee reserves the right to, instead of
taking such action, either resign as Trustee or arrange for the transfer of the
title or control of the asset to a court appointed receiver.
The Trustee shall not be liable to the Funding Corporation, the
Partnership or any other Persons for any environmental claims or contribution
actions under any federal, state or local law, rule or regulation by reason of
the Trustee's actions and conduct as authorized, empowered and directed
hereunder or relating to the discharge, release or threatened release of
hazardous materials into the environment.
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ARTICLE X
CONCERNING THE HOLDERS
Section 10.1 Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders (collectively, an "Act" of such
Holders, which term also shall refer to the instruments or record evidencing or
embodying the same) may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing or, alternatively, may be embodied in and evidenced by
the record of Holders of Bonds voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Bonds duly
called and held in accordance with the provisions of Article XI, or a
combination of such instruments and any such record. Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments or record, or both, are received by the Trustee, and when it is
specifically required herein, by the Funding Corporation and the Partnership.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 9.1) conclusive in favor of the Trustee, the Partnership and the Funding
Corporation, if made in the manner provided in this Section 10.1. The record of
any meeting of Holders of Bonds shall be proved in the manner provided in
Section 11.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to such
officer the execution thereof, or by an affidavit of a witness to such execution
sworn to before any such notary or other such officer, and where such execution
is by an officer of a corporation or association or of a partnership, on behalf
of such corporation, association or partnership, such certificate or affidavit
shall also constitute sufficient proof of such Person's authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The principal amount and serial numbers of Bonds held by any
Person, and the date or dates of holding the same, shall be proved by the
Security Register and the Trustee shall not be affected by notice to the
contrary.
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(d) Any Act by the Holder of any Bond (i) shall bind every future
Holder of the same Bond and the Holder of every Bond issued upon the transfer
thereof or the exchange therefor or in lieu thereof, whether or not notation of
such action is made upon such Bond and (ii) shall be valid notwithstanding that
such Act is taken in connection with the transfer of such Bond to any other
Person, including the Funding Corporation, the Partnership or any Affiliate
thereof.
(e) Until such time as written instruments shall have been delivered
with respect to the requisite percentage of principal amount of Bonds for the
Act contemplated by such instruments, any such instrument executed and delivered
by or on behalf of a Holder of Bonds may be revoked with respect to any or all
of such Bonds by written notice by such Holder (or its duly appointed agent) or
any subsequent Holder (or its duly appointed agent), proven in the manner in
which such instrument was proven unless such instrument is by its terms
expressly irrevocable.
(f) Bonds of any series authenticated and delivered after an Act of
Holders may, and shall if required by the Funding Corporation and the
Partnership, bear a notation in a form approved by the Funding Corporation and
the Partnership as to any action taken by such Act of Holders. If the Funding
Corporation and the Partnership shall so determine, new Bonds of any series so
modified as to conform, in the opinion of the Funding Corporation and the
Partnership, to such action, may be prepared and executed by the Funding
Corporation and the Partnership and authenticated and delivered by the Trustee
in exchange for outstanding Bonds of such series, which outstanding bonds shall
be cancelled by the Trustee.
The Funding Corporation and the Partnership may, but shall not be
obligated to, fix a record date for the purpose of determining the Holders
entitled to sign any instrument evidencing or embodying an Act of the Holders.
If a record date is fixed, those Persons who were Holders at such record date
(or their duly appointed agents), and only those Persons, shall be entitled to
sign any such instrument evidencing or embodying an Act of Holders or to revoke
any such instrument previously signed, whether or not such Persons continue to
be Holders after such record date. No such instrument shall be valid or
effective if signed more than 90 days after such record date, and may be revoked
as provided in paragraph (e) above.
Section 10.2 Bonds Owned by the Funding Corporation, the Partnership
or Affiliates Deemed Not Outstanding. In determining whether the Holders of
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the requisite aggregate principal amount of Bonds have concurred in any request,
demand, authorization, direction, notice, consent and waiver or other act under
this Indenture, Bonds which are owned by the Funding Corporation, the
Partnership or any partner of the Partnership or any Affiliate of any of the
foregoing shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver, only Bonds for which a Responsible Officer of the Trustee has received
written notice of such ownership as conclusively evidenced by the Security
Register shall be so disregarded. The Funding Corporation and the Partnership
shall furnish the Trustee, upon its reasonable request, with a list of such
Affiliates. Bonds so owned which have been pledged in good faith may be regarded
as Outstanding for the purposes of this Section, if the pledgee shall establish
to the satisfaction of the Trustee that the pledgee has the right to vote such
Bonds and that the pledgee is not an Affiliate of the Funding Corporation or the
Partnership. In case of a dispute as to such right, any decision by the Trustee,
taken upon the advice of counsel, shall be full protection to the Trustee.
ARTICLE XI
HOLDERS' MEETINGS
Section 11.1 Purposes for Which Holders' Meetings May Be Called. A
meeting of Holders may be (but shall not be required to be) called at any time
and from time to time pursuant to this Article XI for any of the following
purposes:
(a) to give any notice to the Funding Corporation, the Partnership
or to the Trustee, or to give any directions to the Trustee, or to waive or to
consent to the waiving of any default hereunder and its consequences, or to take
any other action authorized to be taken by Holders pursuant to Article IX;
(b) to remove the Trustee and appoint a successor Trustee pursuant
to Article IX;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to Section 12.2; or
(d) to take any other action authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount of the Bonds under
any other provision of this Indenture or under applicable law.
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Section 11.2 Call of Meetings by Trustee. The Trustee may at any
time call a meeting of Holders of any series to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of Holders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given by the Trustee, in the manner provided in Section
1.5, not less than 10 nor more than 180 days prior to the date fixed for the
meeting, to the Holders of Bonds of such series.
Section 11.3 Funding Corporation, Partnership and Holders May Call
Meeting. In case the Funding Corporation, the Partnership or the Holders of at
least 10% in aggregate principal amount of the Bonds of any series then
Outstanding shall have requested the Trustee to call a meeting of Holders of
such series, by written request setting forth in general terms the action
proposed to be taken at the meeting, and the Trustee shall not have made the
mailing of the notice of such meeting within 20 days after receipt of such
request, then the Funding Corporation, the Partnership or the Holders of such
Bonds in the amount above specified may determine the time and the place in the
Borough of Manhattan, The City of New York, for such meeting and may call such
meeting to take any action authorized in Section 11.1 by giving notice thereof
as provided in Section 11.2.
Section 11.4 Persons Entitled To Vote at Meeting. To be entitled to
vote at any meeting of Holders a Person shall be (a) a Holder of one or more
Outstanding Bonds with respect to which such meeting is being held or (b) a
Person appointed by an instrument in writing as proxy for the Holder or Holders
of such outstanding bonds by a holder of one or more such Outstanding Bonds. The
only Persons who shall be entitled to be present or to speak at any meeting of
Holders shall be the Persons entitled to vote at such meeting and their counsel
and any representatives of the Trustee and its counsel and any representatives
of the Funding Corporation, the Partnership and their counsel.
Section 11.5 Determination of Voting Rights; Conduct and Adjournment
of Meeting. Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of Bonds and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the meeting as it shall think
fit. Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the
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proof specified in Section 10.1 or other proof. Except as otherwise permitted or
required by any such regulations, the holding of Bonds shall be proved in the
manner specified in Section 10.1 and the appointment of any proxy shall be
proved in the manner specified in Section 10.1 or by having the signature of the
Person executing the proxy witnessed or guaranteed by any bank, banker, trust
company or firm satisfactory to the Trustee.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Partnership, the Funding Corporation or Holders as provided in Section 11.3, in
which case the Partnership, the Funding Corporation or the Holders calling the
meeting, as the case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting shall be elected
by vote of the Holders of a majority in principal amount of the Bonds
represented at the meeting and entitled to vote.
Subject to the provisions of Section 10.2, at any meeting each
Holder of a Bond of a series or proxy shall be entitled to one vote for each
$1,000 principal amount of Bonds of such series held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Bond challenged as not Outstanding and ruled by the chairman of
the meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote other than by virtue of Bonds of such series held by him or
instruments in writing as aforesaid duly designating him as the Person to vote
on behalf of other Holders of such series. Any meeting of Holders duly called
pursuant to Section 11.2 or 11.3 may be adjourned from time to time, and the
meeting may be held as so adjourned without further notice. At any meeting, the
presence of Persons holding or representing Bonds with respect to which such
meeting is being held in an aggregate principal amount sufficient to take action
upon the business for the transaction of which such meeting was called shall be
necessary to constitute a quorum; but, if less than a quorum may be present, the
Persons holding or representing a majority of the Bonds represented at the
meeting may adjourn such meeting with the same effect, for all intents and
purposes, as though a quorum had been present.
Section 11.6 Counting Votes and Recording Action of Meeting. The
vote upon any resolution submitted to any meeting of Holders of a series shall
be by written ballots on which shall be subscribed the signatures of the Holders
of Bonds of such series or of their representatives by proxy and the serial
numbers and principal amounts of the Bonds of such series held or represented by
them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting
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for or against any resolution and who shall make and file with the secretary of
the meeting their verified reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Holders
shall be prepared by the secretary of the meeting and there shall be attached to
said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more Persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
said notice was given as provided in Section 11.2. The record shall show the
serial numbers (if any) of the Bonds voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Partnership and the other to the Trustee to be preserved by
the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
ARTICLE XII
SUPPLEMENTAL INDENTURES
Section 12.1 Supplemental Indentures and Amendments to Financing
Documents Without Consent of Holders. Without the consent of the Holders of any
Bonds, the Funding Corporation and the Partnership, when authorized by a Board
Resolution of the Funding Corporation and of the Partnership (copies of which
shall be delivered to the Trustee), and the Trustee (or, if the Trustee is not a
party to such Financing Document or if another agent is also a party to such
Financing Document, the Collateral Agent, the Administrative Agent, the
Intercreditor Agent and/or the Securities Intermediary), at any time and from
time to time, may enter into or consent to amendments or supplements to the
Financing Documents (including this Indenture) in form satisfactory to the
Trustee, for any of the following purposes:
(a) to establish the form and terms of Bonds of any series permitted
by Sections 2.1, 2.3 and 2.7; or
(b) to evidence the succession of another entity to the Funding
Corporation and the assumption by any such successor of the covenants of the
Funding Corporation incorporated herein by reference or herein contained or to
evidence the succession of another entity to the Partnership and the assumption
by any such successor
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of the covenants of the Partnership incorporated herein by reference or herein
contained; or
(c) to evidence the succession of a new Trustee hereunder pursuant
to Section 9.9; or
(d) to add to the covenants of the Funding Corporation or the
Partnership, for the benefit of the Holders, or to surrender any right or power
conferred in this Indenture or any other Financing Document upon the Funding
Corporation or the Partnership; or
(e) to convey, transfer and assign to the Trustee properties or
assets to secure the Bonds, or to the Collateral Agent properties or assets to
secure the Senior Secured Obligations, and to correct or amplify the description
of any property at any time subject to the Lien of this Indenture or the Lien of
any Senior Security Document or to assure, convey and confirm unto the Trustee
any property subject or required to be subject to the Lien of this Indenture or
unto the Collateral Agent any property subject to or required to be subject to
the Lien of the Senior Security Documents; or
(f) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to register any Bonds under the Securities
Act or the Exchange Act, or to comply with any applicable rules or regulations
of any securities exchange on which any Bonds may be listed or to qualify,
requalify or continue the qualification of this Indenture (including any
supplemental indenture) under the Trust Indenture Act, or under any similar
United States federal statute hereafter enacted, and to add to this Indenture
such other provisions as may be expressly permitted by the Trust Indenture Act,
excluding, however, the provisions referred to in Section 316(a)(2) of the Trust
Indenture Act as in effect at the date as of which this Indenture was executed
or any corresponding provision in any similar United States federal statute
hereafter enacted; or
(g) to permit or facilitate the issuance of Bonds in uncertificated
form; or
(h) to cure any ambiguity, to correct or supplement any provision in
any Financing Document (including this Indenture) that may be defective or
inconsistent with any other provision in such Financing Document, or to make any
other provisions with respect to matters or questions arising under any
Financing Document, provided, that such
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action shall not adversely affect the interests of the Holders of any series in
any material respect.
Section 12.2 Supplemental Indenture with Consent of Holders. Subject
to Section 12.1, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Bonds of all series then Outstanding,
considered as one class, by Act of said Holders delivered to the Funding
Corporation, the Partnership and the Trustee, the Funding Corporation and the
Partnership may, and the Trustee, subject to Sections 12.3 and 12.4, shall,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any mutually agreeable provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture; provided, however, that if
there shall be Bonds of more than one series Outstanding hereunder and if a
proposed supplemental indenture shall directly affect the rights of the Holders
of one or more, but less than all, of such series, then the consent only of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Bonds of all series so directly affected considered as one class
shall be required; and provided, further, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Bond directly
affected thereby:
(a) change any Scheduled Payment Date of any Bond or change the
principal amount thereof or the interest thereon, or change the place of payment
where, or the coin or currency in which, any Bond or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment of principal or interest on or after the Scheduled Payment Date for such
payment (or, in the case of redemption, on or after the Redemption Date); or
(b) except to the extent expressly permitted by this Indenture or
the Intercreditor Agreement, permit the creation of any Lien prior to or pari
passu with the Lien of this Indenture with respect to any of the Indenture
Collateral, terminate the Lien of this Indenture on any Indenture Collateral
(except as specifically contemplated hereby) or deprive any Holder of the
security afforded by the Lien of this Indenture; or
(c) reduce the percentage in principal amount of the Outstanding
Bonds the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture; or
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(d) modify any of the provisions of Section 8.7 or of this Section
12.2.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Bonds, or which modifies the
rights of the Holders of Bonds of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under this Indenture
of the Holders of Bonds of any other series.
The provisions of Article IX shall not be amended by supplemental
indenture or otherwise without the consent of the Trustee.
Upon the written request of the Partnership and such other
documentation as the Trustee may reasonably require and upon the filing with the
Trustee of evidence of the Act of said Holders, the Trustee shall join in the
execution of such supplemental indenture or other instrument, as the case may
be, subject to the provisions of Sections 12.3 and 12.4.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 12.3 Documents Affecting Immunity or Indemnity. If in the
opinion of the Funding Corporation, the Partnership or the Trustee any document
required to be executed by it pursuant to the terms of Section 12.2 affects any
interest, right, duty, immunity or indemnity in favor of the Funding
Corporation, the Partnership or the Trustee under this Indenture, the Funding
Corporation, the Partnership or the Trustee, as the case may be, may in its
discretion decline to execute such document.
Section 12.4 Execution of Supplemental Indentures. The Trustee may,
but shall not be required to, take any action that increases its duties and
responsibilities hereunder. In executing or accepting the additional trusts
created by any Series Supplemental Indenture or other supplemental indenture
permitted by this Article XII or the modifications thereby of the trusts created
by this Indenture, the Trustee shall receive, and (subject to Section 9.1) shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is permitted by this Indenture.
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Section 12.5 Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article XII, this Indenture shall be,
and the Bonds shall be deemed to be, modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Bonds theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 12.6 Reference in Bonds to Supplemental Indentures. Bonds
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article XII may, and shall if required by the Partnership, bear
a notation in form approved by the Partnership and the Trustee as to any matter
provided for in such supplemental indenture; and, in such case, suitable
notation may be made upon Outstanding Bonds after proper presentation and
demand. If the Funding Corporation or the Partnership shall so determine, new
Bonds so modified as to conform, in the opinion of the Partnership, to any such
supplemental indenture may be prepared and executed by the Funding Corporation
and the Partnership and authenticated and delivered by the Trustee in exchange
for Outstanding Bonds, which shall be cancelled by the Trustee.
ARTICLE XIII
DEFEASANCE
Section 13.1 Defeasance. Subject to Sections 13.1(b) and 13.2, the
Funding Corporation and the Partnership at any time may terminate (i) all their
obligations under this Indenture, the Bonds and the other Financing Documents
which the Bonds enjoy the benefit of, and may terminate the Liens of the Senior
Security Documents on the Senior Collateral to the extent that such Liens run to
the benefit of the Trustee, the Holder or other agents under this Indenture,
including the Securities Intermediary (a "Legal Defeasance"), or (ii) their
obligations under any of their covenants under this Indenture, the Bonds and the
other Financing Documents which the Bonds enjoy the benefit of, other than under
Sections 4.1(a) and 4.2(a) and their obligation to make payments on the Bonds
pursuant to Section 2.11, and may terminate the Liens of the Senior Security
Documents on the Senior Collateral to the extent that such Liens run to the
benefit of the Trustee, the Holders or other agents under this Indenture,
including the Securities Intermediary (a "Covenant Defeasance"). With respect to
any Covenant Defeasance, except as specified in clause (ii) of the preceding
sentence, the remainder of this Indenture and the Bonds shall be unaffected
thereby. The Funding Corporation and the Partnership may exercise a Legal
Defeasance notwithstanding the prior exercise of a Covenant Defeasance. If the
Funding Corporation and the Partnership exercise a Legal Defeasance, payment of
the Bonds may
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not be accelerated due to an Event of Default. Upon satisfaction of the
conditions set forth herein and on demand of the Funding Corporation and the
Partnership, the Trustee (x) shall acknowledge in writing the discharge of the
obligations terminated by the Funding Corporation and the Partnership, (y) shall
execute (or cooperate in the execution of) documents and deliver (or cooperate
in the delivery of) such instruments in writing as shall be required by the
Partnership and the Funding Corporation to reconvey, release, assign and deliver
to the Funding Corporation and the Partnership any and all of the Trustee's
interest in the Indenture Collateral and the Senior Collateral, and the right,
title and interest in and to any and all rights conveyed, assigned or pledged to
the Trustee or otherwise subject to this Indenture and (z) shall turn over to
the Funding Corporation or the Partnership upon request all balances then held
by it hereunder. Covenant Defeasance, as effected hereby, means that the Funding
Corporation and the Partnership may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth under any of
the covenants in this Indenture except as set forth herein above, whether
directly or indirectly by reason of any reference elsewhere herein to any such
covenant or to any other provision herein or in any other document.
(a) Notwithstanding Section 13.1(a) above, the obligations of the
Funding Corporation and the Partnership pursuant to Sections 2.8, 2.9, 2.10,
2.11 and 9.5 shall survive until the Bonds have been paid in full. Thereafter,
the obligations of the Funding Corporation pursuant to Section 9.5 shall
survive.
Section 13.2 Conditions to Defeasance. Either the Legal Defeasance
or the Covenant Defeasance may be exercised only if:
(a) The Funding Corporation or the Partnership shall have
irrevocably deposited, or caused to be deposited, in trust with the Trustee (or
another trustee satisfying the requirements of Section 9.7 who shall agree to
comply with the provisions of this Article XIII applicable to it) (i) cash in an
amount which, when added to any other moneys held by the Trustee and available
for such payment and to the amounts deposited pursuant to clauses (ii) and (iii)
below, would be sufficient to pay (A) the principal of and interest on all Bonds
issued hereunder and under any Series Supplemental Indenture when due, whether
on any Scheduled Payment Date or upon redemption, acceleration or otherwise, and
(B) all other sums payable hereunder and under any Series Supplemental
Indenture, (ii) noncallable direct obligations of, or obligations guaranteed by,
the United States, maturing on or before the date or dates when the payments
specified in clause (i) above shall become due, the principal amount of which
and the interest thereon, when due, is or
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will be, in the aggregate and taken together with the amounts deposited pursuant
to clauses (i) and (iii), sufficient to make all such payments, and/or (iii)
securities evidencing ownership interests in obligations or in specified
portions thereof (which shall consist of specified portions of the principal of
or interest on such obligations) of the character described in clause (ii),
sufficient to make, when taken together with the amounts deposited pursuant to
clauses (i) and (ii) all the payments specified in clause (i) above, and such
deposit shall not cause the Trustee to have a conflicting interest as defined in
and for the purposes of the Trust Indenture Act;
(b) The Funding Corporation or the Partnership shall have delivered
to the Trustee a certificate from a nationally recognized firm of independent
accountants expressing their opinion that the deposited cash and/or the
obligations as described in clause (a) above without any reinvestment thereof
will provide cash at such times and in such amounts as will be sufficient to pay
principal of and interest on all Outstanding Bonds when due, whether on any
Scheduled Payment Date or upon redemption, acceleration or otherwise;
(c) The Funding Corporation or the Partnership shall have delivered
to the Trustee an Opinion of Counsel to the effect that as of the date of such
opinion (i) subject to certain assumptions and exceptions the trust funds will
not, on the 91st day following the deposit, be subject to any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) the defeasance trust will not be subject to the rights of
holders of Indebtedness other than the Bonds, and (iii) the Holders shall have a
perfected security interest under applicable law in the obligations so
deposited;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than from the incurrence of
Indebtedness the proceeds of which will be used for the Legal Defeasance or the
Covenant Defeasance, as the case may be);
(e) Such Legal Defeasance or Covenant Defeasance, as the case may
be, shall not result in a breach or violation of, or constitute a default under,
any material agreement or instrument (other than the Financing Documents) to
which the Funding Corporation or the Partnership is a party or by which the
Funding Corporation or the Partnership is bound;
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(f) In the case of a Legal Defeasance, the Funding Corporation or
the Partnership shall have delivered to the Trustee an Opinion of Counsel
confirming that (i) the Funding Corporation or the Partnership has received
from, or there has been published by, the Internal Revenue Service a ruling or
(ii) since the date of this Indenture there has been a change in the applicable
United States federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such Legal Defeasance and will be subject to United States federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(g) In the case of a Covenant Defeasance, the Funding Corporation or
the Partnership shall have delivered to the Trustee an Opinion of Counsel
confirming that the Holders will not recognize income, gain or loss for United
States federal income tax purposes as a result of such Covenant Defeasance and
will be subject to United States federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; and
(h) The Funding Corporation or the Partnership shall have delivered
to the Trustee an Officer's Certificate and Opinion of Counsel, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been complied
with.
Neither the obligations nor moneys deposited with the Trustee
pursuant to this Section shall be substituted, withdrawn, reinvested or used for
any purpose other than, and shall be segregated and held in trust for, the
payment of the principal of and interest on the Bonds.
ARTICLE XIV
EXCULPATION
Section 14.1 Liability to Senior Secured Parties. Notwithstanding
any other provision of the Financing Documents (but subject to the last sentence
of this Section 14.1), there shall be no recourse against (and the Holders and
beneficial owners of Bonds and the parties hereto other than the Partnership and
the Funding Corporation, and other than in respect of any obligations undertaken
directly in the Transaction Documents by any Non-Recourse Party (as defined
below), waive any claim against) any general partner or
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limited partner of the Partnership or any shareholder of the Funding Corporation
or any of their respective Affiliates (including Holding), shareholders,
members, managers, officers, directors, representatives or employees (each, a
"Non-Recourse Party") for any liability under this Indenture or any other
Financing Document, by operation of law or otherwise, arising in connection with
any breach or default under any Financing Document except to the extent the same
is enforced against the Partnership and/or the Funding Corporation (but not
against any Non-Recourse Party) and the Senior Collateral and the rents, issues,
profits and proceeds of the Senior Collateral, and the Senior Secured Parties
shall look solely to the Partnership and the Funding Corporation (but not to any
Non-Recourse Party) and the Senior Collateral and the rents, issues, profits and
proceeds of the Senior Collateral in enforcing rights and obligations under and
in connection with the Financing Documents; provided that: (a) the foregoing
provisions of this Section 14.1 shall not constitute a waiver, release or
discharge of any of the indebtedness under, or of any of the terms, covenants,
conditions or provisions of, this Indenture or any other Financing Document, and
the same shall continue until fully paid, discharged, observed or performed,
subject to the limitations on recourse against the Non-Recourse Parties
contained herein; and (b) the foregoing provisions of this Section 14.1 shall
not limit or restrict the right of the Trustee and/or the other Senior Secured
Parties to name any Person (but not any Non-Recourse Party) as a defendant in
any action or suit for a money judgment, deficiency judgment (which judgment
shall in either case be satisfied solely out of the Senior Collateral and any
other property of the Partnership and/or the Funding Corporation) or judicial
foreclosure or for the exercise of any other remedy under or with respect to
this Indenture or any other Financing Document (including an effort to obtain
relief in the nature of an injunction, specific performance or other equitable
relief). The foregoing acknowledgments, agreements and waivers shall be
enforceable by any Non-Recourse Party. Notwithstanding any of the foregoing, it
is expressly understood and agreed, however, that nothing contained in this
Section 14.1 shall limit or restrict any right or remedy of the Senior Secured
Parties (or any assignee or beneficiary thereof or successor thereto) with
respect to, and each of the Non-Recourse Parties shall remain fully liable to
the extent that it would otherwise be liable for its own actions with respect
to, any fraud, willful misrepresentation or willful misconduct, and the
provisions of this Section 14.1 do not limit the liability of any party for
breach of its obligations under any Project Document.
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ARTICLE XV
REQUEST FOR INFORMATION FROM THE TRUSTEE
Section 15.1 Information to Holders. With respect to the information
and documents required to be delivered to the Trustee by the Partnership and the
Funding Corporation pursuant to Rule 144A(d) under the Securities Act or to any
Holder or beneficial owner of a Bond pursuant to those sections of this
Indenture which state that specified information will be provided to Holders or
beneficial owners of the Bonds, the Trustee shall deliver, at the expense of the
Partnership and the Funding Corporation, any such documents and information to
any Holder or owner of a beneficial interest in a Global Bond who makes a
request to the Trustee substantially in the form of Exhibit B hereto (which
request may indicate that it is a continuing request for such information until
further notice from such Holder or owner of a beneficial interest in a Global
Bond to the contrary) for such documents or information.
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IN WITNESS WHEREOF, the parties hereto have each caused this
Indenture to be executed by their duly authorized officers and attested on the
date first above written.
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
----------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
and Secretary
THE BANK OF NEW YORK,
as Trustee and Securities Intermediary
By: /s/ Mary Beth Lewicki
-----------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Trust Indenture
<PAGE>
SCHEDULE I
CLOSING DATE PAYMENTS
See attached.
I-1
<PAGE>
APPENDIX I
INSURANCE REQUIREMENTS
Defined terms used in this Appendix I and not otherwise defined
herein shall have the meanings set forth in that certain Trust Indenture, dated
as of May 21, 1999 (as amended, restated, supplemented or otherwise modified
from time to time, the "Indenture"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation and The Bank of New York, as
trustee.
(A) Insurance by the EPC Contractor. The Partnership shall cause the EPC
Contractor to maintain in full force and effect no later than 10 days
prior to the commencement of any work and continuing until the Final
Completion Date (as defined in the EPC Contract), insurance as required
under the EPC Contract.
(B) Insurance by the Partnership:
(1) The Partnership shall procure at its own expense and maintain in
full force and effect at all times on and after the Closing Date,
except for insurance maintained pursuant to section (B)(2), and
continuing throughout the term of the Senior Secured Obligations,
insurance policies with responsible insurance companies authorized
to do business in Mississippi (if required by law or regulation)
with a Best Insurance Reports rating of "A-" or better and a
financial size category of "VIII" or higher or, if not rated by
Best, a Standard & Poor's financial strength rating of "BBB" or
higher, with limits and coverage provisions sufficient to satisfy
the requirements set forth in each of the Project Documents, but in
no event less than the limits and coverage provisions set forth
below:
(a) Workers' Compensation Insurance: If the Partnership has any
employees, statutory workers' compensation insurance for all
employees.
(b) Employer's Liability Insurance: If the Partnership has any
employees, employer's liability insurance with a $1,000,000
minimum limit per accident. A maximum deductible or
self-insured retention of $25,000 per occurrence shall be
allowed.
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(c) General Liability Insurance: Liability insurance on an
occurrence basis against claims for personal injury (including
bodily injury and death) and property damage. Such insurance
shall provide coverage for products-completed operations,
blanket contractual, explosion, collapse and underground
coverage, broad form property damage, personal injury
insurance, independent contractors and hostile fire pollution
liability with a $1,000,000 minimum limit per occurrence for
combined bodily injury and property damage; provided that such
policy aggregates, if any, shall apply separately to claims
occurring with respect to the Project. A maximum deductible or
self-insured retention of $25,000 per occurrence shall be
allowed.
(d) Automobile Liability Insurance: Automobile liability insurance
against claims for personal injury (including bodily injury
and death) and property damage covering all owned, leased,
non-owned and hired motor vehicles, including loading and
unloading, with a $1,000,000 minimum limit per occurrence for
combined bodily injury and property damage and containing
appropriate no-fault insurance provisions wherever applicable.
A maximum deductible or self-insured retention of $25,000 per
occurrence shall be allowed.
(e) Excess Insurance: Excess liability insurance on an occurrence
basis covering claims in excess of the underlying insurance
described in the foregoing subsections (b), (c) and (d), with
a $25,000,000 minimum limit per occurrence; provided that
aggregate limits of liability, if any, shall apply separately
to claims occurring with respect to the Project.
The amounts of insurance required in the foregoing subsections
(b), (c), (d) and this subsection (e) may be satisfied by the
Partnership purchasing coverage in the amounts specified or by
any combination of primary and excess insurance, provided that
the total amount of insurance meets the requirements specified
above.
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(f) Aircraft Insurance: To the extent aircraft are utilized in
connection with the Project by the Partnership, aircraft
liability insurance for all owned, non-owned, hired and leased
aircraft used in connection with the Project by the
Partnership with a $10,000,000 minimum limit per occurrence
for combined property damage and bodily injury, including
passengers and crew.
(g) Builder's Risk Insurance: A builder's risk insurance policy on
an "all risk" basis including coverage for the perils of earth
movement (including but not limited to earthquake, landslide,
subsidence and volcanic eruption), flood, boiler, turbine and
machinery accidents. Such insurance shall be on a completed
value form, with no periodic reporting requirements, with a
limit equal to $264,000,000 and providing coverage for (i) the
buildings, structures, boilers, machinery, equipment,
facilities, fixtures, supplies, fuel, pipelines, transmission
lines and other properties constituting a part of the Project,
(ii) off-site storage with sub-limits sufficient to insure the
full replacement value of any property or equipment not stored
on the Site, (iii) removal of debris with a sub-limit not less
than $5,000,000, (iv) pollution, clean up and removal for a
sub-limit not less than $500,000, (v) foundations and other
property below the surface of the ground, (vi) electronic
equipment and media, (vii) value losses at replacement cost
including custom duties, taxes and fees, (viii) ground and
inland waterway transit of key equipment on a "warehouse to
warehouse" basis from the manufacturer or supplier to the Site
with limits sufficient to insure the value of the largest
single shipment but in no case less than $25,000,000, (ix)
unintentional errors and omissions, (x) all operational and
performance testing for a period not less than 60 days and
(xi) existing property for a limit not less than $5,000,000.
The earth movement and flood coverage shall not have a
sub-limit. The deductible for all such insurance shall not
exceed (A) $250,000 per occurrence for operational testing
coverage and (B) $100,000 per occurrence for all other
coverage. The builder's risk coverage shall not contain an
exclusion for freezing, mechanical breakdown, or resultant
damage caused by faulty workmanship, design or materials.
Coverage shall remain in
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effect for the Project as a whole until replaced by physical
damage insurance insuring the entire Project as specified in
Section (B)(2)(a) hereof. The physical damage insurance
(specified in Section (B)(2)(a)) may insure part of the
Project while the builder's risk insurance is in place only if
the same insurer is used for both policies that provide these
coverages. The builder's risk coverage shall not be subject to
cancellation except for non-payment of premium (after prior
notice) and shall include a 50/50 clause.
If the insurance company providing the physical damage
insurance is different from the company providing the boiler &
machinery insurance required in this Section, then a joint
loss agreement between such insurance companies shall be
required and included as part of the respective policies.
(h) Delayed Startup Insurance: Delayed startup coverage to pay
fixed costs incurred, including debt service and any
additional cost for replacement power, as a result of loss or
damage insured by Section (g) above resulting in a delay in
completion of the Project beyond its anticipated date of
completion in an amount equal to 12 months' projected
continuing expenses of the Project plus debt service of the
Partnership and any additional cost incurred for replacement
power. Such insurance shall (i) have a deductible of not
greater than 30 days per occurrence and 60 days aggregate for
all occurrences during the construction period, (ii) include
extra expenses (defined as extraordinary expenses incurred
after an insured loss to make temporary repairs and expedite
the permanent repair of the damaged property in excess of the
delayed startup coverage even if such expenses do not reduce
the delayed startup loss) in an amount not less than
$5,000,000, (iii) an indemnity period not less than 18 months,
(iv) not contain any form of a coinsurance provision or
include a waiver of such provision, (v) insure delay due to
loss or damage covered under a guarantee or warranty caused by
an insured peril, (vi) insure delay arising out of damage to
finished goods while stored at the manufacturer/supplier's
premises prior to shipment to the Site, (vii)
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insure delay arising out of the prevention of access to the
Site in an amount not less than 1 month of debt service and
fixed expenses, (viii) insure delay arising out of an insured
peril that damages the TVA/Entergy sub-station in an amount
not less than 6 months of fixed expenses and debt service and
(ix) insure delay arising out of an insured peril that damages
the premises of any utility or gas supplier in an amount not
less that 2 months of debt service and fixed expenses.
Coverage shall remain in effect until replaced by business
interruption insurance as specified in Section (B)(2)(c)
hereof.
The insurance policies required by Sections (B)(1)(g) and
(B)(1)(h) shall be amended to waive any rights by the insurer
to subrogation against the EPC Contractor, subcontractors, the
Partnership, the Senior Secured Parties and their respective
officers and employees and include as insureds all
sub-contractors and the Partnership.
(i) Cargo Insurance: Until the date of Substantial Completion (as
defined in the EPC Contract), cargo insurance which shall be
written on a "warehouse to warehouse" basis including land,
air and marine transit shipments, not insured by the builder's
risk insurance, insuring "all risks" of loss or damage on a
replacement cost basis plus freight and insurance from the
time the goods are finished and stored ready for transit until
they are finally delivered to the Site. Such insurance shall
include coverage for war, strikes, theft, pilferage,
non-delivery, charges of general average sacrifice or
contribution, salvage expenses, temporary storage in route,
consolidation, repackaging, refused and returned shipments,
contain a replacement by air extension clause, 50/50 clause,
unintentional errors and omissions clause, import duty clause,
non-vitiation clause, lenders loss payable clause satisfactory
to the Insurance Consultant, contain no exclusion for
inadequate packing and insure for the replacement value of the
largest single shipment plus freight and insurance, subject to
a minimum limit of $25,000,000 per conveyance.
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(j) Cargo Delayed Startup Insurance: Delayed startup coverage to
pay fixed costs incurred, including debt service, as a result
of (x) loss or damage insured by Section (i) above or (y)
loss, breakdown or damage to the hull, machinery or equipment
of the vessel or aircraft on which the insured property is
being transported, resulting in a delay in completion of the
Project beyond its anticipated date of completion in an amount
not less than $50,000,000. Such insurance shall have a
deductible of not greater than 30 days per occurrence and 60
days in the aggregate for all occurrences during the
construction of the Project.
(2) The Partnership shall procure at its own expense and maintain in
full force and effect at all times on or prior to the date of
Substantial Completion (as defined in the EPC Contract), and
continuing until the indefeasible payment in full in cash or cash
equivalents of all of the Senior Secured Obligations and the
termination of all of the commitments of the Senior Secured Parties
under the Financing Documents, insurance policies with responsible
insurance companies authorized to do business in Mississippi (if
required by law or regulation) with a Best Insurance Reports rating
of "A-" or better and a financial size category of "VIII" or higher
or, if not rated by Best, a Standard & Poor's financial strength
rating of "BBB" or higher, with limits and coverage provisions
sufficient to satisfy the requirements set forth in each of the
Project Documents, but in no event less than the limits and coverage
provisions set forth below:
(a) Physical Damage Insurance: Property damage insurance on an
"all risk" basis, boiler and machinery insurance on a
comprehensive basis (covering all production machinery,
including but not limited to pressure vessels, electrical
turbines, generators, transformers and other related
equipment, motors, air tanks, boilers, machinery, pressure
piping or any other similar objects) including coverage
against damage or loss caused by earth movement (including but
not limited to earthquake, landslide, subsidence and volcanic
eruption) and flood and providing coverage for (i) the Project
in a minimum aggregate amount equal to the "full insurable
value" of the Project, (ii) transit including ocean marine
transit (which may be written separately), if applicable, with
sub-limits sufficient to insure
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the full replacement value of the property or equipment prior
to its being removed from the Site and while located away from
the Site, (iii) steam and electrical transmission lines along
with related equipment for which the Partnership has an
insurable interest, (iv) foundations and other property below
the surface of the ground, (v) unintentional errors and
omissions, and (vi) attorneys' fees, engineering and other
consulting costs, and permit fees directly incurred in order
to repair or replace damaged insured property in a minimum
amount of $1,000,000. For purposes of this Section (B)(2)(a),
"full insurable value" shall mean the full replacement value
of the Project, including any improvements, equipment, spare
parts, fuel and supplies, without deduction for physical
depreciation and/or obsolescence. All such insurance shall
have deductibles of not greater than $250,000 per occurrence,
except for the turbine/generator units which shall not have a
deductible greater than $750,000 per occurrence. In addition,
such insurance shall (i) not include any coinsurance
provision, (ii) provide for increased cost of construction and
loss to undamaged property as the result of enforcement of
building laws or ordinances with sub-limits not less than
$5,000,000, (iii) value losses at replacement cost including
custom duties, taxes and fees, and (iv) include debris removal
with sub-limits not less than $5,000,000. The earth movement
and flood coverage shall be insured with a sub-limit not less
than 100% of the "full insurable value" of the Project plus
100% of the business income amount required by Section
(B)(2)(b) below. The property damage coverage shall not
contain an exclusion for freezing, mechanical breakdown, or
resultant damage caused by faulty workmanship, design or
materials.
If the insurance company providing the physical damage
insurance is different from the company providing the boiler
and machinery insurance required in this Section, then a joint
loss agreement between such insurance companies shall be
required and included as part of the respective policies.
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(b) Business Interruption Insurance: Business interruption
insurance covering 100% of continuing normal Project
operating expenses, payroll and debt service of the
Partnership and the cost of any replacement power
obligation the Partnership may have for a period of 12
months, arising from loss required to be insured by
Section B(2)(a) above. The maximum deductible shall be
no greater than 45 days per occurrence. Such insurance
shall also insure (i) for a period of 2 months that
portion of fixed expenses and debt service not earned
arising from an insured loss or occurrence at the
premises of any utility or gas supplier to the Project,
(ii) an indemnity period of not less than 18 months,
(iii) extra expenses (defined as extraordinary expenses
incurred after an insured loss to make temporary repairs
and expedite the permanent repair of the damaged
property in excess of the business interruption even if
such expense does not reduce the business interruption
loss) in an amount not less than $5,000,000, and (iv)
loss of income due to loss or damage covered under a
guarantee or warranty caused by an insured peril and (v)
for a period of 6 months that portion of fixed expenses
and debt service not earned arising from an insured
peril at the TVA/Entergy sub-station. Such insurance
shall not contain any coinsurance clause or include a
waiver of such clause.
(3) Endorsements: All policies of insurance to be maintained by
the Partnership shall (i) include the Funding Corporation and
Holding as named insureds, (ii) the Senior Secured Parties as
additional insureds and (iii) provide for waivers of
subrogation in favor of the Senior Secured Parties and their
respective officers and employees (and such other Persons as
may be required by the Project Documents). All policies of
liability insurance required to be maintained by the
Partnership under this Section (B), other than employer's
liability, shall be endorsed as follows:
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(a) To provide a severability of interest or cross liability
clause;
(b) The insurance shall be primary and not excess to or
contributing with any insurance or self-insurance
maintained by the Collateral Agent or the other Senior
Secured Parties.
(c) Name the Collateral Agent and the Senior Secured Parties
and their respective officers and employees (and such
other persons as may be required by the Project
Documents) as additional insureds.
(4) Waiver of Subrogation: The Partnership hereby waives any and
every claim for recovery from the Collateral Agent and the
other Senior Secured Parties for any and all loss or damage
covered by any of the insurance policies to be maintained
under the Indenture to the extent that such loss or damage is
recovered under any such policy. Inasmuch as the foregoing
waiver will preclude the assignment of any such claim to the
extent of such recovery, by subrogation (or otherwise), to an
insurance company (or other person), the Partnership shall
give written notice of the terms of such waiver to each
insurance company which has issued, or which may issue in the
future, any such policy of insurance (if such novice is
required by the insurance policy) and shall cause each such
insurance policy to be properly endorsed by the issuer thereof
to, or to otherwise contain one or more provisions that,
prevent the invalidation of the insurance coverage provided
thereby by reason of such waiver.
(C) Amendment of Requirements: The Collateral Agent may (as directed by the
Intercreditor Agent, acting pursuant to the Intercreditor Agreement) at
any time, in consultation with the Insurance Consultant and with
reasonable advance notice to the Partnership, amend the requirements and
approved insurance companies of this Appendix I due to (i) new information
not known by the Senior Secured Parties on the Closing Date or (ii)
changed circumstances after the Closing Date which in the reasonable
judgment of the Insurance Consultant either render such coverage
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materially inadequate or materially reduce the financial ability of the
approved insurance companies to pay claims. The Partnership will respond
and work to secure the additional insurance coverage within a reasonable
period of time not to exceed 2 months.
In the event any insurance (including the limits or deductibles thereof)
hereby required to be maintained shall not be reasonably available and
commercially feasible in the commercial insurance market, the Collateral
Agent (as directed by the Intercreditor Agent, acting pursuant to the
Intercreditor Agreement) shall not unreasonably withhold its agreement to
waive such requirement to the extent the maintenance thereof is not so
available; provided, however, that (i) the Partnership shall first request
any such waiver in writing, which request shall be accompanied by written
reports prepared by two independent insurance advisors of recognized
national standing (one of which may be the Partnership's insurance advisor
and one of which may be the Insurance Consultant), certifying that such
insurance is not reasonably available and commercially feasible in the
commercial insurance market for power plants of similar type, location and
capacity as the Project (and, in any case where the required amount is not
so available, certifying as to the maximum amount which is so available)
and explaining in detail the basis for such conclusions; (ii) at any time
after the granting of any such waiver, but not more often than once a
year, the Collateral Agent may (as directed by the Intercreditor Agent,
acting pursuant to the Intercreditor Agreement) request, and the
Partnership shall furnish to the Collateral Agent within fifteen (15) days
after such request, supplemental reports from such independent insurance
broker or the Insurance Consultant updating their prior reports and
reaffirming such conclusion; and (iii) any such waiver shall be effective
only so long as such insurance shall not be reasonably available and
commercially feasible in the commercial insurance market, it being
understood that the failure of the Partnership to timely furnish any such
supplement report shall be presumptive evidence that such waiver is no
longer effective because such condition no longer exists; provided,
however, that such failure is not the only way to establish such
non-existence. The failure at any time to satisfy the condition to any
waiver of an insurance requirement set forth in the proviso to the
preceding sentence shall not impair or be construed as a relinquishment of
the Partnership's ability to obtain a waiver of an insurance requirement
pursuant to the preceding sentence at any other time upon satisfaction of
such conditions.
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(D) Conditions:
(1) The Partnership shall promptly notify the Collateral Agent of any
loss covered by any insurance maintained pursuant to Sections (B)(1)
or (B)(2).
(2) All policies of insurance required to be maintained pursuant to
Sections (B)(1)(g) and (h) plus (B)(2)(a) and (b), shall provide
that the proceeds of such policies shall be payable solely to the
Collateral Agent pursuant to a standard first mortgage endorsement
substantially equivalent to the Lenders Loss Payable Endorsement
438BFU or ISO endorsement CP12181091, without contribution. All
losses payable under the insurance policies required by Section
(B)(1)(i) and (j) shall include a loss payable clause in favor of
the Collateral Agent.
(3) A loss under any insurance required to be carried pursuant to
Sections (B)(1)(g), (h), (i) and (j) plus (B)(2)(a) and (b), shall
be adjusted with the insurance companies, including the filing in a
timely manner of appropriate proceedings, by the Partnership,
subject to the approval of the Insurance Consultant if such loss is
in excess of $500,000. In addition the Partnership may in its
reasonable judgment consent to the settlement of any loss, provided
that in the event that the amount of the loss exceeds $500,000 the
terms of such settlement is concurred with by the Insurance
Consultant.
(4) All policies of insurance required to be maintained pursuant to
Section (B) shall be endorsed so that if at any time should they be
canceled, or coverage be reduced which affects the interests of the
Senior Secured Parties, such cancellation or reduction shall not be
effective as to the Senior Secured Parties for 60 days, except for
non-payment of premium which shall be 10 days, after receipt by the
Collateral Agent of written notice from such insurer of such
cancellation or reduction.
(5) All policies of insurance required to be maintained pursuant to this
Section (B) shall be mutually acceptable to the Partnership and the
Insurance Consultant.
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(6) The Partnership has previously furnished the Insurance Consultant
with draft copies of the policies of insurance it intends to procure
for the coverage required hereunder including the identities of the
insurer(s) and insured amounts with the deductibles, all of which
the Insurance Consultant has approved. The Partnership warrants that
the insurance policies procured by the Partnership for the coverage
required hereunder shall, to the extent commercially reasonable, be
the same in all material respects as the policies previously
approved by the Insurance Consultant.
(E) Evidence of Insurance: On the Closing Date and on an annual basis at least
10 days prior to each policy anniversary, the Partnership shall furnish
the Collateral Agent with (1) approved written certification of all
insurance required by Section (B) and (2) a schedule of the insurance
policies held by or for the benefit of the Partnership and required to be
in force by the provisions of Section (B). Such certification shall be
executed by each insurer or by an authorized representative of each
insurer where it is not practical for such insurer to execute the
certificate itself. Such certification shall identify underwriters, the
type of insurance, the insurance limits and the policy term and shall
specifically list the special provisions enumerated for such insurance
required by Section (B). Upon request, the Partnership will promptly
furnish the Collateral Agent with copies of all insurance policies,
binders and cover notes or other evidence of such insurance relating to
the insurance required to be maintained by the Partnership. The schedule
of insurance shall include the name of the insurance company, policy
number, type of insurance, major limits of liability and expiration date
of the insurance policies.
(F) Reports: Concurrently with the furnishing of the certification referred to
in Section (E), the Partnership shall furnish the Collateral Agent with a
report of an independent broker, signed by an officer of the broker,
stating that in the opinion of such broker, the insurance then carried or
to be renewed is in accordance with the terms of Section (B), and
attaching an updated copy of the schedule of insurance required by Section
(E) above. In addition the Partnership will advise the Collateral Agent in
writing promptly of any default in the payment of any premium and of any
other act or omission on the part of the Partnership which may invalidate
or render unenforceable, in whole or in part, any insurance being
maintained by the Partnership pursuant to Section (B).
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(G) Failure to Maintain Insurance: In the event the Partnership fails, or
fails to cause the EPC Contractor to take out or maintain the full
insurance coverage required by this Appendix I, the Collateral Agent (as
directed by the Intercreditor Agent, acting pursuant to the Intercreditor
Agreement), upon 30 days' prior notice (unless the aforementioned
insurance would lapse within such period, in which event notice should be
given as soon as reasonably possible) to the Partnership of any such
failure may (but shall not be obligated to) take out the required policies
of insurance and pay the premiums on the same. All amounts so advanced
thereof by the Collateral Agent shall become an additional Senior Secured
Obligation of the Partnership to the Collateral Agent under the Financing
Documents, and the Partnership shall forthwith pay such amounts to the
Collateral Agent, together with interest thereon at the average of (x) the
Post Default Rate for the Series A Bonds and (y) the Post Default Rate for
the Series B Bonds from the date so advanced.
(H) No Duty of the Collateral Agent to Verify or Review: No provision of this
Appendix I or any provision of the Indenture or any Project Document shall
impose on the Collateral Agent any duty or obligation to verify the
existence or adequacy of the insurance coverage maintained by the
Partnership, nor shall the Collateral Agent be responsible for any
representations or warranties made by or on behalf of the Partnership to
any insurance company or underwriter. Any failure on the part of the
Collateral Agent to pursue or obtain the evidence of insurance required by
the Indenture from the Partnership and/or failure of the Collateral Agent
to point out any non-compliance of such evidence of insurance shall not
constitute a waiver of any of the insurance requirements in this Appendix
I or in the Indenture.
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EXHIBIT A
FORM OF CONSENT
This CONSENT AND AGREEMENT (this "Consent"), dated as of [DATE OF
CONSENT], is between [NAME OF CONTRACTING PARTY], a [FORM AND JURISDICTION OF
ORGANIZATION OF CONTRACTING PARTY] (the "Contracting Party"), and THE BANK OF
NEW YORK, as collateral agent (together with its successors in such capacity,
the "Collateral Agent") for the Senior Secured Parties pursuant to the Second
Amended and Restated Collateral Agency Agreement, dated as of May 21, 1999 (as
amended, restated, modified or otherwise supplemented from time to time in
accordance with the terms thereof, the "Collateral Agency Agreement"), among LSP
Energy Limited Partnership (the "Partnership"), the Funding Corporation, the
Trustee, the VEPCO L/C Agent, the Collateral Agent, the Intercreditor Agent and
the Administrative Agent.
RECITALS
A. The Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined cycle electric generating facility to be located in
Batesville, Mississippi.
B. The Contracting Party and the Partnership have entered into the
[NAME OF ASSIGNED AGREEMENT], dated [DATE OF ASSIGNED AGREEMENT] (as amended,
restated, modified or otherwise supplemented from time to time in accordance
with the terms thereof and hereof, the "Assigned Agreement").
C. The Partnership and the Funding Corporation have determined to
issue (1) $150,000,000 aggregate principal amount of their Series A Senior
Secured bonds due January 15, 2014 (the "Series A Bonds") and (2) $176,000,000
aggregate principal amount of their Series B Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, together with the Series A Bonds, the "Bonds")
pursuant to the Indenture.
D. The Partnership and the Funding Corporation will use the net
proceeds of the Bonds to (1) repay in full the Indebtedness outstanding under
the Amended and Restated Bank Facility Credit Agreement, dated as of December
15, 1998, among the Partnership, the banks and other financial institutions
party thereto and Credit
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Suisse First Boston as agent for banks, and (2) pay a portion of the
remaining Project Costs.
E. Pursuant to the Second Amended and Restated Partnership Security
Agreement, dated as of May 21, 1999 (as amended, restated, modified or otherwise
supplemented from time to time in accordance with the terms thereof, the
"Partnership Security Agreement"), between the Partnership and the Collateral
Agent "), as security for the obligations under the Indenture and the other
Senior Secured Obligations, the Partnership has assigned all of its right, title
and interest in, to and under, and granted a security interest in, the Assigned
Agreement and all of its rights to receive payment under or with respect to such
Assigned Agreement and all payments due and to become due to the Partnership
under or with respect to such Assigned Agreement, whether as contractual
obligations, damages, indemnity payments or otherwise, to the Collateral Agent
for the benefit of the Senior Secured Parties.
F. Except as otherwise expressly provided herein, capitalized terms
used in this Consent shall have the meanings given thereto in Article I of the
Indenture.
NOW, THEREFORE, in consideration of the Senior Secured Parties
entering into the Financing Documents and the issuance of the Bonds and the
other Senior Secured Obligations, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Contracting Party
hereby agrees as follows:
SECTION 1. CONSENT TO ASSIGNMENT, ETC.
1.1 Consent to Assignment. The Contracting Party (a) acknowledges
that the Senior Secured Parties are entering into the Financing Documents and
issuing the Senior Secured Obligations in reliance upon the execution and
delivery by the Contracting Party of the Assigned Agreement and this Consent,
(b) consents in all respects to the pledge and assignment to the Collateral
Agent pursuant to the Partnership Security Agreement of all of the Partnership's
right, title and interest in, to and under the Assigned Agreement including,
without limitation, all of the Partnership's rights to receive payment under or
with respect to the Assigned Agreement and all payments due and to become due to
the Partnership under or with respect to the Assigned Agreement, whether as
contractual obligations, damages, indemnity payments or otherwise (collectively,
the "Assigned Interests"), and (c) acknowledges the right of the Collateral
Agent or any designee of the
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Collateral Agent, in the exercise of the Collateral Agent's rights and remedies
under the Partnership Security Agreement, to make all demands, give all notices,
take all actions and exercise all rights of the Partnership under the Assigned
Agreement.
1.2 Substitute Owner. The Contracting Party agrees that (i) if the
Collateral Agent shall notify the Contracting Party that an event of default
under the Indenture has occurred and is continuing and that the Collateral Agent
or any designee of the Collateral Agent has been instructed to exercise the
rights and remedies set forth in the Partnership Security Agreement, then the
Collateral Agent, the Collateral Agent's designee or the Collateral Agent's
transferee or any purchaser of the Assigned Interests in a judicial or
nonjudicial foreclosure sale, in each case, which assumes the obligations of the
Partnership under the Assigned Agreement (the "Substitute Owner") shall be
substituted for the Partnership solely for the purposes of enforcing remedies or
exercising rights under the Assigned Agreement and (ii) in such event, the
Contracting Party will recognize the Substitute Owner and will continue to
perform its obligations under the Assigned Agreement in favor of the Substitute
Owner.
1.3 Right to Cure. In the event of a default by the Partnership in
the performance of any of its obligations under the Assigned Agreement, or upon
the occurrence or nonoccurrence of any event or condition under the Assigned
Agreement which would immediately or with the passage of any applicable grace
period or the giving of notice, or both, enable the Contracting Party to
terminate the Assigned Agreement (each hereinafter a "default"), the Contracting
Party will not terminate the Assigned Agreement until it first gives prompt
written notice of such default to the Collateral Agent or its designees and
affords each such party a period of at least sixty (60) days (or if such default
is a nonmonetary default, such longer period as is required so long as any such
party has commenced and is diligently pursuing appropriate action to cure such
default) from receipt of such notice to cure such default; provided, however,
that if any such party is prohibited from curing any such default by any
process, stay or injunction issued by any governmental authority or pursuant to
any bankruptcy or insolvency proceeding or other similar proceeding involving
the Partnership, then the time periods specified herein for curing a default
shall be extended for the period of such prohibition.
1.4 No Amendments. The Contracting Party agrees that it will not,
without the prior written consent of the Collateral Agent (as directed by the
Intercreditor Agent, acting pursuant to the Intercreditor Agreement), enter into
any amendment or supplement or any assignment, transfer, suspension, novation,
extension, restatement or other
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modification of the Assigned Agreement, or enter into any consensual
cancellation or termination of the Assigned Agreement, or assign or otherwise
transfer any of its right, title and interest under the Assigned Agreement, or
consent to any such assignment or transfer by the Partnership.
1.5 Replacement Agreement. In the event that the Assigned Agreement
is terminated as a result of any bankruptcy or insolvency proceeding or other
similar proceeding affecting the Partnership, the Contracting Party will, at the
request of the Collateral Agent (as directed by the Intercreditor Agent, acting
pursuant to the Intercreditor Agreement), enter into a new agreement with the
Collateral Agent or its transferee or nominee having terms substantially the
same as the terms of the Assigned Agreement.
1.6 No Liability. The Contracting Party acknowledges and agrees that
the rights, benefits, privileges and protections of the Collateral Agent shall
be as set forth in the Collateral Agency Agreement and that neither the
Collateral Agent nor its designees shall have any liability or obligation under
the Assigned Agreement as a result of this Consent, the Partnership Security
Agreement or otherwise, nor shall the Collateral Agent or its designees be
obligated or required to (a) perform any of the Partnership's obligations under
the Assigned Agreement, except during any period in which the Collateral Agent
is a Substitute Owner pursuant to Section 1.2, in which case the obligations of
such Substitute Owner shall be no more than that of the Partnership under the
Assigned Agreement, or (b) take any action to collect or enforce any claim for
payment assigned under the Partnership Security Agreement.
1.7 Performance under Assigned Agreement. The Contracting Party
shall perform and comply with all material terms and provisions of the Assigned
Agreement to be performed or complied with by it and shall maintain the Assigned
Agreement in full force and effect in accordance with the terms thereof. [The
Partnership shall endeavor in good faith and use its best efforts to obtain the
agreement of the Contracting Party to this Section 1.7, provided that obtaining
such agreement shall not be required if the Partnership so endeavors in good
faith and uses its best efforts.]
1.8 Delivery of Notices. The Contracting Party shall deliver to the
Collateral Agent and its designees, concurrently with the delivery thereof to
the Partnership, a copy of each material notice, request or demand given by the
Contracting Party to the Partnership pursuant to the Assigned Agreement.
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SECTION 2. PAYMENTS UNDER THE ASSIGNED AGREEMENT
2.1 Payments. The Contracting Party will pay all amounts payable by
it under the Assigned Agreement in the manner and as and when required by the
Assigned Agreement directly into the appropriate account specified on Exhibit A
hereto, or to such other person or account as shall be specified from time to
time by the Collateral Agent to the Contracting Party in writing.
2.2 No Offset, Etc. All payments required to be made by the
Contracting Party under the Assigned Agreement shall be made without any offset,
recoupment, abatement, withholding, reduction or defense whatsoever, other than
that expressly allowed by the terms of the Assigned Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CONTRACTING PARTY
The Contracting Party makes the following representations and
warranties, which shall survive the execution and delivery of this Consent and
the As signed Agreement and the consummation of the transactions contemplated
hereby and thereby.
3.1 Organization. The Contracting Party is a [FORM OF ORGANIZATION
OF CONTRACTING PARTY] duly organized and validly existing under the laws of the
state of its formation, and is duly qualified, authorized to do business and in
good standing as a foreign [FORM OF ORGANIZATION OF CONTRACTING PARTY] in every
jurisdiction in which it owns or leases real property or in which the nature of
its business requires it to be so qualified, and has all requisite power and
authority, corporate and otherwise, to enter into and to perform its obligations
hereunder and under the Assigned Agreement, and to carry out the terms hereof
and thereof and the transactions contemplated hereby and thereby.
3.2 Authorization. The execution, delivery and performance by the
Contracting Party of this Consent and the Assigned Agreement have been duly
authorized by all necessary corporate or other action on the part of the
Contracting Party and do not require any approval or consent of any holder (or
any trustee for any holder) of any indebtedness or other obligation of (a) the
Contracting Party or (b) any other person or entity, except approvals or
consents which have previously been obtained.
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3.3 Execution and Delivery; Binding Agreements. Each of this Consent
and the Assigned Agreement is in full force and effect, has been duly executed
and delivered on behalf of the Contracting Party by the appropriate officers of
the Contracting Party, and constitutes the legal, valid and binding obligation
of the Contracting Party, enforceable against the Contracting Party in
accordance with its terms, except as the enforceability thereof may be limited
by (a) bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and (b) general equitable
principles (whether considered in a proceeding in equity or at law).
3.4 Litigation. There is no legislation, litigation, action, suit,
proceeding or investigation pending or (to the best of the Contracting Party's
knowledge after due inquiry) threatened against the Contracting Party before or
by any court, administrative agency, arbitrator or governmental authority, body
or agency which, if adversely determined, individually or in the aggregate, (a)
could adversely affect the performance by the Contracting Party of its
obligations hereunder or under the As signed Agreement, or which could modify or
otherwise adversely affect the Approvals (as defined in Section 3.6), (b) could
have a material adverse effect on the condition (financial or otherwise),
business or operations of the Contracting Party or (c) questions the validity,
binding effect or enforceability hereof or of the Assigned Agreement, any action
taken or to be taken pursuant hereto or thereto or any of the transactions
contemplated hereby or thereby.
3.5 Compliance with Other Instruments, Etc. The Contracting Party is
not in violation of its formation or governance documents, and the execution,
delivery and performance by the Contracting Party of this Consent and the
Assigned Agreement and the consummation of the transactions contemplated hereby
and thereby will not result in any violation of, breach of or default under any
term of its formation or governance documents, or of any contract or agreement
to which it is a party or by which it or its property is bound, or of any
license, permit, franchise, judgment, writ, injunction, decree, order, charter,
law, ordinance, rule or regulation applicable to it, except for any such
violations which, individually or in the aggregate, would not adversely affect
the performance by the Contracting Party of its obligations under this Consent
and the Assigned Agreement.
3.6 Government Consent. No consent, order, authorization, waiver,
approval or any other action, or registration, declaration or filing with, any
person, board or body, public or private (collectively, the "Approvals"), is
required to be obtained by the Contracting Party in connection with the
execution, delivery or performance of the As-
A-6
<PAGE>
signed Agreement or the consummation of the transactions contemplated
thereunder, except as listed on Exhibit B hereto. All such Approvals listed on
Exhibit B except for those set forth in Part II thereof (the "Deferred
Approvals") are Final (as defined below). An Approval shall be "Final" if it has
been validly issued, is in full force and effect, is not subject to any
condition (other than compliance with the terms thereof), does not impose
restrictions or requirements inconsistent with the terms of the Assigned
Agreement, and is final and not subject to any appeal. The Contracting Party
reasonably believes that each Deferred Approval will be obtained in the ordinary
course of business prior to the time when such Deferred Approval is required to
be Final.
3.7 No Default or Amendment. Neither the Contracting Party nor, to
the best of the Contracting Party's knowledge after due inquiry, any other party
to the Assigned Agreement is in default of any of its obligations thereunder.
The Contracting Party and, to the best of the Contracting Party's knowledge
after due inquiry, each other party to the Assigned Agreement has complied with
all conditions precedent to the respective obligations of such party to perform
under the Assigned Agreement. To the best of the Contracting Party's knowledge
after due inquiry, no event or condition exists which would either immediately
or with the passage of any applicable grace period or giving of notice, or both,
enable either the Contracting Party or the Partnership to terminate or suspend
its obligations under the Assigned Agreement. The Assigned Agreement has not
been amended, modified or supplemented in any manner.
3.8 No Previous Assignments. The Contracting Party has no notice of,
and has not consented to, any previous assignment by the Partnership of all or
any part of its rights under the Assigned Agreement.
3.9 Representations and Warranties. All representations, warranties
and other statements made by the Contracting Party to the Partnership in the
Assigned Agreement were true and correct as of the date when made and are true
and correct as of the date of this Consent.
SECTION 4. OPINION OF COUNSEL
The Contracting Party shall deliver an opinion of counsel relating
to the Assigned Agreement and this Consent, which opinion shall be substantially
in the form attached hereto as Exhibit C. [The Partnership shall endeavor in
good faith and use its best efforts to obtain this opinion from the Contracting
Party, provided that obtaining such
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opinion shall not be required if the Partnership so endeavors in good faith and
uses its best efforts.]
SECTION 5. MISCELLANEOUS
5.1 Notices. All notices and other communications hereunder shall be
in writing, shall be deemed given upon receipt thereof by the party or parties
to whom such notice is addressed, shall refer on their face to the Assigned
Agreement (although failure to so refer shall not render any such notice of
communication ineffective), shall be sent by first class mail, by personal
delivery or by a nationally recognized courier service, and shall be directed
(a) if to the Contracting Party, in accordance with Section [ ] of the Assigned
Agreement, (b) if to the Collateral Agent, to The Bank of New York, 101 Barclay
Street, Floor 21 West, New York, New York 10286, Attention: Corporation Trust
Trustee Administration, and (c) to such other address or addressee as any such
party may designate by notice given pursuant hereto.
5.2 Governing Law; Submission to Jurisdiction. [The Partnership
shall endeavor in good faith and use its best efforts to obtain the agreement of
the Contracting Party to this Section 5.2, provided that obtaining such
agreement shall not be required if the Partnership so endeavors in good faith
and uses its best efforts.]
(a) THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW EXCEPT SECTION 51401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(b) Any legal action or proceeding with respect to this
Consent and any action for enforcement of any judgment in respect thereof may be
brought in the courts of the State of New York, in and for the County of New
York, or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Consent, the Contracting Party hereby
accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof. The Contracting Party irrevocably
designates, appoints and empowers CT Corporation System, with offices on the
date hereof at 1633 Broadway, New York, New York 10019, as its designee,
appointee and agent to receive
A-8
<PAGE>
and accept for and on its behalf service of any and all legal process, summons,
notices and documents which may be served in such action or proceeding. If for
any reason such designee, appointee and agent shall cease to be available to act
as such, the Contracting Party agrees to designate a new designee, appointee and
agent in New York, New York on terms and for purposes of this provision
satisfactory to the Collateral Agent. The Contracting Party further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Contracting Party at its notice address
provided pursuant to Section 5.1 hereof. The Contracting Party hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Consent brought in the courts referred to above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of the
Collateral Agent or its designees to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the
Contracting Party in any other jurisdiction.
5.3 Counterparts. This Consent may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
5.4 Headings Descriptive. The headings of the several sections and
subsections of this Consent are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Consent.
5.5 Severability. In case any provision in or obligation under this
Consent shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
5.6 Amendment, Waiver. Neither this Consent nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified except by an
instrument in writing signed by the Contracting Party and the Collateral Agent.
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<PAGE>
5.7 Termination. The Contracting Party's obligations hereunder are
absolute and unconditional, and the Contracting Party has no right, and shall
have no right, to terminate this Consent or to be released, relieved or
discharged from any obligation or liability hereunder (a) so long as any Senior
Secured Party shall have any commitments outstanding under any Financing
Document and (b) until all the Senior Secured Obligations shall have been
indefeasibly satisfied in full in cash or cash equivalents. The Collateral Agent
shall notify the Contracting Party when all such obligations have been
satisfied.
5.8 Successors and Assigns. This Consent shall be binding upon the
Contracting Party and its permitted successors and assigns and shall inure to
the benefit of the Collateral Agent, its designees and their respective
successors and as signs.
5.9 Further Assurances. The Contracting Party hereby agrees to
execute and deliver all such instruments and take all such action as may be
necessary to effectuate fully the purposes of this Consent.
5.10 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE CONTRACTING PARTY AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS CONSENT OR ANY MATTER ARISING HERE UNDER.
5.11 Entire Agreement. This Consent and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and provisions of this
Consent and any such agreement, document or instrument, the terms, conditions
and provisions of this Consent shall prevail.
A-10
<PAGE>
IN WITNESS WHEREOF, the Contracting Party has caused this Consent to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
[NAME OF CONTRACTING PARTY]
By: ____________________________________
Name:
Title:
Accepted and Agreed to:
THE BANK OF NEW YORK,
not in its individual
capacity but solely
as Collateral Agent
By: _________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: _________________________
Name:
Title:
LSP BATESVILLE FUNDING CORPORATION
By: _________________________
Name:
A-11
<PAGE>
Title:
A-12
<PAGE>
Exhibit A to
Consent and Agreement
[INSERT PAYMENT INSTRUCTIONS FOR APPROPRIATE ACCOUNT(S)]
A-13
<PAGE>
Exhibit B to
Consent and Agreement
Approvals
Part I: Existing Final Approvals
[INSERT APPROVALS, IF ANY]
Part II: Deferred Approvals
Deferred Approval Date Required to be Final
----------------- -------------------------
[INSERT DEFERRED APPROVALS, IF ANY]
A-14
<PAGE>
Exhibit C to
Consent and Agreement
FORM OF OPINION OF COUNSEL TO
[NAME OF CONTRACTING PARTY]
1. [NAME OF CONTRACTING PARTY] (the "Company") has been duly formed
or incorporated and is validly existing and in good standing under the laws of
the jurisdiction of its formation or incorporation.
2. The Company is duly qualified and authorized to do business and
is in good standing as a foreign corporation in each jurisdiction in which it
owns or leases real property or in which the nature of its business requires it
to be so qualified.
3. The Company has the corporate or other power and authority to
execute and deliver the (a) the Consent and Agreement, dated as of [DATE OF
CONSENT] (the "Consent"), among the Company, LSP Energy Limited Partnership, LSP
Batesville Funding Corporation and The Bank of New York, as Collateral Agent,
and (b) the [NAME OF ASSIGNED AGREEMENT], dated [DATE OF ASSIGNED AGREEMENT]
(the "[SHORT NAME OF ASSIGNED AGREEMENT]") and, together with the Consent, the
"Documents"), between the Company and LSP Energy Limited Partnership, and
perform all of its obligations under each Document.
4. The execution and delivery by the Company of the Documents and
the consummation by the Company of the transactions contemplated thereby have
been duly authorized by all requisite corporate or other action on the part of
the Company and do not require any approval or consent of any holder (or any
trustee for or agent of any holder) of any indebtedness or other obligation of
the Company or any other person or entity, other than approvals or consents
which have previously been obtained and which are in full force and effect.
5. Each of the Documents has been duly executed and delivered by the
Company.
6. Each of the Documents constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
A-15
<PAGE>
7. The execution and delivery by the Company of the Documents and
the performance by the Company of its obligations thereunder do not (a) conflict
with the formation or governance documents of the Company or (b) conflict with
or result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any lien upon any of the property or
assets of the Company pursuant to the terms of, any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party or by which
it or any of its properties or assets is bound.
8. Neither the execution, delivery or performance by the Company of
the Documents nor compliance by the Company with the terms thereof will
contravene any provision of any Applicable Laws. "Applicable Laws" shall mean
the [general corporate] law of the State of [STATE OF FORMATION OF CONTRACTING
PARTY] and those laws, rules and regulations of the States of New York and
[GOVERNING LAW OF ASSIGNED AGREEMENT] and of the United States of America which,
in our experience, are normally applicable to transactions of the type
contemplated by the Documents.
9. The Company (a) has obtained each Governmental Approval (other
than the Deferred Approvals, if any (as defined in the Consent)) which is
necessary to authorize or is required in connection with the execution, delivery
or performance of the Documents and (b) is in compliance with all of the terms
and conditions of each such Governmental Approval. "Governmental Approval" means
any consent, approval, license, authorization or validation of, or filing,
recording or registration with, any Governmental Authority pursuant to
Applicable Laws.
10. Neither the execution, delivery or performance by the Company of
its obligations under the Documents nor compliance by the Company with the terms
thereof will contravene any Applicable Order. "Applicable Orders" means those
orders, writs, injunctions, decrees or arbitral awards that are binding upon the
Company or its properties or assets.
A-16
<PAGE>
EXHIBIT B
FORM OF REQUEST FOR INFORMATION FROM THE TRUSTEE
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: $150,000,000 7.164% Series A Senior Secured
Bonds due January 15, 2014 and $176,000,000
8.160% Series B Senior Secured Bonds due July 15, 2025
Pursuant to Section 15.1 of that certain Trust Indenture, dated as
of May 21, 1999 (as amended, modified or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among LSP Energy Limited
Partnership (the "Partnership"), LSP Batesville Funding Corporation (the
"Funding Corporation" and, together with the Partnership, the "Issuers") and The
Bank of New York, as Trustee (the "Trustee"), [NAME OF HOLDER], as beneficial
holder, hereby requests, which request is a continuing request until further
notice to the contrary, that you deliver to us at [ADDRESS OF HOLDER] all
information and copies of all documents that the Issuers are required to
deliver, and have delivered, to you pursuant to Rule 144A(d) under the
Securities Act of 1933, as amended, or pursuant to those sections of the
Indenture which state that specified information will be provided to holders or
beneficial owners of the bonds issued thereunder upon their request. [NAME OF
HOLDER] hereby certifies that it is a beneficial holder of Series [__] Senior
Secured Bonds issued under the Indenture.
[NAME OF HOLDER]
__________________________ _____________________
Authorized Signature Date
B-1
<PAGE>
EXHIBIT C1
FORMS OF INFRASTRUCTURE FINANCING DOCUMENTS
See attached.
C-1
<PAGE>
EXHIBIT C2
FORMS OF INFRASTRUCTURE CERTIFICATIONS
C-2
<PAGE>
INFRASTRUCTURE CERTIFICATE
The undersigned, __________________, __________________ of LSP
Energy, Inc., the general partner of LSP Energy Limited Partnership (the
"Partnership") hereby certifies on behalf of the Partnership to The Bank of New
York, as the Trustee under the Indenture dated as of May 21, 1999, by and among
the Partnership, LSP Batesville Funding Corporation and the Trustee, that it has
received a favorable opinion (reasoned or otherwise subject to usual and
customary exceptions) of a recognized law firm in the State of Mississippi with
respect to state issues and a favorable opinion (reasoned or otherwise subject
to usual and customary exceptions) of a recognized law firm with respect to
federal issues that address the following matters:
1. The execution and delivery by each of the Mississippi Department of
Economic and Community Development ("MDECD"), acting on behalf of the
State of Mississippi (the "State"), the Mississippi Major Economic Impact
Authority, a division of the MDECD also acting for and on behalf of the
State (the "Authority"), Panola County, Mississippi, acting by and through
its Board of Supervisors (the "County"), the Industrial Development
Authority of the Second Judicial District of Panola County, Mississippi,
acting for and on behalf of the County (the "IDA"), Panola Partnership,
Inc., a Mississippi nonprofit, tax-exempt corporation ("Panola
Partnership"), and the City of Batesville, Mississippi, acting by and
through its Mayor and Board of Aldermen (the "City" and, collectively with
the MDECD, the Authority, the County, the IDA, Panola Partnership, and the
City, the "Mississippi Entities") of each of (a) the Consent and
Agreement, dated as of [__________], among each of the Mississippi
Entities, the Partnership and The Bank of New York, as Collateral Agent
(the "Consent"), (b) the Inducement Agreement, dated as of [__________],
between certain of the Mississippi Entities and the Partnership (the
"Inducement Agreement"), (c) the Infrastructure Use Agreement (Water
Supply System and Wastewater Disposal System), dated as of [__________],
between certain of the Mississippi Entities and the Partnership (the "Use
Agreement (Water)"), (d) the Inducement Use Agreement (Lateral Pipeline),
dated as of [__________], between certain of the Mississippi Entities and
the Partnership (the "Use Agreement (Gas)"), (e) the Coordination
Agreement, dated as of [__________], between the City and the Partnership
(the "Coordination Agreement"), and (f) the Agreement, dated as of
[__________], between Panola Partnership and the Partnership (the
"Agreement", together with the Consent, the Inducement Agreement, the Use
Agreement (Water), the Use Agreement (Gas)
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<PAGE>
and the Coordination Agreement, the "Documents") and the performance by
each of the Mississippi Entities of its obligations thereunder do not
conflict with the statutes, rules and regulations governing such
Mississippi Entities.
2. Each of the Mississippi Entities (a) has obtained each Governmental
Approval which is, as of the date hereof, necessary to authorize or is
required in connection with the execution, delivery or performance of the
Documents, including, but not limited to, all Government Approvals, if
any, required under the Natural Gas Act of 1938, the Natural Gas Policy
Act of 1978, and any related state utility laws, and (b) is in compliance
with all of the terms and conditions of each such Governmental Approval.
"Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with,
any Governmental Authority pursuant to Applicable Laws.
3. Pursuant to the provisions of the Mississippi Major Economic Impact Act,
appearing as Section 57751 et. seq., Mississippi Code of 1972, as amended
(the "Impact Act"), the State of Mississippi ("State"), acting through the
State Bond Commission, is authorized to issue certain general obligations
bonds ("Impact Bonds"), the proceeds of which may be used to finance a
"Project," as such term is defined, in part, in Section
57755(f)(viii)(Supp. 1997) of the Impact Act, to include "[a]ny major
capital project designed to manufacture, produce and transmit electrical
power using natural gas as it primary raw material to be constructed and
maintained in Panola County, Mississippi, with an initial capital
investment of not less than Two Hundred Fifty Million Dollars
($250,000,000)."
LSP Energy Limited Partnership
By: LSP Energy Inc.,
general partner
By: ___________________________
Name:
Title:
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<PAGE>
INFRASTRUCTURE CERTIFICATE
The undersigned, __________________, __________________ of LSP
Energy, Inc., the general partner of LSP Energy Limited Partnership (the
"Partnership") hereby certifies on behalf of the Partnership to The Bank of New
York, as the Trustee under the Indenture dated as of May 21, 1999, by and among
the Partnership, LSP Batesville Funding Corporation and the Trustee, that to the
best of the Partnership's knowledge:
1. The execution and delivery by each of the Mississippi Department of
Economic and Community Development ("MDECD"), acting on behalf of the
State of Mississippi (the "State"), the Mississippi Major Economic Impact
Authority, a division of the MDECD also acting for and on behalf of the
State (the "Authority"), Panola County, Mississippi, acting by and through
its Board of Supervisors (the "County"), the Industrial Development
Authority of the Second Judicial District of Panola County, Mississippi,
acting for and on behalf of the County (the "IDA"), Panola Partnership,
Inc., a Mississippi nonprofit, tax-exempt corporation ("Panola
Partnership"), and the City of Batesville, Mississippi, acting by and
through its Mayor and Board of Aldermen (the "City" and, collectively with
the MDECD, the Authority, the County, the IDA, Panola Partnership, and the
City, the "Mississippi Entities") of each of (a) the Consent and
Agreement, dated as of [__________], among each of the Mississippi
Entities, the Partnership and The Bank of New York, as Collateral Agent
(the "Consent"), (b) the Inducement Agreement, dated as of [__________]
between certain of the Mississippi Entities and the Partnership (the
"Inducement Agreement"), (c) the Infrastructure Use Agreement (Water
Supply System and Wastewater Discharge System), dated as of [__________],
between certain of the Mississippi Entities and the Partnership (the "Use
Agreement (Water)"), (d) the Infrastructure Use Agreement (Lateral
Pipeline), dated as of [__________], between certain of the Mississippi
Entities and the Partnership (the "Use Agreement (Lateral Pipeline)"), (e)
the Coordination Agreement, dated as of [__________], between the City and
the Partnership (the "Coordination Agreement"), and (f) the Agreement,
dated as of [__________], between Panola Partnership and the Partnership
(the "Agreement", and together with the Consent, the Inducement Agreement,
the Use Agreement (Water), the Use Agreement (Gas), and the Coordination
Agreement, the "Documents"), and the consummation by each of the
Mississippi Entities of the transactions contemplated thereby do not
require any approval or consent of any holder (or
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<PAGE>
any trustee for or agent of any holder) of any indebtedness or other
obligation of each of the Mississippi Entities or any other person or
entity, other than approvals or consents which have previously been
obtained and which are in full force and effect;
2. The execution and delivery by each of the Mississippi Entities of the
Documents and the performance by each of the Mississippi Entities of its
obligations thereunder do not conflict with or result in any breach of any
of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the property or
assets of each of the Mississippi Entities pursuant to the terms of, any
indenture, mortgage, deed of trust, agreement or other instrument to which
such Mississippi Entity is a party or by which it or any of its properties
or assets is bound; and
3. Neither the execution, delivery or performance by each of the Mississippi
Entities of its obligations under the Documents nor compliance by each of
the Mississippi Entities with the terms thereof will contravene any
Applicable Order. "Applicable Orders" means those orders, writs,
injunctions, decrees or arbitral awards that are binding upon each of the
Mississippi Entities or its properties or assets.
LSP Energy Limited Partnership
By: LSP Energy Inc.,
general partner
By: ___________________________
Name:
Title:
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<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF TRANSFER
LSP Batesville Funding Corporation
c/o LS Power Management, LLC
Two Tower Center 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
LSP Energy Limited Partnership
c/o LS Power Management, LLC
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: [fill in full title of securities]
Reference is hereby made to the Indenture, dated as of May 21, 1999
(the "Indenture"), among LSP Batesville Funding Corporation and LSP Energy
Limited Partnership, (each an "Issuer" and, together, the "Issuers"), and The
Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to
transfer the Bond[s] or interest in such Bond[s] specified in Annex A hereto, in
the principal amount of $___________ in such Bond[s] or interests (the
"Transfer"), to __________________________ (the "Transferee"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
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[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial
interest in the 144A Global Bond or a Definitive Bond Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Bond is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Bond for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Bond
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Bond and/or the Definitive Bond and
in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial
interest in [the Temporary Regulation S Global Bond, the Regulation S Global
Bond or a Definitive Bond pursuant to Regulation S. The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Bond will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the
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Regulation S Global Bond, the Temporary Regulation S Global Bond and/or the
Definitive Bond and in the Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a
beneficial interest in the IAI Global Bond or a Definitive Bond pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Bonds and Restricted
Definitive Bonds and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Issuer or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Bond or Restricted Definitive Bonds and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit F to the Indenture and (2) an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of which
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the Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Bond will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the IAI Global
Bond and/or the Definitive Bonds and in the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial
interest in an Unrestricted Global Bond or of an Unrestricted Definitive Bond.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Bond will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Bonds, on Restricted
Definitive Bonds and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Bond will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Bonds, on Restricted Definitive Bonds and in the Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the
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restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Bond will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Bonds or Restricted Definitive Bonds and
in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
_____________________________________________
[Insert Name of Transferor]
By:__________________________________________
Name:
Title:
Dated: ______________________
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ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Bond (CUSIP __________), or
(ii) |_| Regulation S Global Bond (CUSIP __________), or
(iii) |_| IAI Global Bond (CUSIP __________); or
(b) |_| a Restricted Definitive Bond.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Bond (CUSIP __________), or
(ii) |_| Regulation S Global Bond (CUSIP __________), or
(iii) |_| IAI Global Bond (CUSIP __________); or
(iv) |_| Unrestricted Global Bond (CUSIP __________); or
(b) |_| a Restricted Definitive Bond; or
(c) |_| an Unrestricted Definitive Bond,
in accordance with the terms of the Indenture.
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EXHIBIT E
FORM OF CERTIFICATE OF EXCHANGE
LSP Batesville Funding Corporation
c/o LS Power Management, LLC
Two Tower Center 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
LSP Energy Limited Partnership
c/o LS Power Management, LLC
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: [fill in full title of securities]
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of May 21, 1999
(the "Indenture"), among LSP Batesville Funding Corporation and LSP Energy
Limited Partnership, (each an "Issuer" and, together, the "Issuers"), and The
Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to
exchange the Bond[s] or interest in such Bond[s] specified herein, in the
principal amount of $____________ in such Bond[s] or interests (the "Exchange").
In connection with the Exchange, the Owner hereby certifies that:
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1. Exchange of Restricted Definitive Bonds or Beneficial Interests
in a Restricted Global Bond for Unrestricted Definitive Bonds or Beneficial
Interests in an Unrestricted Global Bond
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Bond to beneficial interest in an Unrestricted Global Bond. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Bond for a beneficial interest in an Unrestricted Global Bond in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Bonds and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Bond is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) |_| Check if Exchange is from beneficial interest in a
Restricted Global Bond to Unrestricted Definitive Bond. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Bond for an
Unrestricted Definitive Bond, the Owner hereby certifies (i) the Definitive Bond
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Bonds and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Bond is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Bond to
beneficial interest in an Unrestricted Global Bond. In connection with the
Owner's Exchange of a Restricted Definitive Bond for a beneficial interest in an
Unrestricted Global Bond, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Bonds and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in
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order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Bond to
Unrestricted Definitive Bond. In connection with the Owner's Exchange of a
Restricted Definitive Bond for an Unrestricted Definitive Bond, the Owner hereby
certifies (i) the Unrestricted Definitive Bond is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Bonds and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Bond is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Bonds or Beneficial Interests
in Restricted Global Bonds for Restricted Definitive Bonds or Beneficial
Interests in Restricted Global Bonds
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Bond to Restricted Definitive Bond. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Bond for a
Restricted Definitive Bond with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Bond is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Bond
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Bond and in
the Indenture and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Bond to
beneficial interest in a Restricted Global Bond. In connection with the Exchange
of the Owner's Restricted Definitive Bond for a beneficial interest in the
[CHECK ONE] |_| 144A Global Bond, |_| Regulation S Global Bond, |_| IAI Global
Bond with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Bonds and pursuant to
and in accordance with the Securities Act, and in compliance with any
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applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Bond and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
_____________________________________________
[Insert Name of Transferor]
By:__________________________________________
Name:
Title:
Dated: ______________________
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EXHIBIT F
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
LSP Energy Limited Partnership
LSP Batesville Funding Corporation
Two Tower Center--20th Floor
East Brunswick, NJ 08816
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 100103629
Attention: Transactions Advisory Group
Dear Sirs:
We are delivering this letter in connection with an offering of
$150,000,000 of 7.164% Series A Senior Secured Bonds due January 15, 2014 (the
"Series A Bonds") and $176,000,000 of 8.160% Series B Senior Secured Bonds due
July 15, 2025 (the "Series B Bonds" and, together with the Series A Bonds, the
"Bonds") of LSP Energy Limited Partnership, a Delaware limited partnership (the
"Partnership") and LSP Batesville Funding Corporation, a Delaware corporation
(the "Funding Corporation" and, together with the Partnership, the "Issuers"),
as described in the Confidential Offering Circular (the "Offering Circular")
relating to the offering.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"),
or an entity in which all of the equity owners are accredited investors within
the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an
"Institutional Accredited Investor");
(ii) (A) any purchase of the Bonds by us will be for our own account or
for the account of one or more other Institutional Accredited Investors or as
fiduciary for the account of one or more trusts, each of which is an "accredited
investor" within the meaning of Rule 501(a)(7) under the Securities Act and for
each of which we exercise sole
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investment discretion or (B) we are a "bank", within the meaning of Section
3(a)(2) of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring the Bonds as fiduciary for the account of one or more institutions for
which we exercise sole investment discretion;
(iii) in the event that we purchase any of the Bonds, we will acquire
Bonds having a minimum purchase price of not less than $100,000 for our own
account or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing the
Bonds;
(v) we are not acquiring the Bonds with a view to distribution thereof or
with any present intention of offering or selling any of the Bonds, except
inside the United States in accordance with Rule 144A under the Securities Act
or outside the United States in accordance with Regulation S under the
Securities Act, as provided below, provided that the disposition of our property
and the property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(vi) we have received a copy of the Offering Circular relating to the
offering of the Bonds and acknowledge that we have had access to such financial
and other information, and have been afforded the opportunity to ask such
questions of representatives of the Issuers and receive answers thereto, as we
deem necessary in connection with our decision to purchase the Bonds.
We understand that the Bonds are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Bonds have not been registered under the Securities
Act, and we agree, on our own behalf and on behalf of each transferee such
Bonds, that such Bonds may be offered, resold, pledged or otherwise transferred
only (i) in the United States to a person who we reasonably believe is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, (ii) outside the
United States in a transaction in accordance with Rule 904 under the Securities
Act, (iii) pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available) or (iv) pursuant to an effective
registration statement under the Securities Act, in each of cases (i) through
(iv), in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction. We
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understand that the registrar and transfer agent for the Bonds will not be
required to accept for registration of transfer any Bonds acquired by us, except
upon presentation of evidence satisfactory to the Issuers and the transfer agent
that the foregoing restrictions on transfer may have been complied with. We
further understand that any Bonds acquired by us will be in the form of
definitive physical certificates and will bear a legend reflecting the substance
of this paragraph.
We acknowledge that you, the Issuers and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
Date:____________________ ______________________________________
(Name of Purchaser)
By:___________________________________
Name
Title
Address:
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EXHIBIT G
[Form of face of
[____]% Series [__] Senior Secured Bonds due [____]]
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
[____]% SERIES [__] SENIOR SECURED BONDS DUE [____]
[INSERT THE GLOBAL BOND LEGEND, IF
APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND,
IF APPLICABLE PURSUANT TO THE
PROVISIONS OF THE INDENTURE]
[INSERT THE REGULATION S TEMPORARY
GLOBAL BOND LEGEND, IF APPLICABLE
PURSUANT TO THE PROVISIONS OF THE
INDENTURE]
No. ______
CUSIP NUMBER: ____________
PRINCIPAL AMOUNT: $___________
FINAL SCHEDULED PAYMENT DATE: ____________
ISSUE DATE: ____________
REGISTERED HOLDER: [IF THIS BOND IS A GLOBAL BOND,
INSERT: "Cede & Co."]
INTEREST RATE: ______%
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LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation"), which term includes any
successor or assign under the Indenture referred to below) and LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to
[________________] [IF A GLOBAL BOND, INSERT "CEDE & CO."], or its registered
assigns, the outstanding principal amount hereof, such payment to be made in
semiannual installments on January 15 and July 15 of each year (commencing
[____________]) and ending on the final Scheduled Payment Date set forth above,
each such installment to be in an amount equal to the principal amount hereof
multiplied by the percentage set forth opposite the applicable payment date in
the table set forth on Annex A attached hereto (provided that the portion of the
principal amount remaining unpaid on the final Scheduled Payment Date, together
with all interest accrued thereon, shall in any and all cases be due and payable
on the final Scheduled Payment Date), and to pay interest on the unpaid portion
of the Principal Amount at the interest rate set forth above from the most
recent Scheduled Payment Date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from the issue date
set forth above, semiannually on January 15 and July 15 in each year (commencing
[_______________]) until the principal amount is paid in full or payment thereof
is duly provided for. Any installment of principal and, to the extent permitted
by applicable law, any payment of interest not punctually paid or duly provided
for shall continue to bear interest at a rate equal to the interest rate set
forth above. The principal and interest so payable, and punctually paid or duly
provided for, at any Scheduled Payment Date shall, as provided in the Indenture,
be paid to the Person in whose name this Bond (or one or more Predecessor Bonds)
is registered in the Security Register at the close of business on the Regular
Record Date for such payment of principal and interest, which shall be the 15th
day (whether or not a Business Day) next preceding such Scheduled Payment Date.
Any such principal and interest that is payable, but is not so punctually paid
or duly provided for at any Scheduled Payment Date, shall forthwith cease to be
payable to the Holder hereof on such Regular Record Date, and such Overdue
Interest or Overdue Principal may be paid to the Person in whose name this Bond
(or one or more Predecessor Bonds) is registered at the close of business on a
Special Record Date for the payment of such Overdue Principal and Overdue
Interest (together with any other amounts payable with respect to such Overdue
Principal and Overdue Interest), to be fixed by the Trustee, notice of which
shall be given to the Holder hereof not less than 10 days prior to such special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities
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exchange on which this Bond may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. Payments
of principal of and interest on this Bond shall be made (i) if the Funding
Corporation or the Partnership so elects, by check mailed to the Holder of this
Bond at his or her registered address or (ii) otherwise, at the Place of
Payment; provided that the final installment of principal payable with respect
to this Bond shall be made as provided in Section 6.5 of the Indenture (in the
event this Bond is redeemed) or shall be made upon presentation and surrender of
this Bond at the Place of Payment. All payments in respect of this Bond shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of debts.
[INSERT THE FOLLOWING IF THIS IS A REGULATION S TEMPORARY GLOBAL
BOND:] Until this Regulation S Temporary Global Bond is exchanged for one or
more Regulation S Permanent Global Bonds, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Bond shall in all other respects be entitled
to the same benefits as other Bonds under the Indenture.]
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
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IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING
CORPORATION
By:_________________________________
Name:
Title:
LSP ENERGY LIMITED
PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By:_________________________________
Name:
Title:
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CERTIFICATE OF AUTHENTICATION
Dated:
This Bond is one of the [_____]% Series [___] Senior Secured Bonds
due [_______________] of LSP Energy Limited Partnership and LSP Batesville
Funding Corporation referred to in the within-mentioned Indenture.
[__________________],
as Trustee
By:_____________________________
Authorized Signatory
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[Form of reverse of
[______]% Series [___] Senior Secured Bonds due [_______________]
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
[______]% SERIES [__] SENIOR SECURED BONDS DUE [______________]
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their [______]% Series [___] Senior
Secured Bonds due [______] (the "Series [___] Bonds"). The Series [___] Bonds
are issued under the Trust Indenture dated as of May 21, 1999 (the "Original
Indenture") among the Funding Corporation, the Partnership and The Bank of New
York, a New York banking corporation, as trustee (in such capacity, together
with its successors in such capacity, the "Trustee"), as supplemented by the
[_______] Supplemental Indenture dated as of [______________] (the "[_________]
Supplemental Indenture") among the Funding Corporation, the Partnership and the
Trustee (the Original Indenture, as so supplemented, and as the same may be
amended, modified and further supplemented, the "Indenture"). All capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
ascribed to them in the Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse
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for any such amounts payable shall be otherwise limited in accordance with
Section 2.15 and Section 14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of all series then Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Bonds of all series then Outstanding, on behalf of the Holders of all the
Bonds, to waive compliance by the Funding Corporation and the Partnership with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any Act (as such term is defined in the
Indenture), including, but not limited to, such a consent, waiver or direction
by the Holder of this Bond shall be conclusive and binding upon the Holder and
upon all future Holders of this Bond and the Holder of every Bond issued upon
the transfer hereof or the exchange herefor or in lieu hereof whether or not
notation of such Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
[$______________] in aggregate principal amount as provided in the [_______]
Supplemental Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the [_______] Supplemental Indenture [are (i) redeemable at the option of
the Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the [_______] Supplemental Indenture, and the Funding Corporation
and the Partnership are required to redeem this Bond upon the occurrence of
certain specified events pursuant to Section 6.3 of the Indenture and Sections
3.9 and 3.10 of the Common Agreement, and (ii) not subject to any sinking fund].
G-7
<PAGE>
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Bonds are issuable only as registered Bonds without coupons [in
minimum denominations of $100,000 and any integral multiple of $1,000 in excess
thereof].
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
[INSERT THE FOLLOWING IF THIS IS A REGULATION S TEMPORARY GLOBAL
BOND: This Regulation S Temporary Global Bond is exchangeable in whole or in
part for one or more Global Bonds only (i) on or after the termination of the
40day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article II of the Indenture. Upon exchange of this Regulation S Temporary
Global Bond for one or more Global Bonds, the Trustee shall cancel this
Regulation S Temporary Global Bond.]
G-8
<PAGE>
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
G-9
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT ________________________________
(Cust)
(Minor)
under Uniform Gift to Minors Act
____________________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
G-10
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Bond on the books of the Funding Corporation and the Partnership, with full
power of substitution in the premises.
Dated:____________________
_________________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
G-11
<PAGE>
ANNEX A TO
[______]% SERIES A SENIOR SECURED BOND DUE [__________________]
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
------------------ ------------------
[INSERT AMORTIZATION TABLE FOR
PARTICULAR SERIES OF BONDS]
G-12
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND*
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of Signature of
Principal Amount Principal Amount is Global Bond authorized officer of
Date of of of following such decrease Trustee or Bond
Exchange this Global Bond this Global Bond (or increase) Custodian
- -------- --------------------- ---------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
* [THIS SCHEDULE SHOULD BE INCLUDED ONLY IF THE BOND IS ISSUED IN GLOBAL
FORM]
G-13
<PAGE>
Exhibit 4.2
================================================================================
FIRST SUPPLEMENTAL INDENTURE
dated as of May 21, 1999
to
TRUST INDENTURE
dated as of May 21, 1999
among
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK, as Trustee
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of May 21, 1999 (this "First
Supplemental Indenture"), to the Trust Indenture, dated as of May 21, 1999 (the
"Original Indenture"), among LSP BATESVILLE FUNDING CORPORATION, a Delaware
corporation (together with its successors and assigns, the "Funding
Corporation"), LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").
WHEREAS, the Funding Corporation, the Partnership and the Trustee
have heretofore executed and delivered the Original Indenture to provide for the
issuance from time to time of Bonds (as defined in the Original Indenture) of
the Funding Corporation and the Partnership, to be issued in one or more series;
WHEREAS, Sections 2.1, 2.3 and 12.1 of the Original Indenture
provide, among other things, that the Funding Corporation, the Partnership and
the Trustee may enter into indentures supplemental to the Original Indenture
for, among other things, the purpose of establishing the designation, form,
terms and provisions of Bonds of any series as permitted by Sections 2.1, 2.3
and 12.1 of the Original Indenture;
WHEREAS, the Funding Corporation and the Partnership (i) desire the
issuance of a series of Bonds to be designated as hereinafter provided and (ii)
have requested the Trustee to enter into this First Supplemental Indenture for
the purpose of establishing the designation, form, terms and provisions of the
Bonds of such series;
WHEREAS, all action on the part of the Funding Corporation and the
Partnership necessary to authorize the issuance of said Bonds under the Original
Indenture and this First Supplemental Indenture (the Original Indenture, as
supplemented by this First Supplemental Indenture, being hereinafter called the
"Indenture") has been duly taken.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery of, said Bonds,
and in consideration of the acceptance of said Bonds by the Holders thereof and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Original Indenture.
(b) The rules of interpretation set forth in the Original Indenture
shall be applied hereto as if set forth in full herein.
<PAGE>
(c) For all purposes of this First Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings (such meanings
shall apply equally to both the singular and plural forms of the respective
terms):
"Series A Senior Secured Bonds due 2014" shall have the meaning
ascribed thereto in Section 2.1(a) hereof.
"Initial Bonds" shall mean the Series A Senior Secured Bonds due
2014.
"Make-Whole Premium" means an amount equal to the Discounted Present
Value calculated for any Bond subject to redemption less the unpaid principal
amount of such Bond; provided that the Make-Whole Premium shall not be less than
zero. For purposes of this definition, the "Discounted Present Value" of any
Bond subject to redemption shall be equal to the discounted present value of all
principal and interest payments scheduled to become due in respect of such Bond
after the date of such redemption, calculated using a discount rate equal to the
sum of (1) the yield to maturity on the United States treasury security having
an average life equal to the remaining average life of such Bond and trading in
the secondary market at the price closest to par and (2) 30 basis points;
provided, however, that if there is no United States treasury security having an
average life equal to the remaining average life of such Bond, such discount
rate shall be calculated using a yield to maturity interpolated or extrapolated
on a straight-line basis (rounding to the nearest month, if necessary) from the
yields to maturity for two United States treasury securities having average
lives most closely corresponding to the remaining average life of such Bond and
trading in the secondary market at the price closest to par.
ARTICLE II.
THE TERMS OF THE BONDS
SECTION 2.1. Terms of 7.164% Series A Senior Secured Bonds due
January 15, 2014.
(a) There is hereby created one series of Bonds designated: 7.164%
Series A Senior Secured Bonds due January 15, 2014, in the aggregate principal
amount of $150,000,000 (the "Series A Senior Secured Bonds due 2014"). The
Series A Senior Secured Bonds due 2014 may forthwith be executed by the Funding
Corporation and the Partnership and delivered to the Trustee for authentication
and delivery by the Trustee in accordance with the provisions of Section 2.4 of
the Original Indenture.
(b) Each of the Series A Senior Secured Bonds due 2014 shall have
and be subject to such other terms as provided in the Indenture and shall be
evidenced by one or more Bonds in the form of Exhibit G to the Indenture.
2
<PAGE>
SECTION 2.2. Interest and Principal.
Each Initial Bond shall bear interest on the unpaid principal amount
thereof from time to time outstanding from the date thereof until such amount is
paid in full at a rate of 7.164% per annum. The principal amount of each Initial
Bond shall be due and payable in installments as set forth below:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2001 2.75%
January 15, 2002 2.75%
July 15, 2002 2.30%
January 15, 2003 2.30%
July 15, 2003 2.45%
January 15, 2004 2.45%
July 15, 2004 2.60%
January 15, 2005 2.60%
July 15, 2005 3.80%
January 15, 2006 3.80%
July 15, 2006 4.15%
January 15, 2007 4.15%
July 15, 2007 4.20%
January 15, 2008 4.20%
July 15, 2008 4.35%
January 15, 2009 4.35%
July 15, 2009 4.50%
January 15, 2010 4.50%
July 15, 2010 4.70%
January 15, 2011 4.70%
July 15, 2011 5.10%
January 15, 2012 5.10%
July 15, 2012 5.10%
January 15, 2013 5.10%
July 15, 2013 4.00%
January 15, 2014 4.00%
Payment of principal of and interest on each Bond of the series
created hereby shall be made (a) if the Funding Corporation or the Partnership
so elects, by check mailed to the Holder at his or her registered address, (b)
otherwise as provided in Section 2.11 of the Original Indenture or (c) upon
application by a record Holder of at least $1,000,000 in aggregate principal
amount of Initial Bonds to the Trustee not later than 15 days prior to the
applicable Payment
3
<PAGE>
Date, by wire transfer to an account maintained by such record Holder with a
bank in The City of New York; provided that the final installment of principal
payable with respect to each Bond of the series created hereby shall be payable
as provided in Section 6.5 of the Original Indenture (in the case of any such
Bond redeemed) or payable upon presentation and surrender of each such Bond at
the Place of Payment.
SECTION 2.3. Redemption.
(a) Optional Redemption. The Initial Bonds may be redeemed at the
option of the Funding Corporation and the Partnership in accordance with and
subject to Section 6.3 of the Original Indenture as follows:
(i) The Outstanding Initial Bonds may be redeemed prior to
maturity, as a whole or in part ratably, at any time, at a Redemption
Price equal to the outstanding principal amount of the Initial Bonds being
redeemed, plus accrued and unpaid interest thereon to but not including
the Redemption Date plus the Make-Whole Premium, upon notice given by the
Issuers to the Holders of the Initial Bonds not less than 30 nor more than
60 days prior to the date selected by the Issuer for such redemption (the
"Redemption Date").
(ii) All proceeds received by the Trustee from or on behalf of
the Partnership or the Funding Corporation identified as proceeds for an
optional redemption of the Initial Bonds under this Section 2.3(a) shall
be applied by the Trustee to the redemption of such Bonds on the
Redemption Date in respect thereof.
(b) Mandatory Redemption. Subject to the provisions of Section 6.3
of the Original Indenture, the Initial Bonds are subject to mandatory redemption
under the conditions and on the terms set forth in the Original Indenture.
ARTICLE III.
MISCELLANEOUS
SECTION 3.1. Execution of Supplemental Indenture.
This First Supplemental Indenture is executed and shall be construed
as an indenture supplemental to the Original Indenture and, as provided in the
Original Indenture, this First Supplemental Indenture forms a part thereof.
SECTION 3.2. Concerning the Trustee.
The recitals contained herein and in the Bonds of the series created
hereby, except with respect to the Trustee's certificates of authentication,
shall be taken as the statements of the Funding Corporation and the Partnership,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this First
Supplemental Indenture or of the Bonds of the series created hereby.
4
<PAGE>
SECTION 3.3. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 3.4. GOVERNING LAW.
THIS FIRST SUPPLEMENTAL INDENTURE AND EACH BOND OF THE SERIES
CREATED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
--------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
--------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary Beth Lewicki
--------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
6
<PAGE>
Exhibit 4.3
================================================================================
SECOND SUPPLEMENTAL INDENTURE
dated as of May 21, 1999
to
TRUST INDENTURE
dated as of May 21, 1999
among
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK, as Trustee
================================================================================
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of May 21, 1999 (this
"Second Supplemental Indenture"), to the Trust Indenture, dated as of May 21,
1999 (the "Original Indenture"), among LSP BATESVILLE FUNDING CORPORATION, a
Delaware corporation (together with its successors and assigns, the "Funding
Corporation"), LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").
WHEREAS, the Funding Corporation, the Partnership and the Trustee
have heretofore executed and delivered the Original Indenture to provide for the
issuance from time to time of Bonds (as defined in the Original Indenture) of
the Funding Corporation and the Partnership, to be issued in one or more series;
WHEREAS, Sections 2.1, 2.3 and 12.1 of the Original Indenture
provide, among other things, that the Funding Corporation, the Partnership and
the Trustee may enter into indentures supplemental to the Original Indenture
for, among other things, the purpose of establishing the designation, form,
terms and provisions of Bonds of any series as permitted by Sections 2.1, 2.3
and 12.1 of the Original Indenture;
WHEREAS, the Funding Corporation and the Partnership (i) desire the
issuance of a series of Bonds to be designated as hereinafter provided and (ii)
have requested the Trustee to enter into this Second Supplemental Indenture for
the purpose of establishing the designation, form, terms and provisions of the
Bonds of such series;
WHEREAS, all action on the part of the Funding Corporation and the
Partnership necessary to authorize the issuance of said Bonds under the Original
Indenture and this Second Supplemental Indenture (the Original Indenture, as
supplemented by this Second Supplemental Indenture, being hereinafter called the
"Indenture") has been duly taken.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery of, said Bonds,
and in consideration of the acceptance of said Bonds by the Holders thereof and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Original Indenture.
(b) The rules of interpretation set forth in the Original Indenture
shall be applied hereto as if set forth in full herein.
<PAGE>
(c) For all purposes of this Second Supplemental Indenture, except
as otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings (such meanings
shall apply equally to both the singular and plural forms of the respective
terms):
"Series B Senior Secured Bonds due 2025" shall have the meaning
ascribed thereto in Section 2.1(a) hereof.
"Initial Bonds" shall mean the Series B Senior Secured Bonds due
2025.
"Make-Whole Premium" means an amount equal to the Discounted Present
Value calculated for any Bond subject to redemption less the unpaid principal
amount of such Bond; provided that the Make-Whole Premium shall not be less than
zero. For purposes of this definition, the "Discounted Present Value" of any
Bond subject to redemption shall be equal to the discounted present value of all
principal and interest payments scheduled to become due in respect of such Bond
after the date of such redemption, calculated using a discount rate equal to the
sum of (1) the yield to maturity on the United States treasury security having
an average life equal to the remaining average life of such Bond and trading in
the secondary market at the price closest to par and (2) 50 basis points;
provided, however, that if there is no United States treasury security having an
average life equal to the remaining average life of such Bond, such discount
rate shall be calculated using a yield to maturity interpolated or extrapolated
on a straight-line basis (rounding to the nearest month, if necessary) from the
yields to maturity for two United States treasury securities having average
lives most closely corresponding to the remaining average life of such Bond and
trading in the secondary market at the price closest to par.
ARTICLE II.
THE TERMS OF THE BONDS
SECTION 2.1. Terms of 8.160% Series B Senior Secured Bonds due
July15, 2015.
(a) There is hereby created one series of Bonds designated: 8.160%
Series B Senior Secured Bonds due July 15, 2025, in the aggregate principal
amount of $176,000,000 (the "Series B Senior Secured Bonds due 2025"). The
Series B Senior Secured Bonds due 2025 may forthwith be executed by the Funding
Corporation and the Partnership and delivered to the Trustee for authentication
and delivery by the Trustee in accordance with the provisions of Section 2.4 of
the Original Indenture.
(b) Each of the Series B Senior Secured Bonds due 2025 shall have
and be subject to such other terms as provided in the Indenture and shall be
evidenced by one or more Bonds in the form of Exhibit G to the Indenture.
2
<PAGE>
SECTION 2.2. Interest and Principal.
Each Initial Bond shall bear interest on the unpaid principal amount
thereof from time to time outstanding from the date thereof until such amount is
paid in full at a rate of 8.160% per annum. The principal amount of each Initial
Bond shall be due and payable in installments as set forth below:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2014 2.65%
January 15, 2015 2.65%
July 15, 2015 2.85%
January 15, 2016 2.85%
July 15, 2016 2.85%
January 15, 2017 2.85%
July 15, 2017 3.00%
January 15, 2018 3.00%
July 15, 2018 2.90%
January 15, 2019 2.90%
July 15, 2019 3.45%
January 15, 2020 3.45%
July 15, 2020 2.15%
January 15, 2021 2.15%
July 15, 2021 5.25%
January 15, 2022 5.25%
July 15, 2022 5.35%
January 15, 2023 5.35%
July 15, 2023 5.40%
January 15, 2024 5.40%
July 15, 2024 6.90%
January 15, 2025 6.90%
July 15, 2025 14.50%
Payment of principal of and interest on each Bond of the series
created hereby shall be made (a) if the Funding Corporation or the Partnership
so elects, by check mailed to the Holder at his or her registered address, (b)
otherwise as provided in Section 2.11 of the Original Indenture or (c) upon
application by a record Holder of at least $1,000,000 in aggregate principal
amount of Initial Bonds to the Trustee not later than 15 days prior to the
applicable Payment Date, by wire transfer to an account maintained by such
record Holder with a bank in The City of New York; provided that the final
installment of principal payable with respect to each Bond of the series created
hereby shall be payable as provided in Section 6.5 of the Original Indenture (in
3
<PAGE>
the case of any such Bond redeemed) or payable upon presentation and surrender
of each such Bond at the Place of Payment.
SECTION 2.3. Redemption.
(a) Optional Redemption. The Initial Bonds may be redeemed at the
option of the Funding Corporation and the Partnership in accordance with and
subject to Section 6.3 of the Original Indenture as follows:
(i) The Outstanding Initial Bonds may be redeemed prior to
maturity, as a whole or in part ratably, at any time, at a Redemption
Price equal to the outstanding principal amount of the Initial Bonds being
redeemed, plus accrued and unpaid interest thereon to but not including
the Redemption Date plus the Make-Whole Premium, upon notice given by the
Issuers to the Holders of the Initial Bonds not less than 30 nor more than
60 days prior to the date selected by the Issuer for such redemption (the
"Redemption Date").
(ii) All proceeds received by the Trustee from or on behalf of
the Partnership or the Funding Corporation identified as proceeds for an
optional redemption of the Initial Bonds under this Section 2.3(a) shall
be applied by the Trustee to the redemption of such Bonds on the
Redemption Date in respect thereof.
(b) Mandatory Redemption. Subject to the provisions of Section 6.3
of the Original Indenture, the Initial Bonds are subject to mandatory redemption
under the conditions and on the terms set forth in the Original Indenture.
ARTICLE III.
MISCELLANEOUS
SECTION 3.1. Execution of Supplemental Indenture.
This Second Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture and, as
provided in the Original Indenture, this Second Supplemental Indenture forms a
part thereof.
SECTION 3.2. Concerning the Trustee.
The recitals contained herein and in the Bonds of the series created
hereby, except with respect to the Trustee's certificates of authentication,
shall be taken as the statements of the Funding Corporation and the Partnership,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Second Supplemental Indenture or of the Bonds of the series created hereby.
4
<PAGE>
SECTION 3.3. Counterparts.
This Second Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 3.4. GOVERNING LAW.
THIS SECOND SUPPLEMENTAL INDENTURE AND EACH BOND OF THE SERIES
CREATED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Second Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
6
<PAGE>
Exhibit 4.4
================================================================================
THIRD SUPPLEMENTAL INDENTURE
dated as of [________], 1999
to
TRUST INDENTURE
dated as of May 21, 1999
among
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK, as Trustee
================================================================================
<PAGE>
THIRD SUPPLEMENTAL INDENTURE, dated as of [_________], 1999 (this
"Third Supplemental Indenture"), to the Trust Indenture, dated as of May 21,
1999 (the "Original Indenture"), among LSP BATESVILLE FUNDING CORPORATION, a
Delaware corporation (together with its successors and assigns, the "Funding
Corporation"), LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").
WHEREAS, the Funding Corporation, the Partnership and the Trustee
have heretofore executed and delivered the Original Indenture to provide for the
issuance from time to time of Bonds (as defined in the Original Indenture) of
the Funding Corporation and the Partnership, to be issued in one or more series;
WHEREAS, Sections 2.1, 2.3 and 12.1 of the Original Indenture
provide, among other things, that the Funding Corporation, the Partnership and
the Trustee may enter into indentures supplemental to the Original Indenture
for, among other things, the purpose of establishing the designation, form,
terms and provisions of Bonds of any series as permitted by Sections 2.1, 2.3
and 12.1 of the Original Indenture;
WHEREAS, the Funding Corporation and the Partnership (i) desire the
issuance of a series of Bonds to be designated as hereinafter provided, which
Bonds will, pursuant to the terms of the exchange offer described in the
prospectus dated [_______], 1999, be offered to the Holders of the Partnership's
and the Funding Corporation's Series A Senior Secured Bonds due 2014 in exchange
therefor, and (ii) have requested the Trustee to enter into this Third
Supplemental Indenture for the purpose of establishing the designation, form,
terms and provisions of the Bonds of such series;
WHEREAS, all action on the part of the Funding Corporation and the
Partnership necessary to authorize the issuance of said Bonds under the Original
Indenture and this Third Supplemental Indenture (the Original Indenture, as
supplemented by this Third Supplemental Indenture, being hereinafter called the
"Indenture") has been duly taken.
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery of, said Bonds,
and in consideration of the acceptance of said Bonds by the Holders thereof and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Original Indenture.
<PAGE>
(b) The rules of interpretation set forth in the Original Indenture
shall be applied hereto as if set forth in full herein.
(c) For all purposes of this Third Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings (such meanings
shall apply equally to both the singular and plural forms of the respective
terms): "Make-Whole Premium" means an amount equal to the Discounted Present
Value calculated for any Series C Bond subject to redemption less the unpaid
principal amount of such Bond; provided that the Make-Whole Premium shall not be
less than zero. For purposes of this definition, the "Discounted Present Value"
of any Series C Bond subject to redemption shall be equal to the discounted
present value of all principal and interest payments scheduled to become due in
respect of such Series C Bond after the date of such redemption, calculated
using a discount rate equal to the sum of (1) the yield to maturity on the
United States treasury security having an average life equal to the remaining
average life of such Series C Bond and trading in the secondary market at the
price closest to par and (2) 30 basis points; provided, however, that if there
is no United States treasury security having an average life equal to the
remaining average life of such Series C Bond, such discount rate shall be
calculated using a yield to maturity interpolated or extrapolated on a
straight-line basis (rounding to the nearest month, if necessary) from the
yields to maturity for two United States treasury securities having average
lives most closely corresponding to the remaining average life of such Series C
Bond and trading in the secondary market at the price closest to par.
"Series C Bonds" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
ARTICLE II.
THE TERMS OF THE BONDS
Section 2.1 SECTION Terms of 7.164% Series C Senior Secured Bonds
due January 15, 2014.
(a) There is hereby created one series of Bonds designated: 7.164%
Series C Senior Secured Bonds due January 15, 2014, in the aggregate principal
amount of $150,000,000 (the "Series C Bonds"). The Series C Bonds may forthwith
be executed by the Funding Corporation and the Partnership and delivered to the
Trustee for authentication and delivery by the Trustee in accordance with the
provisions of Section 2.4 of the Original Indenture.
(b) Each of the Series C Bonds shall have and be subject to such
other terms as provided in the Indenture and shall be evidenced by one or more
Bonds in the form of Exhibit G to the Original Indenture.
Section 2.2 SECTION Interest and Principal.
Each Series C Bond shall bear interest on the unpaid principal
amount thereof from time to time outstanding from the date thereof until such
amount is paid in full at a rate of
2
<PAGE>
7.164% per annum. The principal amount of each Series C Bond shall be due and
payable in installments as set forth below:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2001 2.75%
January 15, 2002 2.75%
July 15, 2002 2.30%
January 15, 2003 2.30%
July 15, 2003 2.45%
January 15, 2004 2.45%
July 15, 2004 2.60%
January 15, 2005 2.60%
July 15, 2005 3.80%
January 15, 2006 3.80%
July 15, 2006 4.15%
January 15, 2007 4.15%
July 15, 2007 4.20%
January 15, 2008 4.20%
July 15, 2008 4.35%
January 15, 2009 4.35%
July 15, 2009 4.50%
January 15, 2010 4.50%
July 15, 2010 4.70%
January 15, 2011 4.70%
July 15, 2011 5.10%
January 15, 2012 5.10%
July 15, 2012 5.10%
January 15, 2013 5.10%
July 15, 2013 4.00%
January 15, 2014 4.00%
Payment of principal of and interest on each Bond of the series
created hereby shall be made (a) if the Funding Corporation or the Partnership
so elects, by check mailed to the Holder at his or her registered address, (b)
otherwise as provided in Section 2.11 of the Original Indenture or (c) upon
application by a record Holder of at least $1,000,000 in aggregate principal
amount of Series C Bonds to the Trustee not later than 15 days prior to the
applicable Payment Date, by wire transfer to an account maintained by such
record Holder with a bank in The City of New York; provided that the final
installment of principal payable with respect to each Bond of the series created
hereby shall be payable as provided in Section 6.5 of the Original Indenture (in
3
<PAGE>
the case of any such Bond redeemed) or payable upon presentation and surrender
of each such Bond at the Place of Payment.
Section 2.3 SECTION Redemption.
(a) Optional Redemption. The Series C Bonds may be redeemed at the
option of the Funding Corporation and the Partnership in accordance with and
subject to Section 6.3 of the Original Indenture as follows:
(i) The Outstanding Series C Bonds may be redeemed prior to
maturity, as a whole or in part ratably, at any time, at a Redemption
Price equal to the outstanding principal amount of the Series C Bonds
being redeemed, plus accrued and unpaid interest thereon to but not
including the Redemption Date plus the Make-Whole Premium, upon notice
given by the Issuers to the Holders of the Series C Bonds not less than 30
nor more than 60 days prior to the date selected by the Issuer for such
redemption (the "Redemption Date").
(ii) All proceeds received by the Trustee from or on behalf of
the Partnership or the Funding Corporation identified as proceeds for an
optional redemption of the Series C Bonds under this Section 2.3(a) shall
be applied by the Trustee to the redemption of such Bonds on the
Redemption Date in respect thereof.
(b) Mandatory Redemption. Subject to the provisions of Section 6.3
of the Original Indenture, the Series C Bonds are subject to mandatory
redemption under the conditions and on the terms set forth in the Original
Indenture.
ARTICLE III.
MISCELLANEOUS
Section 3.1 SECTION Execution of Supplemental Indenture.
This Third Supplemental Indenture is executed and shall be construed
as an indenture supplemental to the Original Indenture and, as provided in the
Original Indenture, this Third Supplemental Indenture forms a part thereof.
Section 3.2 SECTION Concerning the Trustee.
The recitals contained herein and in the Bonds of the series created
hereby, except with respect to the Trustee's certificates of authentication,
shall be taken as the statements of the Funding Corporation and the Partnership,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this Third
Supplemental Indenture or of the Bonds of the series created hereby.
Section 3.3 SECTION Counterparts.
4
<PAGE>
This Third Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 3.4 SECTION GOVERNING LAW.
THIS THIRD SUPPLEMENTAL INDENTURE AND EACH BOND OF THE SERIES
CREATED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LSP BATESVILLE FUNDING CORPORATION
By: ____________________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ____________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: ____________________________________
Name:
Title:
6
<PAGE>
Exhibit 4.5
================================================================================
FOURTH SUPPLEMENTAL INDENTURE
dated as of [__________], 1999
to
TRUST INDENTURE
dated as of May 21, 1999
among
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK, as Trustee
================================================================================
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE, dated as of [________], 1999 (this
"Fourth Supplemental Indenture"), to the Trust Indenture, dated as of May 21,
1999 (the "Original Indenture"), among LSP BATESVILLE FUNDING CORPORATION, a
Delaware corporation (together with its successors and assigns, the "Funding
Corporation"), LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").
WHEREAS, the Funding Corporation, the Partnership and the Trustee
have heretofore executed and delivered the Original Indenture to provide for the
issuance from time to time of Bonds (as defined in the Original Indenture) of
the Funding Corporation and the Partnership, to be issued in one or more series;
WHEREAS, Sections 2.1, 2.3 and 12.1 of the Original Indenture
provide, among other things, that the Funding Corporation, the Partnership and
the Trustee may enter into indentures supplemental to the Original Indenture
for, among other things, the purpose of establishing the designation, form,
terms and provisions of Bonds of any series as permitted by Sections 2.1, 2.3
and 12.1 of the Original Indenture;
WHEREAS, the Funding Corporation and the Partnership (i) desire the
issuance of a series of Bonds to be designated as hereinafter provided, which
Bonds will, pursuant to the terms of the exchange offer described in the
prospectus dated [__________], 1999, be offered to the Holders of the
Partnership's and the Funding Corporation's Series B Senior Secured Bonds due
2025 in exchange therefor, and (ii) have requested the Trustee to enter into
this Fourth Supplemental Indenture for the purpose of establishing the
designation, form, terms and provisions of the Bonds of such series;
WHEREAS, all action on the part of the Funding Corporation and the
Partnership necessary to authorize the issuance of said Bonds under the Original
Indenture and this Fourth Supplemental Indenture (the Original Indenture, as
supplemented by this Fourth Supplemental Indenture, being hereinafter called the
"Indenture") has been duly taken.
NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery of, said Bonds,
and in consideration of the acceptance of said Bonds by the Holders thereof and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Original Indenture.
<PAGE>
(b) The rules of interpretation set forth in the Original Indenture
shall be applied hereto as if set forth in full herein.
(c) For all purposes of this Fourth Supplemental Indenture, except
as otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings (such meanings
shall apply equally to both the singular and plural forms of the respective
terms):
"Make-Whole Premium" shall mean an amount equal to the Discounted
Present Value calculated for any Series D Bond subject to redemption less the
unpaid principal amount of such Bond; provided that the Make-Whole Premium shall
not be less than zero. For purposes of this definition, the "Discounted Present
Value" of any Series D Bond subject to redemption shall be equal to the
discounted present value of all principal and interest payments scheduled to
become due in respect of such Series D Bond after the date of such redemption,
calculated using a discount rate equal to the sum of (1) the yield to maturity
on the United States treasury security having an average life equal to the
remaining average life of such Series D Bond and trading in the secondary market
at the price closest to par and (2) 50 basis points; provided, however, that if
there is no United States treasury security having an average life equal to the
remaining average life of such Series D Bond, such discount rate shall be
calculated using a yield to maturity interpolated or extrapolated on a
straight-line basis (rounding to the nearest month, if necessary) from the
yields to maturity for two United States treasury securities having average
lives most closely corresponding to the remaining average life of such Series D
Bond and trading in the secondary market at the price closest to par.
"Series D Bonds" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
ARTICLE II
THE TERMS OF THE BONDS
SECTION 2.1. Terms of 8.160% Series D Senior Secured Bonds due July
15, 2015.
(a) There is hereby created one series of Bonds designated: 8.160%
Series D Senior Secured Bonds due July 15, 2025, in the aggregate principal
amount of $176,000,000 (the "Series D Bonds "). The Series D Bonds may forthwith
be executed by the Funding Corporation and the Partnership and delivered to the
Trustee for authentication and delivery by the Trustee in accordance with the
provisions of Section 2.4 of the Original Indenture.
(b) Each of the Series D Bonds shall have and be subject to such
other terms as provided in the Indenture and shall be evidenced by one or more
Bonds in the form of Exhibit G to the Original Indenture.
SECTION 2.2. Interest and Principal.
2
<PAGE>
Each Series D Bond shall bear interest on the unpaid principal
amount thereof from time to time outstanding from the date thereof until such
amount is paid in full at a rate of 8.160% per annum. The principal amount of
each Series D Bond shall be due and payable in installments as set forth below:
Scheduled Percentage of
Payment Principal
Date Amount Payable
---- --------------
July 15, 2014 2.65%
January 15, 2015 2.65%
July 15, 2015 2.85%
January 15, 2016 2.85%
July 15, 2016 2.85%
January 15, 2017 2.85%
July 15, 2017 3.00%
January 15, 2018 3.00%
July 15, 2018 2.90%
January 15, 2019 2.90%
July 15, 2019 3.45%
January 15, 2020 3.45%
July 15, 2020 2.15%
January 15, 2021 2.15%
July 15, 2021 5.25%
January 15, 2022 5.25%
July 15, 2022 5.35%
January 15, 2023 5.35%
July 15, 2023 5.40%
January 15, 2024 5.40%
July 15, 2024 6.90%
January 15, 2025 6.90%
July 15, 2025 14.50%
Payment of principal of and interest on each Bond of the series
created hereby shall be made (a) if the Funding Corporation or the Partnership
so elects, by check mailed to the Holder at his or her registered address, (b)
otherwise as provided in Section 2.11 of the Original Indenture or (c) upon
application by a record Holder of at least $1,000,000 in aggregate principal
amount of Series D Bonds to the Trustee not later than 15 days prior to the
applicable Payment Date, by wire transfer to an account maintained by such
record Holder with a bank in The City of New York; provided that the final
installment of principal payable with respect to each Bond of the series created
hereby shall be payable as provided in Section 6.5 of the Original Indenture (in
the case of any such Bond redeemed) or payable upon presentation and surrender
of each such Bond at the Place of Payment.
3
<PAGE>
SECTION 2.3. Redemption.
(a) Optional Redemption. The Series D Bonds may be redeemed at the
option of the Funding Corporation and the Partnership in accordance with and
subject to Section 6.3 of the Original Indenture as follows:
(i) The Outstanding Series D Bonds may be redeemed prior to
maturity, as a whole or in part ratably, at any time, at a Redemption
Price equal to the outstanding principal amount of the Series D Bonds
being redeemed, plus accrued and unpaid interest thereon to but not
including the Redemption Date plus the Make-Whole Premium, upon notice
given by the Issuers to the Holders of the Series D Bonds not less than 30
nor more than 60 days prior to the date selected by the Issuer for such
redemption (the "Redemption Date").
(ii) All proceeds received by the Trustee from or on behalf of
the Partnership or the Funding Corporation identified as proceeds for an
optional redemption of the Series D Bonds under this Section 2.3(a) shall
be applied by the Trustee to the redemption of such Bonds on the
Redemption Date in respect thereof.
(b) Mandatory Redemption. Subject to the provisions of Section 6.3
of the Original Indenture, the Series D Bonds are subject to mandatory
redemption under the conditions and on the terms set forth in the Original
Indenture.
ARTICLE III.
MISCELLANEOUS
SECTION 3.1 Execution of Supplemental Indenture.
This Fourth Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture and, as
provided in the Original Indenture, this Fourth Supplemental Indenture forms a
part thereof.
SECTION 3.2. Concerning the Trustee.
The recitals contained herein and in the Bonds of the series created
hereby, except with respect to the Trustee's certificates of authentication,
shall be taken as the statements of the Funding Corporation and the Partnership,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Fourth Supplemental Indenture or of the Bonds of the series created hereby.
SECTION 3.3. Counterparts.
This Fourth Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
4
<PAGE>
SECTION 3.4. GOVERNING LAW.
THIS FOURTH SUPPLEMENTAL INDENTURE AND EACH BOND OF THE SERIES
CREATED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Fourth Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LSP BATESVILLE FUNDING CORPORATION
By:______________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:______________________________
Name:
Title:
6
<PAGE>
Exhibit 4.6
Face of
7.164% Series A Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES A SENIOR SECURED BONDS DUE JANUARY 15, 2014
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, EACH OF THE HOLDERS OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN
AGREES UNLESS THIS SECURITY HAS SOONER BEEN REGISTERED UNDER THE SECURITIES ACT
THAT BEGINNING FROM TWO YEARS AFTER THE LATER OF (X) THE ORIGINAL ISSUE DATE OF
THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF
WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH
THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) (1) TO THE ISSUERS OR ANY
AFFILIATE THEREOF, (2) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN THE RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (2) THROUGH (5) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. UNLESS THE ISSUERS DETERMINE
OTHERWISE IN ACCORDANCE WITH
<PAGE>
APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE ISSUES UPON REQUEST OF THE
HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFEREED TO IN RULE 144(K) UNDER
THE SECURITIES ACT BEGINNING FROM THE LATER OR (A) THE ORIGINAL ISSUE DATE OF
THIS SECURITY AND (B) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE
THEREOF WERE THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
No. 1
CUSIP NUMBER: 50217B AA 7
PRINCIPAL AMOUNT: One Hundred Fifty Million Dollars ($150,000,000)
FINAL SCHEDULED PAYMENT DATE: January 15, 2014
ISSUE DATE: May 21, 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 7.164%
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation"), which term includes any
successor or assign under the Indenture referred to below) and LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2001) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided that
the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date, together with all interest accrued thereon, shall in any and all
cases be due and payable on the final Scheduled Payment Date), and to pay
interest on the unpaid portion of the Principal Amount at the interest rate set
forth above from the most recent Scheduled Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid or duly provided
for, from the issue date set forth above, semiannually on January 15 and July 15
in each year (commencing January 15, 2000) until the principal amount is paid in
full or payment thereof is duly provided for. Any installment of principal and,
to the extent permitted by applicable law, any payment of interest not
punctually paid or duly provided for shall continue to bear interest at a rate
equal to the interest rate set forth above. The principal and interest so
payable, and punctually paid or duly provided for, at any Scheduled Payment Date
shall, as provided in the Indenture, be paid to the Person in whose name this
Bond (or one or more
2
<PAGE>
Predecessor Bonds) is registered in the Security Register at the close of
business on the Regular Record Date for such payment of principal and interest,
which shall be the 15th day (whether or not a Business Day) next preceding such
Scheduled Payment Date. Any such principal and interest that is payable, but is
not so punctually paid or duly provided for at any Scheduled Payment Date, shall
forthwith cease to be payable to the Holder hereof on such Regular Record Date,
and such Overdue Interest or Overdue Principal may be paid to the Person in
whose name this Bond (or one or more Predecessor Bonds) is registered at the
close of business on a Special Record Date for the payment of such Overdue
Principal and Overdue Interest (together with any other amounts payable with
respect to such Overdue Principal and Overdue Interest), to be fixed by the
Trustee, notice of which shall be given to the Holder hereof not less than 10
days prior to such special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Bond may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. Payments of
principal of and interest on this Bond shall be made (i) if the Funding
Corporation or the Partnership so elects, by check mailed to the Holder of this
Bond at his or her registered address or (ii) otherwise, at the Place of
Payment; provided that the final installment of principal payable with respect
to this Bond shall be made as provided in Section 6.5 of the Indenture (in the
event this Bond is redeemed) or shall be made upon presentation and surrender of
this Bond at the Place of Payment. All payments in respect of this Bond shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ____________________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: May 21, 1999
This Bond is one of the 7.164% Series A Senior Secured Bonds due
January 15, 2014 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 7.164% Series A Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES A SENIOR SECURED BONDS DUE JANUARY 15, 2014
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 7.164% Series A Senior Secured
Bonds due January 15, 2014 (the "Series A Bonds"). The Series A Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the First
Supplemental Indenture dated as of May 21, 1999 (the "First Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of
<PAGE>
all series then Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal amount of the Bonds
of all series then Outstanding, on behalf of the Holders of all the Bonds, to
waive compliance by the Funding Corporation and the Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any Act (as such term is defined in the Indenture),
including, but not limited to, such a consent, waiver or direction by the Holder
of this Bond shall be conclusive and binding upon the Holder and upon all future
Holders of this Bond and the Holder of every Bond issued upon the transfer
hereof or the exchange herefor or in lieu hereof whether or not notation of such
Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$150,000,000 in aggregate principal amount as provided in the First Supplemental
Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the First Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the First Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series A Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
_____________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Bond on the books of the Funding Corporation and the Partnership, with full
power of substitution in the premises.
Dated:____________________
________________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
7.164% SERIES A SENIOR SECURED BOND DUE JANUARY 15, 2014
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2001 2.75%
January 15, 2002 2.75%
July 15, 2002 2.30%
January 15, 2003 2.30%
July 15, 2003 2.45%
January 15, 2004 2.45%
July 15, 2004 2.60%
January 15, 2005 2.60%
July 15, 2005 3.80%
January 15, 2006 3.80%
July 15, 2006 4.15%
January 15, 2007 4.15%
July 15, 2007 4.20%
January 15, 2008 4.20%
July 15, 2008 4.35%
January 15, 2009 4.35%
July 15, 2009 4.50%
January 15, 2010 4.50%
July 15, 2010 4.70%
January 15, 2011 4.70%
July 15, 2011 5.10%
January 15, 2012 5.10%
July 15, 2012 5.10%
January 15, 2013 5.10%
July 15, 2013 4.00%
January 15, 2014 4.00%
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
- -------- ----------- ----------- ----------------- ---------------
<PAGE>
Face of
7.164% Series A Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES A SENIOR SECURED BONDS DUE JANUARY 15, 2014
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, EACH OF THE HOLDERS OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN
AGREES UNLESS THIS SECURITY HAS SOONER BEEN REGISTERED UNDER THE SECURITIES ACT
THAT BEGINNING FROM TWO YEARS AFTER THE LATER OF (X) THE ORIGINAL ISSUE DATE OF
THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF
WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH
THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) (1) TO THE ISSUERS OR ANY
AFFILIATE THEREOF, (2) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN THE RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (2) THROUGH (5) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. UNLESS THE ISSUERS DETERMINE
OTHERWISE IN ACCORDANCE WITH
<PAGE>
APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE ISSUES UPON REQUEST OF THE
HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFEREED TO IN RULE 144(K) UNDER
THE SECURITIES ACT BEGINNING FROM THE LATER OR (A) THE ORIGINAL ISSUE DATE OF
THIS SECURITY AND (B) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE
THEREOF WERE THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL BOND, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED BONDS, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL BOND SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
No. 2
CUSIP NUMBER: U5463E AA 3
PRINCIPAL AMOUNT: $0
FINAL SCHEDULED PAYMENT DATE: January 15, 2014
ISSUE DATE: May 21, 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 7.164%
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation"), which term includes any
successor or assign under the Indenture referred to below) and LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2001) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided that
the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date, together with all interest accrued thereon, shall in any and all
cases be due and payable on the final Scheduled Payment Date), and to pay
interest on the unpaid portion of the Principal Amount at the interest rate set
forth above from the most recent Scheduled
<PAGE>
Payment Date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from the issue date set forth
above, semiannually on January 15 and July 15 in each year (commencing January
15, 2000) until the principal amount is paid in full or payment thereof is duly
provided for. Any installment of principal and, to the extent permitted by
applicable law, any payment of interest not punctually paid or duly provided for
shall continue to bear interest at a rate equal to the interest rate set forth
above. The principal and interest so payable, and punctually paid or duly
provided for, at any Scheduled Payment Date shall, as provided in the Indenture,
be paid to the Person in whose name this Bond (or one or more Predecessor Bonds)
is registered in the Security Register at the close of business on the Regular
Record Date for such payment of principal and interest, which shall be the 15th
day (whether or not a Business Day) next preceding such Scheduled Payment Date.
Any such principal and interest that is payable, but is not so punctually paid
or duly provided for at any Scheduled Payment Date, shall forthwith cease to be
payable to the Holder hereof on such Regular Record Date, and such Overdue
Interest or Overdue Principal may be paid to the Person in whose name this Bond
(or one or more Predecessor Bonds) is registered at the close of business on a
Special Record Date for the payment of such Overdue Principal and Overdue
Interest (together with any other amounts payable with respect to such Overdue
Principal and Overdue Interest), to be fixed by the Trustee, notice of which
shall be given to the Holder hereof not less than 10 days prior to such special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which this Bond
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture. Payments of principal of and interest on
this Bond shall be made (i) if the Funding Corporation or the Partnership so
elects, by check mailed to the Holder of this Bond at his or her registered
address or (ii) otherwise, at the Place of Payment; provided that the final
installment of principal payable with respect to this Bond shall be made as
provided in Section 6.5 of the Indenture (in the event this Bond is redeemed) or
shall be made upon presentation and surrender of this Bond at the Place of
Payment. All payments in respect of this Bond shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of debts.
Until this Regulation S Temporary Global Bond is exchanged for one
or more Regulation S Permanent Global Bonds, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Bond shall in all other respects be entitled
to the same benefits as other Bonds under the Indenture.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ____________________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: May 21, 1999
This Bond is one of the 7.164% Series A Senior Secured Bonds due
January 15, 2014 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 7.164% Series A Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES A SENIOR SECURED BONDS DUE JANUARY 15, 2014
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 7.164% Series A Senior Secured
Bonds due January 15, 2014 (the "Series A Bonds"). The Series A Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the First
Supplemental Indenture dated as of May 21, 1999 (the "First Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
<PAGE>
of all series then Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Bonds of all series then Outstanding, on behalf of the Holders of all the
Bonds, to waive compliance by the Funding Corporation and the Partnership with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any Act (as such term is defined in the
Indenture), including, but not limited to, such a consent, waiver or direction
by the Holder of this Bond shall be conclusive and binding upon the Holder and
upon all future Holders of this Bond and the Holder of every Bond issued upon
the transfer hereof or the exchange herefor or in lieu hereof whether or not
notation of such Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$150,000,000 in aggregate principal amount as provided in the First Supplemental
Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the First Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the First Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series A Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
This Regulation S Temporary Global Bond is exchangeable in whole or
in part for one or more Global Bonds only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article II of the Indenture. Upon exchange of this Regulation S Temporary
Global Bond for one or more Global Bonds, the Trustee shall cancel this
Regulation S Temporary Global Bond.
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
______________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Bond on the books of the Funding Corporation and the Partnership, with full
power of substitution in the premises.
Dated:____________________
________________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
7.164% SERIES A SENIOR SECURED BOND DUE JANUARY 15, 2014
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2001 2.75%
January 15, 2002 2.75%
July 15, 2002 2.30%
January 15, 2003 2.30%
July 15, 2003 2.45%
January 15, 2004 2.45%
July 15, 2004 2.60%
January 15, 2005 2.60%
July 15, 2005 3.80%
January 15, 2006 3.80%
July 15, 2006 4.15%
January 15, 2007 4.15%
July 15, 2007 4.20%
January 15, 2008 4.20%
July 15, 2008 4.35%
January 15, 2009 4.35%
July 15, 2009 4.50%
January 15, 2010 4.50%
July 15, 2010 4.70%
January 15, 2011 4.70%
July 15, 2011 5.10%
January 15, 2012 5.10%
July 15, 2012 5.10%
January 15, 2013 5.10%
July 15, 2013 4.00%
January 15, 2014 4.00%
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
- -------- ------------ ------------ ---------------- ---------------
<PAGE>
Exhibit 4.7
Face of
8.160% Series B Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES B SENIOR SECURED BONDS DUE JULY 15, 2025
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, EACH OF THE HOLDERS OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN
AGREES UNLESS THIS SECURITY HAS SOONER BEEN REGISTERED UNDER THE SECURITIES ACT
THAT BEGINNING FROM TWO YEARS AFTER THE LATER OF (X) THE ORIGINAL ISSUE DATE OF
THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF
WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH
THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) (1) TO THE ISSUERS OR ANY
AFFILIATE THEREOF, (2) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN THE RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (2) THROUGH (5) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. UNLESS THE ISSUERS DETERMINE
OTHERWISE IN ACCORDANCE WITH
<PAGE>
APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE ISSUES UPON REQUEST OF THE
HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFEREED TO IN RULE 144(K) UNDER
THE SECURITIES ACT BEGINNING FROM THE LATER OR (A) THE ORIGINAL ISSUE DATE OF
THIS SECURITY AND (B) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE
THEREOF WERE THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
<TABLE>
<S> <C>
No. 1
CUSIP NUMBER: 50217B AB 5
PRINCIPAL AMOUNT: One Hundred Seventy-Six Million Dollars ($176,000,000)
FINAL SCHEDULED PAYMENT DATE: July 15, 2025
ISSUE DATE: May 21, 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 8.160%
</TABLE>
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation"), which term includes any
successor or assign under the Indenture referred to below) and LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2014) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided that
the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date, together with all interest accrued thereon, shall in any and all
cases be due and payable on the final Scheduled Payment Date), and to pay
interest on the unpaid portion of the Principal Amount at the interest rate set
forth above from the most recent Scheduled Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid or duly provided
for, from the issue date set forth above, semiannually on January 15 and July 15
in each year (commencing January 15, 2000) until the principal amount is paid in
full or payment thereof is duly provided for. Any installment of principal and,
to the extent permitted by applicable law, any payment of interest not
punctually paid or duly provided for shall continue to bear interest at a rate
equal to the interest rate set forth above. The principal and interest so
payable, and punctually paid or duly provided for, at any Scheduled Payment Date
shall, as
<PAGE>
provided in the Indenture, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds) is registered in the Security Register at the close
of business on the Regular Record Date for such payment of principal and
interest, which shall be the 15th day (whether or not a Business Day) next
preceding such Scheduled Payment Date. Any such principal and interest that is
payable, but is not so punctually paid or duly provided for at any Scheduled
Payment Date, shall forthwith cease to be payable to the Holder hereof on such
Regular Record Date, and such Overdue Interest or Overdue Principal may be paid
to the Person in whose name this Bond (or one or more Predecessor Bonds) is
registered at the close of business on a Special Record Date for the payment of
such Overdue Principal and Overdue Interest (together with any other amounts
payable with respect to such Overdue Principal and Overdue Interest), to be
fixed by the Trustee, notice of which shall be given to the Holder hereof not
less than 10 days prior to such special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which this Bond may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.
Payments of principal of and interest on this Bond shall be made (i) if the
Funding Corporation or the Partnership so elects, by check mailed to the Holder
of this Bond at his or her registered address or (ii) otherwise, at the Place of
Payment; provided that the final installment of principal payable with respect
to this Bond shall be made as provided in Section 6.5 of the Indenture (in the
event this Bond is redeemed) or shall be made upon presentation and surrender of
this Bond at the Place of Payment. All payments in respect of this Bond shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ____________________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: May 21, 1999
This Bond is one of the 8.160% Series B Senior Secured Bonds due
July 15, 2025 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 8.160% Series B Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES B SENIOR SECURED BONDS DUE JULY 15, 2025
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds"). The Series B Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the Second
Supplemental Indenture dated as of May 21, 1999 (the "Second Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of all series then Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Bonds of
<PAGE>
all series then Outstanding, on behalf of the Holders of all the Bonds, to waive
compliance by the Funding Corporation and the Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any Act (as such term is defined in the Indenture),
including, but not limited to, such a consent, waiver or direction by the Holder
of this Bond shall be conclusive and binding upon the Holder and upon all future
Holders of this Bond and the Holder of every Bond issued upon the transfer
hereof or the exchange herefor or in lieu hereof whether or not notation of such
Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$176,000,000 in aggregate principal amount as provided in the Second
Supplemental Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the Second Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the Second Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series B Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
_____________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Bond on the books of the Funding Corporation and the Partnership, with full
power of substitution in the premises.
Dated:____________________
________________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
8.160% SERIES B SENIOR SECURED BOND DUE JULY 15, 2025
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2014 2.65%
January 15, 2015 2.65%
July 15, 2015 2.85%
January 15, 2016 2.85%
July 15, 2016 2.85%
January 15, 2017 2.85%
July 15, 2017 3.00%
January 15, 2018 3.00%
July 15, 2018 2.90%
January 15, 2019 2.90%
July 15, 2019 3.45%
January 15, 2020 3.45%
July 15, 2020 2.15%
January 15, 2021 2.15%
July 15, 2021 5.25%
January 15, 2022 5.25%
July 15, 2022 5.35%
January 15, 2023 5.35%
July 15, 2023 5.40%
January 15, 2024 5.40%
July 15, 2024 6.90%
January 15, 2025 6.90%
July 15, 2025 14.50%
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
- -------- ------------ ------------ ---------------- ---------------
<PAGE>
Face of
8.160% Series B Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES B SENIOR SECURED BONDS DUE JULY 15, 2025
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, EACH OF THE HOLDERS OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN
AGREES UNLESS THIS SECURITY HAS SOONER BEEN REGISTERED UNDER THE SECURITIES ACT
THAT BEGINNING FROM TWO YEARS AFTER THE LATER OF (X) THE ORIGINAL ISSUE DATE OF
THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE THEREOF
WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH
THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) (1) TO THE ISSUERS OR ANY
AFFILIATE THEREOF, (2) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN THE RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (2) THROUGH (5) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. UNLESS THE ISSUERS DETERMINE
OTHERWISE IN ACCORDANCE WITH
<PAGE>
APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE ISSUES UPON REQUEST OF THE
HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFEREED TO IN RULE 144(K) UNDER
THE SECURITIES ACT BEGINNING FROM THE LATER OR (A) THE ORIGINAL ISSUE DATE OF
THIS SECURITY AND (B) THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE
THEREOF WERE THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL BOND, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED BONDS, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL BOND SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
No. 2
CUSIP NUMBER: U5463E AB 1
PRINCIPAL AMOUNT: $0
FINAL SCHEDULED PAYMENT DATE: July 15, 2025
ISSUE DATE: May 21, 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 8.160%
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation"), which term includes any
successor or assign under the Indenture referred to below) and LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2014) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided that
the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date, together with all interest accrued thereon, shall in any and all
cases be due and payable on the final Scheduled Payment Date), and to pay
interest on the unpaid portion of the Principal Amount at the interest rate set
forth above from the most recent Scheduled
<PAGE>
Payment Date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from the issue date set forth
above, semiannually on January 15 and July 15 in each year (commencing January
15, 2000) until the principal amount is paid in full or payment thereof is duly
provided for. Any installment of principal and, to the extent permitted by
applicable law, any payment of interest not punctually paid or duly provided for
shall continue to bear interest at a rate equal to the interest rate set forth
above. The principal and interest so payable, and punctually paid or duly
provided for, at any Scheduled Payment Date shall, as provided in the Indenture,
be paid to the Person in whose name this Bond (or one or more Predecessor Bonds)
is registered in the Security Register at the close of business on the Regular
Record Date for such payment of principal and interest, which shall be the 15th
day (whether or not a Business Day) next preceding such Scheduled Payment Date.
Any such principal and interest that is payable, but is not so punctually paid
or duly provided for at any Scheduled Payment Date, shall forthwith cease to be
payable to the Holder hereof on such Regular Record Date, and such Overdue
Interest or Overdue Principal may be paid to the Person in whose name this Bond
(or one or more Predecessor Bonds) is registered at the close of business on a
Special Record Date for the payment of such Overdue Principal and Overdue
Interest (together with any other amounts payable with respect to such Overdue
Principal and Overdue Interest), to be fixed by the Trustee, notice of which
shall be given to the Holder hereof not less than 10 days prior to such special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which this Bond
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture. Payments of principal of and interest on
this Bond shall be made (i) if the Funding Corporation or the Partnership so
elects, by check mailed to the Holder of this Bond at his or her registered
address or (ii) otherwise, at the Place of Payment; provided that the final
installment of principal payable with respect to this Bond shall be made as
provided in Section 6.5 of the Indenture (in the event this Bond is redeemed) or
shall be made upon presentation and surrender of this Bond at the Place of
Payment. All payments in respect of this Bond shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of debts.
Until this Regulation S Temporary Global Bond is exchanged for one
or more Regulation S Permanent Global Bonds, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Bond shall in all other respects be entitled
to the same benefits as other Bonds under the Indenture.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ____________________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: May 21, 1999
This Bond is one of the 8.160% Series B Senior Secured Bonds due
July 15, 2025 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 8.160% Series B Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES B SENIOR SECURED BONDS DUE JULY 15, 2025
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds"). The Series B Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the Second
Supplemental Indenture dated as of May 21, 1999 (the "Second Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of all series then Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Bonds of
<PAGE>
all series then Outstanding, on behalf of the Holders of all the Bonds, to waive
compliance by the Funding Corporation and the Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any Act (as such term is defined in the Indenture),
including, but not limited to, such a consent, waiver or direction by the Holder
of this Bond shall be conclusive and binding upon the Holder and upon all future
Holders of this Bond and the Holder of every Bond issued upon the transfer
hereof or the exchange herefor or in lieu hereof whether or not notation of such
Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$176,000,000 in aggregate principal amount as provided in the Second
Supplemental Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the Second Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the Second Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series B Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
This Regulation S Temporary Global Bond is exchangeable in whole or
in part for one or more Global Bonds only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article II of the Indenture. Upon exchange of this Regulation S Temporary
Global Bond for one or more Global Bonds, the Trustee shall cancel this
Regulation S Temporary Global Bond.
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
______________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Bond on the books of the Funding Corporation and the Partnership, with full
power of substitution in the premises.
Dated:____________________
________________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
8.160% SERIES B SENIOR SECURED BOND DUE JULY 15, 2025
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2014 2.65%
January 15, 2015 2.65%
July 15, 2015 2.85%
January 15, 2016 2.85%
July 15, 2016 2.85%
January 15, 2017 2.85%
July 15, 2017 3.00%
January 15, 2018 3.00%
July 15, 2018 2.90%
January 15, 2019 2.90%
July 15, 2019 3.45%
January 15, 2020 3.45%
July 15, 2020 2.15%
January 15, 2021 2.15%
July 15, 2021 5.25%
January 15, 2022 5.25%
July 15, 2022 5.35%
January 15, 2023 5.35%
July 15, 2023 5.40%
January 15, 2024 5.40%
July 15, 2024 6.90%
January 15, 2025 6.90%
July 15, 2025 14.50%
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
- -------- ------------ ------------ ---------------- ---------------
<PAGE>
Exhibit 4.8
Face of
7.164% Series C Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES C SENIOR SECURED BONDS DUE JANUARY 15, 2014
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
No. 1
CUSIP NUMBER: 05217BAD1
PRINCIPAL AMOUNT: One Hundred Fifty Million Dollars
($150,000,000)
FINAL SCHEDULED PAYMENT DATE: January 15, 2014
ISSUE DATE: [_________], 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 7.164%
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation", which term includes any successor
or assign under the Indenture referred to below) and LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2001) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided that
the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date,
<PAGE>
together with all interest accrued thereon, shall in any and all cases be due
and payable on the final Scheduled Payment Date), and to pay interest on the
unpaid portion of the Principal Amount at the interest rate set forth above from
the most recent Scheduled Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from the
issue date set forth above, semiannually on January 15 and July 15 in each year
(commencing January 15, 2000) until the principal amount is paid in full or
payment thereof is duly provided for. Any installment of principal and, to the
extent permitted by applicable law, any payment of interest not punctually paid
or duly provided for shall continue to bear interest at a rate equal to the
interest rate set forth above. The principal and interest so payable, and
punctually paid or duly provided for, at any Scheduled Payment Date shall, as
provided in the Indenture, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds) is registered in the Security Register at the close
of business on the Regular Record Date for such payment of principal and
interest, which shall be the 15th day (whether or not a Business Day) next
preceding such Scheduled Payment Date. Any such principal and interest that is
payable, but is not so punctually paid or duly provided for at any Scheduled
Payment Date, shall forthwith cease to be payable to the Holder hereof on such
Regular Record Date, and such Overdue Interest or Overdue Principal may be paid
to the Person in whose name this Bond (or one or more Predecessor Bonds) is
registered at the close of business on a Special Record Date for the payment of
such Overdue Principal and Overdue Interest (together with any other amounts
payable with respect to such Overdue Principal and Overdue Interest), to be
fixed by the Trustee, notice of which shall be given to the Holder hereof not
less than 10 days prior to such special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which this Bond may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.
Payments of principal of and interest on this Bond shall be made (i) if the
Funding Corporation or the Partnership so elects, by check mailed to the Holder
of this Bond at his or her registered address, (ii) otherwise, at the Place of
Payment, or (iii) upon application by a record Holder of at least $1,000,000 in
aggregate principal amount of Series C Bonds to the Trustee not later than 15
days prior to the applicable Payment Date, by wire transfer to an account
maintained by such record Holder with a bank in The City of New York; provided
that the final installment of principal payable with respect to this Bond shall
be made as provided in Section 6.5 of the Indenture (in the event this Bond is
redeemed) or shall be made upon presentation and surrender of this Bond at the
Place of Payment. All payments in respect of this Bond shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ______________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ______________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: [________], 1999
This Bond is one of the 7.164% Series C Senior Secured Bonds due
January 15, 2014 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 7.164% Series C Senior Secured Bonds due January 15, 2014
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
7.164% SERIES C SENIOR SECURED BONDS DUE JANUARY 15, 2014
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 7.164% Series C Senior Secured
Bonds due January 15, 2014 (the "Series C Bonds"). The Series C Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the Third
Supplemental Indenture dated as of [________], 1999 (the "Third Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of
<PAGE>
all series then Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal amount of the Bonds
of all series then Outstanding, on behalf of the Holders of all the Bonds, to
waive compliance by the Funding Corporation and the Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any Act (as such term is defined in the Indenture),
including, but not limited to, such a consent, waiver or direction by the Holder
of this Bond shall be conclusive and binding upon the Holder and upon all future
Holders of this Bond and the Holder of every Bond issued upon the transfer
hereof or the exchange herefor or in lieu hereof whether or not notation of such
Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$150,000,000 in aggregate principal amount as provided in the Third Supplemental
Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the Third Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the Third Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series C Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
_______________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ______________________________________________________ attorney to
transfer said Bond on the books of the Funding Corporation and the Partnership,
with full power of substitution in the premises.
Dated:____________________
_______________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
7.164% SERIES C SENIOR SECURED BOND DUE JANUARY 15, 2014
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2001 2.75%
January 15, 2002 2.75%
July 15, 2002 2.30%
January 15, 2003 2.30%
July 15, 2003 2.45%
January 15, 2004 2.45%
July 15, 2004 2.60%
January 15, 2005 2.60%
July 15, 2005 3.80%
January 15, 2006 3.80%
July 15, 2006 4.15%
January 15, 2007 4.15%
July 15, 2007 4.20%
January 15, 2008 4.20%
July 15, 2008 4.35%
January 15, 2009 4.35%
July 15, 2009 4.50%
January 15, 2010 4.50%
July 15, 2010 4.70%
January 15, 2011 4.70%
July 15, 2011 5.10%
January 15, 2012 5.10%
July 15, 2012 5.10%
January 15, 2013 5.10%
July 15, 2013 4.00%
January 15, 2014 4.00%
<PAGE>
SCHEDULED OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
-------- ----------- ----------- ----------------- ---------------
<PAGE>
Exhibit 4.9
Face of
8.160% Series D Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES D SENIOR SECURED BONDS DUE JULY 15, 2025
THIS GLOBAL BOND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.10 OF THE INDENTURE, (II) THIS GLOBAL BOND MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9(a) OF THE INDENTURE,
(III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.13 OF THE INDENTURE AND (IV) THIS GLOBAL BOND MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.
No. 1
CUSIP NUMBER: 50217BAF6
PRINCIPAL AMOUNT: One Hundred Seventy-Six Million Dollars
($176,000,000)
FINAL SCHEDULED PAYMENT DATE: July 15, 2025
ISSUE DATE: [_________], 1999
REGISTERED HOLDER: Cede & Co.
INTEREST RATE: 8.160%
LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Funding Corporation", which term includes any successor
or assign under the Indenture referred to below) and LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter called the
"Partnership", which term includes any successor or assign under the Indenture
referred to below), for value received hereby promise to pay to CEDE & CO., or
its registered assigns, the outstanding principal amount hereof, such payment to
be made in semiannual installments on January 15 and July 15 of each year
(commencing July 15, 2014) and ending on the final Scheduled Payment Date set
forth above, each such installment to be in an amount equal to the principal
amount hereof multiplied by the percentage set forth opposite the applicable
payment date in the table set forth on Annex A attached hereto (provided
<PAGE>
that the portion of the principal amount remaining unpaid on the final Scheduled
Payment Date, together with all interest accrued thereon, shall in any and all
cases be due and payable on the final Scheduled Payment Date), and to pay
interest on the unpaid portion of the Principal Amount at the interest rate set
forth above from the most recent Scheduled Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid or duly provided
for, from the issue date set forth above, semiannually on January 15 and July 15
in each year (commencing January 15, 2000) until the principal amount is paid in
full or payment thereof is duly provided for. Any installment of principal and,
to the extent permitted by applicable law, any payment of interest not
punctually paid or duly provided for shall continue to bear interest at a rate
equal to the interest rate set forth above. The principal and interest so
payable, and punctually paid or duly provided for, at any Scheduled Payment Date
shall, as provided in the Indenture, be paid to the Person in whose name this
Bond (or one or more Predecessor Bonds) is registered in the Security Register
at the close of business on the Regular Record Date for such payment of
principal and interest, which shall be the 15th day (whether or not a Business
Day) next preceding such Scheduled Payment Date. Any such principal and interest
that is payable, but is not so punctually paid or duly provided for at any
Scheduled Payment Date, shall forthwith cease to be payable to the Holder hereof
on such Regular Record Date, and such Overdue Interest or Overdue Principal may
be paid to the Person in whose name this Bond (or one or more Predecessor Bonds)
is registered at the close of business on a Special Record Date for the payment
of such Overdue Principal and Overdue Interest (together with any other amounts
payable with respect to such Overdue Principal and Overdue Interest), to be
fixed by the Trustee, notice of which shall be given to the Holder hereof not
less than 10 days prior to such special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which this Bond may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.
Payments of principal of and interest on this Bond shall be made (i) if the
Funding Corporation or the Partnership so elects, by check mailed to the Holder
of this Bond at his or her registered address, (ii) otherwise, at the Place of
Payment, or (iii) upon application by a record Holder of at least $1,000,000 in
aggregate principal amount of Series D Bonds to the Trustee not later than 15
days prior to the applicable Payment Date, by wire transfer to an account
maintained by such record Holder with a bank in The City of New York; provided
that the final installment of principal payable with respect to this Bond shall
be made as provided in Section 6.5 of the Indenture (in the event this Bond is
redeemed) or shall be made upon presentation and surrender of this Bond at the
Place of Payment. All payments in respect of this Bond shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to be due on a
day that is not a Business Day, such amount shall be payable on the next
succeeding Business Day, and if such payment is timely made, no interest shall
accrue for the period from and after the day on which such payment was due.
Interest payments for this Bond will be computed and paid on the basis of a
360-day year consisting of twelve 30-day months.
<PAGE>
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Funding Corporation and the Partnership have
caused this instrument to be duly executed.
LSP BATESVILLE FUNDING CORPORATION
By: ______________________________
Name:
Title:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ______________________________
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated: [________], 1999
This Bond is one of the 8.160% Series D Senior Secured Bonds due
July 15, 2025 of LSP Energy Limited Partnership and LSP Batesville Funding
Corporation referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:__________________________
Authorized Signatory
<PAGE>
Reverse of 8.160% Series D Senior Secured Bonds due July 15, 2025
LSP BATESVILLE FUNDING CORPORATION
LSP ENERGY LIMITED PARTNERSHIP
8.160% SERIES D SENIOR SECURED BONDS DUE JULY 15, 2025
This bond is one of an authorized issue of Bonds of the Funding
Corporation and the Partnership known as their 8.160% Series D Senior Secured
Bonds due July 15, 2025 (the "Series D Bonds"). The Series D Bonds are issued
under the Trust Indenture dated as of May 21, 1999 (the "Original Indenture")
among the Funding Corporation, the Partnership and The Bank of New York, a New
York banking corporation, as trustee (in such capacity, together with its
successors in such capacity, the "Trustee"), as supplemented by the Fourth
Supplemental Indenture dated as of [_________], 1999 (the "Fourth Supplemental
Indenture") among the Funding Corporation, the Partnership and the Trustee (the
Original Indenture, as so supplemented, and as the same may be amended, modified
and further supplemented, the "Indenture"). All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Indenture.
All Bonds of any series issued and Outstanding under the Indenture
rank on a parity with each other Bond of the same series and with all Bonds of
each other series. Reference is hereby made to the Indenture for a description
of the nature and extent of the Bonds and the respective rights, limitations of
the rights, duties and immunities thereunder of the Holders of the Bonds and of
the Trustee, the Partnership and the Funding Corporation in respect of the Bonds
and the terms upon which the Bonds are made and are to be authenticated and
delivered.
Except as otherwise specifically provided in the Indenture, the
Intercreditor Agreement or the Common Agreement, all payments of principal of,
premium, if any, and interest on this Bond are (i) payable only from the assets
of the Funding Corporation and the Partnership and the income and proceeds
thereof received by the Trustee or the Administrative Agent and allocable to the
Trustee therefrom and (ii) secured by assets subject to the Lien of the
Indenture, and all payments of principal, premium, if any, and interest shall be
made in accordance with the terms of the Indenture. Each Holder, by acceptance
of this Bond, hereby acknowledges and agrees that recourse for any such amounts
payable shall be otherwise limited in accordance with Section 2.15 and Section
14.1 of the Original Indenture.
The obligations of the Funding Corporation and the Partnership to
pay the principal of and interest on the Bonds when due as herein prescribed are
absolute and unconditional and no provision of this Bond or the Indenture shall
alter or impair such obligations.
The Indenture permits, with certain exceptions, as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Funding Corporation and the Partnership and the rights of the Holders of the
Bonds under the Indenture at any time by the Funding Corporation and the
Partnership without the consent of the Holders or with the consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
of
<PAGE>
all series then Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal amount of the Bonds
of all series then Outstanding, on behalf of the Holders of all the Bonds, to
waive compliance by the Funding Corporation and the Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any Act (as such term is defined in the Indenture),
including, but not limited to, such a consent, waiver or direction by the Holder
of this Bond shall be conclusive and binding upon the Holder and upon all future
Holders of this Bond and the Holder of every Bond issued upon the transfer
hereof or the exchange herefor or in lieu hereof whether or not notation of such
Act is made upon this Bond.
As provided in the Indenture, the aggregate principal amount of
Bonds which may be issued, authenticated and delivered thereunder is unlimited.
This Bond is one of the series designated on the face hereof, limited to
$176,000,000 in aggregate principal amount as provided in the Fourth
Supplemental Indenture.
This Bond and all Bonds issued or to be issued in the series created
under the Fourth Supplemental Indenture are (i) redeemable at the option of the
Funding Corporation and the Partnership, in accordance with the terms of the
Indenture and the Fourth Supplemental Indenture, and the Funding Corporation and
the Partnership are required to redeem this Bond upon the occurrence of certain
specified events pursuant to Section 6.3 of the Indenture and Sections 3.9 and
3.10 of the Common Agreement, and (ii) not subject to any sinking fund.
Notice of any optional redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each Holder at its
address as it appears in the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption of which
provision is made in accordance with the Indenture shall cease to bear interest
from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by the
Funding Corporation and the Partnership with certain conditions set forth in the
Indenture, the defeasance of (a) the entire indebtedness of this Bond and (b)
certain restrictive covenants and agreements.
The unpaid portion of the principal amount hereof, together with any
interest accrued and unpaid thereon and all other amounts due hereunder, if any,
may become due and payable upon the occurrence and during the continuance of any
Event of Default, but only as provided in the Indenture.
The Series D Bonds are issuable only as registered Bonds without
coupons in minimum denominations of $100,000 and any integral multiple of $1,000
in excess thereof.
The transfer of Bonds may be registered and Bonds may be exchanged
as provided in the Indenture. The Security Registrar, the Trustee and the
Issuers may require a Holder, among other things, to pay any taxes and fees
required by law or permitted by the Indenture and to furnish appropriate
endorsements and transfer documents.
<PAGE>
The person in whose name this Bond is registered shall be deemed to
be the owner and holder hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Bond be overdue
regardless of any notice to anyone to the contrary.
Bonds known to a Responsible Officer of the Trustee to be owned or
held by, or for the account or benefit of, the Funding Corporation, the
Partnership or any Partner, or an Affiliate of any of the foregoing, shall not
be entitled to share in any payment or distribution provided for in Article VIII
of the Indenture until all Bonds held by other Persons have been indefeasibly
paid in full.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ABBREVIATIONS
The following abbreviations when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT__________________________
(Cust) (Minor)
under Uniform Gift to Minors Act
_______________________________________
(State)
Additional abbreviations may also be used though
not in the above list
---------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Identifying Number of Assignee__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing _________________________________________________________ attorney to
transfer said Bond on the books of the Funding Corporation and the Partnership,
with full power of substitution in the premises.
Dated:____________________
______________________________
NAME:
NOTICE: The signature to this assignment must correspond with the name as
written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
ANNEX A TO
8.160% SERIES D SENIOR SECURED BOND DUE JULY 15, 2025
The following table sets forth the date of each semiannual
installment of principal to be paid on this Bond and the applicable percentage
of the original principal amount payable on each such date:
Scheduled Percentage of
Payment Principal
Date Amount Payable
--------- --------------
July 15, 2014 2.65%
January 15, 2015 2.65%
July 15, 2015 2.85%
January 15, 2016 2.85%
July 15, 2016 2.85%
January 15, 2017 2.85%
July 15, 2017 3.00%
January 15, 2018 3.00%
July 15, 2018 2.90%
January 15, 2019 2.90%
July 15, 2019 3.45%
January 15, 2020 3.45%
July 15, 2020 2.15%
January 15, 2021 2.15%
July 15, 2021 5.25%
January 15, 2022 5.25%
July 15, 2022 5.35%
January 15, 2023 5.35%
July 15, 2023 5.40%
January 15, 2024 5.40%
July 15, 2024 6.90%
January 15, 2025 6.90%
July 15, 2025 14.50%
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges of a part
of another Global Bond or Definitive Bond for an interest in this Global Bond,
have been made:
Amount of Amount of
decrease in increase in Principal Amount
Principal Principal of Signature of
Amount Amount this Global Bond authorized
of of following such officer of
Date of this Global this Global decrease Trustee or Bond
Exchange Bond Bond (or increase) Custodian
-------- ----------- ----------- ---------------- ---------------
<PAGE>
Exhibit 4.10
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
$150,000,000 7.164% Series A Senior Secured Bonds
due January 15, 2014
$176,000,000 8.160% Series B Senior Secured Bonds
due July 15, 2025
May 21, 1999
Credit Suisse First Boston Corporation
Scotia Capital Markets (USA) Inc.
TD Securities (USA) Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
In connection with the issue and sale of (i) $150,000,000 principal
amount of 7.164% Series A Senior Secured Bonds due January 15, 2014 and (ii)
$176,000,000 principal amount of 8.160% Series B Senior Secured Bonds due July
15, 2025 (the "Initial Securities") issued by LSP Energy Limited Partnership, a
Delaware limited partnership, and LSP Batesville Funding Corporation, a
Delaware corporation (the "Issuers"), pursuant to the terms of the Indenture (as
defined below) and as an inducement to Credit Suisse First Boston Corporation,
Scotia Capital Markets (USA) Inc. and TD Securities (USA) Inc. (collectively,
the "Initial Purchasers") to enter into the Purchase Agreement dated May 13,
1999 (the "Purchase Agreement"), among the Issuers and the Initial Purchasers,
the Issuers hereby agree to provide the registration rights set forth in this
Registration Rights Agreement (this "Agreement") for the benefit of the holders
of the Initial Securities. The execution of this Agreement is a condition to the
purchase of the Initial Securities under the Purchase Agreement.
<PAGE>
SECTION 1. Definitions. Capitalized terms used herein without
definition shall have the respective meanings ascribed thereto, whether
expressly or by reference to another agreement or document, in the Indenture.
The definitions set forth in this Agreement shall equally apply to both the
singular and plural forms of the terms defined. As used in this Agreement, the
following terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of
Section 5 of this Agreement.
"Affiliate", with respect to any Person, shall mean any other Person
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such first Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities or by contract or otherwise. For
purposes of Section 2, an "Affiliate" of the Issuers shall mean and include, in
addition, any Person deemed an affiliate thereof under the Securities Act or the
Exchange Act in connection with the Exchange Offer.
"Closing Date" shall mean the date of the initial issuance and sale
of the Initial Securities.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Cure Date" shall have the meaning set forth in Section 4(a) of this
Agreement.
"Effective Date" shall mean the date which is 270 days after the
Closing Date.
"Effective Period" shall have the meaning set forth in Section 3(a)
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
2
<PAGE>
"Exchange Offer" shall have the meaning set forth in Section 2(a) of
this Agreement.
"Exchange Offer Registration Statement" shall have the meaning set
forth in Section 2(a) of this Agreement.
"Exchange Period" shall have the meaning set forth in Section 2(a)
of this Agreement.
"Exchange Securities" shall have the meaning set forth in Section
2(a) of this Agreement.
A "holder" of Registrable Securities shall mean the registered
holder of such securities or any beneficial owner thereof.
"Holder Indemnified Party" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Holder Information" shall have the meaning set forth in Section
8(a) of this Agreement.
"Illiquidity Event" with respect to the Registrable Securities shall
mean any of the following events:
(a) as of the Effective Date, both (i) an Exchange Offer
Registration Statement (which, if applicable pursuant to Section 2(a),
covers resales of such Exchange Securities) has not become effective and
(ii) the Registrable Securities are not the subject of an Initial Shelf
Registration Statement which has become effective; or
(b) the Exchange Securities offered in exchange for the Registrable
Securities are the subject of an Exchange Offer Registration Statement
which was effective (and which, if applicable pursuant to Section 2(a),
covered resales of such Exchange Securities) but which ceased to be
effective for any reason prior to the end of the Exchange Period; or
3
<PAGE>
(c) the Registrable Securities are the subject of an Initial Shelf
Registration Statement or Subsequent Shelf Registration Statement which
was effective but which has ceased to be effective for any reason prior to
the end of the Effective Period.
An Illiquidity Event shall be deemed to cease to exist on the date
subsequent to the occurrence of such Illiquidity Event on which:
(i) in the case of an Illiquidity Event described in clause (a)
above, either (i) an Exchange Offer Registration Statement (which, if
applicable pursuant to Section 2(a), covers resales of the Exchange
Securities exchanged for such Registrable Securities) shall become
effective and an Exchange Offer for such Registrable Securities shall have
commenced or (ii) an Initial Shelf Registration Statement covering such
Registrable Securities shall become effective; or
(ii) in the case of an Illiquidity Event described in clause (b)
above, either (i) an Exchange Offer Registration Statement (which, if
applicable pursuant to Section 2(a), covers resales of the Exchange
Securities offered in exchange for such Initial Securities) shall become
effective and an Exchange Offer for such Registrable Securities shall have
commenced pursuant to an Exchange Offer Registration Statement or (ii) an
Initial Shelf Registration Statement covering such Registrable Securities
shall become effective; or
(iii) in the case of an Illiquidity Event described in clause (c)
above, a Subsequent Shelf Registration Statement covering such Registrable
Securities shall become effective.
"Indenture" shall mean the Trust Indenture dated as of May 21, 1999,
and as further amended or supplemented from time to time in accordance with the
terms thereof, among the Issuers and the Trustee, and pursuant to which the
Initial Securities are to be issued.
"Initial Purchasers" shall have the meaning set forth in the first
paragraph of this Agreement.
"Initial Securities" shall have the meaning set forth in the first
paragraph of this Agreement.
4
<PAGE>
"Initial Shelf Registration Statement" shall have the meaning set
forth in Section 3(a) of this Agreement.
"Inspectors" shall have the meaning set forth in Section 5(m) of
this Agreement.
"Issuers" shall have the meaning set forth in the first paragraph of
this Agreement.
"Managing Underwriters" shall mean the investment banker or
investment bankers and manager or managers that shall administer an Underwritten
Offering.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments and all material incorporated by reference into such prospectus.
"Purchase Agreement" shall have the meaning set forth in the first
paragraph of this Agreement.
"Records" shall have the meaning set forth in Section 5(m) of this
Agreement.
"Registrable Securities" shall mean the Initial Securities upon
original issuance thereof and at all times subsequent thereto until, in the case
of any such Initial Security, (i) a Registration Statement covering such Initial
Security, or the Exchange Security to be exchanged for such Initial Security
(and, in the case of any Resale Security, any resale thereof), has been declared
effective and such Initial Security has been disposed of or exchanged (or, in
any case where such Registration Statement covers the resale of Resale
Securities, such Initial Security has been Exchanged and the Resale Security
received therefor has been resold), as the case may be, in accordance with such
effective Registration Statement, (ii) such Initial Security is sold in
compliance with Rule 144 or would be permitted to be sold pursuant to Rule
144(k), (iii) such Initial Security shall have
5
<PAGE>
been otherwise transferred and a new certificate therefor not bearing a legend
restricting further transfer shall have been delivered by or on behalf of the
Issuers and such Initial Security shall be trade able by each holder thereof
without restriction under the Securities Act or the Exchange Act and without
material restriction under the applicable blue sky or state securities laws or
(iv) such Initial Security ceases to be outstanding.
"Registration Statement" shall mean any registration statement
(including any Shelf Registration Statement) of the Issuers that covers any of
the Registrable Securities or the Exchange Securities, as the case may be,
pursuant to the provisions of this Agreement, including the Prospectus which is
part of such Registration Statement, amendments (including post-effective
amendments) and supplements to such Registration Statement and all exhibits and
appendices to any of the foregoing. For purposes of the foregoing, unless the
context requires otherwise, a Registration Statement for an Exchange Offer shall
not be deemed to cover Registrable Securities held by a Restricted Person
unless such Registration Statement covers the resale of Resale Securities to be
received by such Restricted Person pursuant to such Exchange Offer and any such
Initial Securities shall continue to be Registrable Securities.
"Resale Initial Purchaser" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Resale Securities" shall mean any Exchange Security received by a
Restricted Person pursuant to an Exchange Offer, and at all times subsequent
thereto, until, subject to the time periods set forth herein, such Exchange
Security has been resold by such Restricted Person.
"Restricted Person" shall mean (a) any Affiliate of the Issuers, (b)
any Initial Purchaser or (c) any Affiliate of any Initial Purchaser (other than
Affiliates of such Initial Purchaser that (i) are acquiring Exchange Securities
in the ordinary course of business and do not have an arrangement with any
Person to distribute Exchange Securities and (ii) may trade such Exchange
Securities without restriction under the Securities Act).
"Rule 144" shall mean Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
6
<PAGE>
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Rule 415" shall mean Rule 415 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Shelf Notice" shall have the meaning set forth in Section 2(b) of
this Agreement.
"Shelf Registration Statement" shall have the meaning set forth in
Section 3(b) of this Agreement.
"Special Counsel" shall mean Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel to the Initial Purchasers, or any other firm acceptable to
the Issuers, acting as special counsel to the holders of Registrable Securities
or Exchange Securities.
"Subsequent Shelf Registration Statement" shall have the meaning set
forth in Section 3(b) of this Agreement.
"TIA" shall mean the Trust Indenture Act of 1939, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Trustee" shall mean The Bank of New York, its successors and any
successor trustee under the Indenture.
"Underwritten Registration" or "Underwritten Offering" shall mean a
registration in which securities are sold to an underwriter or group of
underwriters for reoffering to the public.
SECTION 2. Exchange Offer.
7
<PAGE>
(a) Unless the Issuers determine in good faith that the Exchange
Offer shall not be permissible under applicable law or Commission policy, the
Issuers shall prepare and cause to be filed with the Commission as soon as
reason ably practicable after the Closing Date, subject to Sections 2(b) and
2(c) of this Agreement, a Registration Statement (an "Exchange Offer
Registration Statement") for an offer to exchange (an "Exchange Offer") the
Registrable Securities (subject to Section 2(c)) for a like aggregate principal
amount of debt securities of the Issuers that are in all material respects
substantially identical to the Initial Securities (the "Exchange Securities")
(and which are entitled to the benefits of the Indenture, which shall be
qualified under the TIA in connection with such registration, or a trust
indenture which is substantially identical in all material respects to the
Indenture), other than (i) such changes to the Indenture or any such
substantially identical indenture as the Trustee and the Issuers may deem
necessary in connection with the Trustee's rights and duties or to comply with
any requirements of the Commission to effect or maintain the qualification
thereof under the TIA and (ii) such changes relating to restrictions on transfer
set forth in the Indenture. The Exchange Offer shall be registered under the
Securities Act on the appropriate form of Registration Statement and shall
comply with all applicable tender offer rules and regulations under the Exchange
Act and with all other applicable laws. Subject to the terms and limitations of
Section 2(c), such Exchange Offer Registration Statement may also cover any
resales of Exchange Securities by any Restricted Person, in the manner or
manners designated by them which, in any event, is reasonably acceptable to the
Issuers.
The Issuers shall use their reasonable best efforts to (i) cause the
Exchange Offer Registration Statement to become effective under the Securities
Act on or prior to the Effective Date, (ii) keep the Exchange Offer open for a
period of not less than the shorter of (A) the period ending when the last
remaining Initial Security is tendered into the Exchange Offer and (B) 30 days
from the date notice is mailed to the holders of Initial Securities (provided
that in no event shall such period be less than the period required under
applicable Federal and state securities laws), and (iii) maintain such Exchange
Offer Registration Statement continuously effective for a period (the "Exchange
Period") of not less than the longer of (A) the period until the consummation of
the Exchange Offer and (B) 120 days after effectiveness of the Exchange Offer
Registration Statement, provided however, that in the event that all resales of
Exchange Securities (including, subject to the time periods set forth herein,
any Resale Securities and including, subject to the time periods set forth
herein, any resales by broker-dealers that receive Exchange Securities for their
own account pursuant to the Exchange Offer) covered by such Exchange Offer
Registration Statement have been made, the Exchange Offer Registration
Statement need
8
<PAGE>
not remain continuously effective for the period set forth in clause (B) above.
Upon con summation of the Exchange Offer, the Issuers shall deliver to the
Trustee under the Indenture for cancellation all Initial Securities tendered by
the holders thereof pursuant to the Exchange Offer and not withdrawn prior to
the date of consummation of the Exchange Offer. Each Restricted Person shall
notify the Issuers promptly after reselling all Resale Securities held by such
Restricted Person which are covered by any such Registration Statement.
Each holder of Registrable Securities to be exchanged in the
Exchange Offer (other than any Restricted Person) shall be required as a
condition to participating in the Exchange Offer to represent that (i) it is not
an Affiliate of the Issuers, (ii) any Exchange Securities to be received by it
shall be acquired in the ordinary course of its business and (iii) that at the
time of the consummation of the Exchange Offer it shall have no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Securities. Upon consummation of an Exchange
Offer in accordance with this Section 2 and compliance with the other provisions
of this Section 2, the Issuers shall, subject to Sections 2(b) and 2(c), have no
further obligation to register Registrable Securities pursuant to Section 3(a)
of this Agreement; provided that the other provisions of this Agreement shall
continue to apply as set forth in such provisions.
(b) In the event that the Issuers reasonably determine in good faith
that (i) the Exchange Securities would not, upon receipt in the Exchange Offer
by any holder of Registrable Securities (other than any Restricted Person and
other than any holder who is not acquiring such Exchange Securities in the
ordinary course of business or who has an arrangement with any person to
participate in the distribution of such Exchange Securities), be tradeable by
each holder thereof without restriction under the Securities Act and the
Exchange Act and without restriction under applicable blue sky or state
securities laws, (ii) after conferring with counsel, the Commission is unlikely
to permit the Exchange Offer Registration Statement to become effective prior to
the Effective Date (except in the circumstances set forth in Section 2(c)) or
(iii) the Exchange Offer may not be made in compliance with applicable laws,
then the Issuers shall promptly deliver notice thereof (the "Shelf Notice") to
the holders of the Registrable Securities and the Trustee and shall thereafter
file an Initial Shelf Registration Statement pursuant to, and otherwise comply
with, the provisions of Section 3(a). Following the delivery of a Shelf Notice
in accordance with this Section 2(b) and compliance with Section 3(a), the
Issuers shall not have any further obligation under this Section 2.
9
<PAGE>
(c) In the event that the Issuers reasonably determine in good faith
that (i) the Exchange Securities would not, upon consummation of any resale
thereof by a Restricted Person to any Person other than another Restricted
Person, be tradeable by each holder thereof without restriction under the
Securities Act (other than applicable prospectus requirements) and the Exchange
Act and without restriction under applicable blue sky or state securities laws
or (ii) the Commission is unlikely to permit the Exchange Offer Registration
Statement to become effective prior to the Effective Date solely because such
Registration Statement covers resales of the Exchange Securities by Restricted
Persons, then the Issuers shall promptly deliver a Shelf Notice to the
Restricted Persons who are holders of Registrable Securities and to the Trustee,
and the Issuers shall thereafter file an Initial Shelf Registration Statement
with respect to any such Registrable Securities pursuant to, and otherwise
comply with, the provisions of Section 3(a); provided that such Initial Shelf
Registration Statement shall only cover resales of Registrable Securities by
Restricted Persons if a Shelf Notice is not then otherwise required to be
delivered pursuant to Section 2(b). Following the delivery of a Shelf Notice in
accordance with this Section 2(c) and compliance with Section 3(a), the Issuers
shall not have any further obligation under this Section 2 with respect to the
filing of an offer to exchange the Registrable Securities held by the Restricted
Persons (including, without limitation, any obligation to provide that an
Exchange Offer Registration Statement filed pursuant to Section 2(a) cover
resales of Exchange Securities by Restricted Persons); provided that the
provisions of this Section 2 shall otherwise remain in full force and effect
with respect to Registrable Securities held by any person other than a
Restricted Person.
SECTION 3. Shelf Registration; Registrable Securities. With respect
to the Registrable Securities, if a Shelf Notice is delivered in accordance with
Section 2(b) or 2(c) of this Agreement, then the Issuers shall comply with the
following provisions of this Section 3:
(a) Initial Shelf Registration. The Issuers shall prepare and cause
to be filed with the Commission a Registration Statement for an offering to be
made on a continuous basis covering all of the Registrable Securities (or, if a
Shelf Notice is delivered solely pursuant to Section 2(c), all of the
Registrable Securities held by any Restricted Persons) (the "Initial Shelf
Registration Statement"); provided, however, that no holder shall be entitled to
have its Registrable Securities covered by such Initial Shelf Registration
Statement unless such holder agrees in writing, within 10 Business Days after
actual receipt of a request therefrom, to be bound by all the provisions of this
Agreement applicable to such holder. No holder shall be entitled to the benefits
of Section 4 of this Agreement
10
<PAGE>
unless and until such holder shall have provided all information reasonably
requested by the Issuers (after conferring with counsel), and such holder shall
not be entitled to such benefits with respect to any period during which such
information was not provided. Each holder to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuers all
information required to be disclosed in order to make the information previously
furnished to the Issuers by such holder not materially misleading. The Initial
Shelf Registration Statement shall be an appropriate form permitting
registration of such Registrable Securities for resale by the holders thereof in
the manner or manners reasonably designated by them (but excluding any
Underwritten Offerings). The Issuers shall use their reasonable best efforts to
(A) cause the Initial Shelf Registration Statement to be declared effective
under the Securities Act on or prior to the Effective Date and (B) keep the
Initial Shelf Registration Statement continuously effective under the Securities
Act for a period of two years after the Closing Date (subject to extension
pursuant to the last paragraph of Section 5 and subject, with respect to
Registrable Securities held by Restricted Persons, to the limitations set forth
in Section 2(c)) (such two-year period, as it may be extended, being the
"Effective Period"), or such shorter period ending when (1) all Registrable
Securities covered by the Initial Shelf Registration Statement have been sold or
(2) a Subsequent Shelf Registration Statement covering all of such Registrable
Securities remaining unsold has been declared effective under the Securities Act
or (3) all Registrable Securities may be sold pursuant to subsection (k) of Rule
144.
Notwithstanding any other provision hereof, the Issuers may postpone
or suspend the filing or the effectiveness of a Registration Statement (or any
amendments or supplements thereto), if (1) such action is required by applicable
law, or (2) such action is taken by the Issuers in good faith and for valid
business reasons (not including avoidance of the Issuers' obligations
hereunder), including the acquisition or divestiture of assets, other pending
corporate developments, public filings with the Commission or other similar
events, so long as the Issuers promptly thereafter comply with the requirements
of Section 5(b) hereof, if applicable. The Effective Period shall be extended by
the number of days during which the effectiveness of a Registration Statement is
suspended.
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(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effective Period after the
Effective Date, the Issuers may attempt to obtain the withdrawal of any order
suspending the effectiveness thereof, and may amend such Initial Shelf
Registration Statement or Subsequent Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
applicable to the Initial Securities pursuant to Rule 415 covering all of such
Registrable Securities remaining unsold (a "Subsequent Shelf Registration
Statement"). If a Subsequent Shelf Registration Statement is declared effective,
the Issuers shall use their reasonable best efforts to keep such Shelf
Registration Statement continuously effective for a period after the date of
such effectiveness equal in length to the length of the Effective Period plus
the aggregate number of days from the date of the order suspending the
effectiveness of the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement to the date of the effectiveness of the Subsequent
Shelf Registration Statement. As used herein, the term "Shelf Registration
Statement" means the Initial Shelf Registration Statement and any Subsequent
Shelf Registration Statement.
SECTION 4. Additional Interest for Illiquidity.
(a) The Issuers acknowledge and agree that the Initial Purchasers
(and any subsequent holders of the Initial Securities) have acquired the Initial
Securities in reliance on the Issuers' covenant to use its reasonable best
efforts to (i) cause to become effective on or prior to the Effective Date (A)
the Exchange Offer Registration Statement or (B) an Initial Shelf Registration
Statement, and (ii) maintain the respective effectiveness of such Registration
Statements as described herein. The Issuers further acknowledge and agree that
the failure of the Issuers to fulfill such covenants will have an adverse effect
on the holders of the Initial Securities. There fore, the Issuers agree that
from and after the date on which any Illiquidity Event occurs, additional
interest (in addition to the interest otherwise payable with respect to the
Registrable Securities) shall accrue with respect to the Initial Securities
until but not including the date on which such Illiquidity Event shall cease to
exist (and provided no other Illiquidity Event with respect to any Initial
Securities shall then be continuing), at the rate of one half of one percent
(0.50%) per annum, which additional interest shall be payable by the Issuers to
the holders of all Initial Securities at the times, in the manner and subject to
the same terms and conditions set forth in the Indenture, as nearly as may be,
as though the interest rates provided in such Initial Securities had been
increased by one half of one percent (0.50%) per annum. Subject to the
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provisions of this Section 4, the Issuers agree that they shall be liable to the
holders of all Initial Securities for the payment of any and all additional
interest on the Initial Securities that shall accrue pursuant to this Section 4.
Any such additional interest accrued on any such Initial Securities
but unpaid on the date on which such interest ceases to accrue (the "Cure Date")
shall be due and payable on the first interest payment date following the next
record date following such Cure Date (or the record date occurring on such Cure
Date, if such Cure Date is a record date) to the holders of record of such
Initial Securities on such record date.
(b) The Issuers shall promptly notify the holders of the Initial
Securities and the Trustee of the occurrence of any Illiquidity Event of which
they have knowledge.
Notwithstanding the foregoing, the Issuers shall not be required to
pay the additional interest described in clause (a) of this Section 4 to a
holder with respect to the Registrable Securities held by such holder if the
applicable Illiquidity Event arises by reason of the failure of such holder to
provide such information as (i) the Issuers may reasonably request, with
reasonable prior written notice, for use in the Shelf Registration Statement or
any Prospectus included therein to the extent the Issuers reasonably determine
that such information is required to be included therein by applicable law, (ii)
the NASD or the Commission may request in connection with such Shelf
Registration Statement, or (iii) is required to comply with the agreements of
such holder contained in clause (a) of Section 3 to the extent compliance
thereof is necessary for the Shelf Registration Statement to be declared
effective.
SECTION 5. Registration Procedures. In connection with the
registration of any Registrable Securities or Exchange Securities pursuant to
Sections 2 and 3 hereof, the Issuers shall use their reasonable best efforts to
effect such registration to permit the sale of such Registrable Securities or
Exchange Securities in accordance with any permitted intended method or methods
of disposition thereof, and pursuant thereto the Issuers shall:
(a) prepare and cause to be filed with the Commission a Registration
Statement or Registration Statements as prescribed by Sections 2 and 3 of this
Agreement, and use their reasonable best efforts to cause each such Registration
Statement to become effective and remain effective for the applicable period as
provided herein; provided, however, that (i) during the period in which the
Initial Registration Statement is open for the
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Restricted Persons, the Issuers shall afford any Restricted Person which is a
holder of Registrable Securities or Exchange Securities and the Special Counsel,
upon such holder's written request to the Issuers, an opportunity to review
copies of all such documents proposed to be filed, and (ii) if such filing is
pursuant to Section 3, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto (including documents that would be
incorporated therein by reference after the initial filing of the Registration
Statement), the Issuers shall afford the Special Counsel for all holders of the
Registrable Securities covered by such Registration Statement an opportunity to
review copies of all such documents proposed to be filed;
(b) prepare and cause to be filed with the Commission such
amendments and post-effective amendments to each Shelf Registration Statement as
may be necessary to keep such Registration Statement continuously effective for
the applicable period as provided herein; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented in
accordance with the intended methods of disposition by the sellers of
Registrable Securities covered thereby set forth therein;
(c) if a Shelf Registration Statement is filed pursuant to Section 3
hereof, notify the selling holders of Registrable Securities promptly after the
Issuers become aware thereof, and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or Prospectus or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities for offer or sale in
any jurisdiction, or the initiation of any proceeding for such purpose, (v) of
the existence of any fact known to the Issuers which results in such
Registration Statement or related Prospectus or any document incorporated
therein by reference containing any untrue statement
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of a material fact or omitting to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (which notice may be
accompanied by an instruction that such notice constitutes material non-public
information and to suspend the use of the prospectus until the requisite changes
have been made, and which instruction shall require that such holders shall not
communicate such material non-public information to any third party and shall
not sell or purchase, or offer to sell or purchase, any securities of the
Issuers after receipt of such notice) and (vi) if the Issuers reasonably
determines that the filing of a post-effective amendment to such Registration
Statement would be appropriate;
(d) if a Shelf Registration Statement is filed pursuant to Section
3, use its reasonable efforts to prevent the issuance of any order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction and, if any such order is issued, to obtain the withdrawal of any
such order at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section
3, furnish to each selling holder of Registrable Securities who so requests (at
such holder's address set forth in the Securities Register) without charge, one
conformed copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(f) if a Shelf Registration Statement is filed pursuant to Section
3, deliver to each selling holder of Registrable Securities without charge, as
many copies of the Prospectus (including each preliminary prospectus) and each
amendment or supplement thereto as such persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Issuers hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto;
(g) prior to any public offering of Registrable Securities, register
or qualify, or cooperate with the selling holders of Registrable Securities, the
under writers, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale
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under the securities or blue sky laws of such jurisdictions within the United
States as the selling holders reasonably request in writing (provided that, if
Registrable Securities are offered other than through an Underwritten Offering,
the Issuers agrees to cause its counsel to perform blue sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(g)); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective; and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, however,
that the Issuers will not be required to qualify as a foreign corporation, or to
do business, to file a general consent or take any action which would subject it
to service of process in any jurisdiction or take any action which would subject
itself to taxation in any such jurisdiction;
(h) if a Shelf Registration Statement is filed pursuant to Section
3, cooperate with the Trustee and the selling holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company, and enable such Registrable Securities to be in such
authorized denominations and registered in such names as the holders may
reasonably request at least three Business Days prior to any such sale;
(i) if a Shelf Registration Statement is filed pursuant to Section
3, upon the occurrence of any event contemplated by Section 5(c), prepare a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Issuers so notify the holders to
suspend the use of the Prospectus after the occurrence of such an event, the
holders shall suspend use of the Prospectus, and not communicate such material
non-public information to any third party, and not sell or purchase, or offer to
sell or purchase, any securities of the Issuers, until the Issuers have amended
or supplemented the Prospectus to correct such misstatement or omission;
(j) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to continue to be rated by the
rating agencies that
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initially rated the Initial Securities during the period that the Registration
Statement is required hereunder to remain effective (it being acknowledged,
however, that the foregoing shall not be deemed to require the Issuers to
maintain the rating of such Registrable Securities at the rating given the
Initial Securities);
(k) prior to the effective date of the first Registration Statement
relating to the Registrable Securities or the Exchange Securities, as the case
may be, (i) provide the Trustee with printed certificates for such securities in
definitive form or in a global form eligible for deposit with The Depository
Trust Company and (ii) provide a CUSIP number for such Registrable Securities or
Exchange Securities represented by such certificates;
(l) if a Shelf Registration Statement is filed pursuant to Section
3, enter into such reasonably required agreements and take all other appropriate
actions in order to expedite or facilitate the registration or the disposition
of such Registrable Securities;
(m) in the event of any Underwritten Offering (which shall only be
undertaken at the request of a majority in interest of the holders of
Registrable Securities), if a Shelf Registration Statement is filed pursuant to
Section 3, make available prior to the filing thereof for inspection by a
representative of the holders of a majority in aggregate principal amount of the
Registrable Securities being sold, and the Special Counsel, on the one hand, or
underwriter on the other hand (collectively, the "Inspectors"), during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers and its subsidiaries (collectively, the
"Records"), and cause the officers, directors and employees of the Issuers and
its subsidiaries to supply all relevant information as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities; provided, however, that, as a condition to supplying such
information, the Issuers shall receive an agreement in writing from the Special
Counsel agreeing that any information that is designated in writing by the
Issuers, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such Inspector (other than as to
holders of Registrable Securities) and by any holders of Registrable Securities
receiving such information, unless (i) disclosure of such information is
required pursuant to applicable law or by court or administrative order, (ii)
disclosure of such information is, in the reasonable opinion of counsel to the
Issuers, necessary to avoid or correct a misstatement or omission of a material
fact in the Registration Statement, Prospectus or any supplement or
post-effective amendment thereto or disclosure is otherwise required by law,
(iii) such information becomes generally available to the public other than as a
result of a disclosure by any Inspector or any such holder of Registrable
Securities in
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violation of this Section 5(m) or (iv) such information is approved for release
by the Issuers, in writing;
(n) use its best efforts to cause the Indenture or the trust
indenture provided for in Section 2, as the case may be, to be qualified under
the TIA not later than the effective date of such Registration Statement; and,
in connection therewith, cooperate with the Trustee under the Indenture and the
holders of the Registrable Securities to effect such changes to the Indenture as
may be required for the Indenture to be so qualified in accordance with the
terms of the TIA and execute, and use its best efforts to cause such Trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the Commission to enable the
Indenture or the trust indenture provided for in Section 2 to be so qualified in
a timely manner;
(o) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission.
For purposes of the covenants set forth in this Section 5,
references to a Shelf Registration Statement, including a Shelf Registration
Statement filed pursuant to Section 3, shall be deemed to include any
Registration Statement, filed pursuant to Section 2, which covers, for the
period set forth therein, resales of Exchange Securities held by Restricted
Persons as provided in Section 2, and, in connection with such resales such
Restricted Persons shall be entitled to exercise all rights, receive all notices
and copies of documents, and otherwise receive all benefits afforded to sellers
or holders of Registrable Securities under this Section 5 in connection with a
Shelf Registration Statement. Without limiting the generality of the foregoing,
the Issuers agree to fulfill their obligations set forth in Sections 5(a), (b),
(c), (d), (e), (f), (h), (i), (l) and (m) with respect to any such Registration
Statement filed pursuant to Section 2 insofar as it covers such resales.
The Issuers may require each seller of Registrable Securities as to
which any registration is being effected, as a condition thereto, to furnish to
the Issuers such information regarding the holder and the distribution of such
Registrable Securities as the Issuers may, from time to time, request in
writing, including without limitation stating that (i) it is not an Affiliate of
the Issuers, (ii) the amount of Registrable Securities held by such holder prior
to the Exchange Offer, (iii) the amount of Registrable Securities owned by such
holder to be exchanged in the Exchange Offer and representing that such holder
is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange
Securities to be issued,
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and (iv) it is acquiring the Exchange Securities in its ordinary course of
business and to covenant and agree to promptly notify the Issuers if any such
information so provided by such seller ceases to be true and correct and will
promptly thereafter furnish the Issuers with corrected information. The Issuers
may exclude from such registration the Registrable Securities of any Person who
fails to furnish such information within a reasonable time after receiving such
request.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Issuers of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(v) or 5(c)(vi) hereof, such holder shall forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such holder is advised in writing (the "Advice") by the Issuers
that the use of the applicable Prospectus may be resumed, and has received
copies of any amendments or supplements thereto and, if so directed by the
Issuers, such holder will deliver to the Issuers (at its expense) all copies in
its possession, other than permanent file copies then in such holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice, or certify in writing as to the destruction
thereof. In the event the Issuers shall give any such notice, the length of the
Effective Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 5(i) or (y) the Advice.
SECTION 6. Delivery of Prospectus; Notification Upon Resale. The
Initial Purchasers acknowledge that it is the position of the staff of the
Commission that any broker-dealer that receives Exchange Securities for its own
account in exchange for Registrable Securities pursuant to the Exchange Offer
must deliver a prospectus in connection with any resale of such Resale
Securities. By so acknowledging, such Initial Purchasers shall not be deemed to
admit that, by delivering a prospectus, it is an underwriter within the meaning
of the Securities Act.
The Initial Purchasers shall notify the Issuers promptly upon the
completion of the resale of the Resale Securities received by such Initial
Purchasers pursuant to the Exchange Offer.
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SECTION 7. Registration Expenses.
The Issuers shall bear all expenses incurred in connection with the
performance of their obligations under Sections 2, 3 and 4; provided, however,
that the Issuers shall bear or reimburse the holders for the reasonable fees and
disbursements of only one counsel, the Special Counsel, in accordance with the
terms of the Purchase Agreement; provided, further, however, that in the event
of an Underwritten Offering, the Issuers shall not be responsible for any fees
and expenses of any underwriter, including any underwriting discounts and
commissions or any legal fees and expenses of counsel to the underwriters
(except for the reasonable fees and disbursements of counsel in connection with
state securities or blue sky qualification of any of the Registrable Securities
or the Exchange Securities).
SECTION 8. Indemnification and Contribution.
(a) The Issuers agree to (A) indemnify and hold harmless each holder
of Registrable Securities (including any Initial Purchaser which holds
Registrable Securities, including Resale Securities, for its own account (each,
a "Resale Initial Purchaser") and each Person, if any, who controls any such
Person within the meaning of either the Securities Act or the Exchange Act and
each director, officer, employee or agent of each such Person (each a "Holder
Indemnified Party") against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them are subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement covering Registrable Securities held by such person
or any Prospectus relating to any such Registration Statement, or any amendment
thereof or supplement thereto and all documents incorporated by reference
therein, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary in order to make the statements therein,
in light of the circumstances in which they were made, not misleading, and (B)
reimburse each such Holder Indemnified Party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuers will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or
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Prospectus, or in any amendment thereof or supplement thereto, in reliance upon
and in conformity with written information relating to such holder provided by
such holder to the Issuers specifically for use therein (collectively, the
"Holder Information"); provided, further, however, that the indemnity
obligations arising out of this Section 8 with respect to any untrue statement
or alleged untrue statement or omission or alleged omission made in any
preliminary Prospectus shall not inure to the benefit of any holder or any
controlling Person of such holder if such holder failed to send or deliver to
the Person asserting any such losses a copy of the final Prospectus with or
prior to the delivery of the written confirmation of the sale of the Registrable
Securities or the Exchange Securities, as the case may be, if a prospectus
relating to such Registrable Securities or Exchange Securities was required to
be delivered by such holder under the Securities Act, and such final Prospectus
would have cured the untrue statement or omission giving rise to such losses if
the Issuers had previously furnished copies thereof to such holder. This
indemnity agreement will be in addition to any liability which the Issuers may
otherwise have.
(b) As a condition to the inclusion of a holder's Registrable
Securities in a Registration Statement, such holder shall agree to (i) indemnify
and hold harmless the Issuers and each person who controls the Issuers within
the meaning of either the Securities Act or the Exchange Act, and each director,
officer, employee or agent of each such person, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
are subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a Registration Statement covering Registrable
Securities held by such holder or any Prospectus relating to any such
Registration Statement or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, and (ii) reimburse
each such indemnified party for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; in each and every
case under clause (i) and (ii) above to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement or Prospectus or in any
amendment thereof or supplement thereto, in reliance upon and in conformity with
the Holder Information. This indemnity agreement will be in addition to any
liability which any such holder may otherwise have. In no event shall the
liability of any selling holder of Registrable Securities hereunder be greater
in amount than
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the dollar amount of the proceeds (net of payment of all expenses) received by
such holder upon the sale (or, in the case of Resale Securities, the resale) of
the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof (enclosing a copy of all papers served); but the omission
to so notify the indemnifying party (i) shall not relieve it from liability
under paragraph (a) or (b) above unless and to the extent it did not otherwise
learn of such action and such omission results in the forfeiture by the
indemnifying party or material impairment of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligations
provided in paragraph (a) or (b) above. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying
party to such indemnified party of its election to so assume the defense of such
claim or action, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
costs of investigation; provided that if (i) the defendants in any such action
include both the indemnified party and the indemnifying party, the indemnified
party shall have received the written opinion of counsel that representation of
both parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, or (ii) the indemnifying party shall not
have employed counsel for the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action,
then the indemnified party or parties shall have the right to select one firm of
separate counsel (in addition to the fees and expenses of local counsel) to
assert any separate legal defenses and to otherwise defend such action on behalf
of such indemnified party or parties. No indemnifying party shall be liable for
any settlement of any action or claim for monetary damages which an indemnified
party may effect without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld.
(d) If the indemnification provided for in Section 8(a) or (b)
hereof is for any reason, other than as specified in such provisions,
unavailable to or insufficient to hold
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harmless an indemnified party, then each indemnifying party shall contribute to
the aggregate losses, claims, damages or liabilities (or actions in respect
thereof) referred to in Section 8(a) or (b) hereof in such proportion as is
appropriate to reflect the relative fault and benefits to the Issuers on the one
hand and such holders on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative fault of the Issuers and such holders shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any
untrue statement or omission. The obligations of the holders in this Section
8(d) are several in proportion to their respective obligations hereunder and not
joint. Notwithstanding the provisions of this Section 8(d), in no event shall
any holder of Registrable Securities be required to contribute any amount which
is in excess of (i) the aggregate principal amount of Initial Securities sold or
exchanged by such holder less (ii) the amount of any damages that such person
has otherwise been required to pay by reason of such alleged untrue statement or
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each Holder Indemnified Party shall have the same rights to
contribution as a holder, and each person who controls the Issuers within the
meaning of either the Securities Act or the Exchange Act and each officer,
director, employee and agent of such person, shall have the same rights to
contribution as the Issuers, subject in each case to the applicable terms and
conditions of this Section 8(d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 8(d), notify such
party or parties from whom contribution may be sought; but the omission to so
notify such party or parties (x) shall not relieve the party or parties from
whom contribution may be sought from any liability under this paragraph (d)
unless and to the extent it did not otherwise learn of such action and such
omission results in the forfeiture by the party or parties from whom
contribution may be sought or material impairment of substantial rights and
defenses and (y) shall not, in any event, relieve such party or parties from any
obligations other than under this Section 8(d).
(e) The provisions of this Section 8 will remain in full force and
effect, regardless of any investigation made by or on behalf of any holder of
Registrable Securities, the Initial Purchasers, the Issuers or any of the
officers, directors or controlling
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persons referred to in this Section 8 and will survive the sale (or, in the case
of Resale Securities, the resale) by a holder of Registrable Securities of such
Registrable Securities.
SECTION 9. Underwritten Registrations (If Any). No holder may
participate in any Underwritten Registration, which Underwritten Registration
shall only be undertaken at the option of the Issuers, unless such holder (a)
agrees to sell such holder's Initial Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
SECTION 10. Termination. In the event that no Initial Securities are
sold to the Initial Purchasers pursuant to the Purchase Agreement, this
Agreement shall automatically terminate, without liability on the part of any
party. Upon the fulfillment of all obligations on the part of the Issuers to
register the Initial Securities as set forth herein (including maintaining the
effectiveness of any applicable Registration Statements), this Agreement shall
terminate; provided that the provisions of Sections 7 and 8 hereof shall survive
any termination and remain in full force and effect.
SECTION 11. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, entered into, and shall not, on or after the date hereof, enter into,
any agreement with respect to their securities that is inconsistent with the
rights granted to the holders of Registrable Securities herein or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
holders of at least a majority of the then outstanding aggregate principal
amount of the Registrable Securities (or, after the consummation of any Exchange
Offer in accordance with Section 2, of Exchange Securities); provided that, with
respect to any matter that directly or indirectly affects the rights of any
Restricted Person hereunder occurring within the period in which the Initial
Registration Statement is open for the Restricted Persons, the Issuers shall
obtain the written consent of each such Restricted Person against which such
amendment, modification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except
24
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for the foregoing proviso), a waiver or consent to departure from the provisions
hereof with respect to a matter that relates exclusively to the rights of
holders of Registrable Securities whose securities are being sold or exchanged
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Registrable Securities may be given by
holders of at least a majority in aggregate principal amount of the Registrable
Securities being sold or exchanged by such holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Resale Initial Purchasers and that does not
directly or indirectly affect the rights of holders of Registrable Securities or
Exchange Securities may be given by each of the Resale Initial Purchasers
affected thereby.
(c) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing and delivered by hand
delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a holder of Registrable Securities, at the most current
address given by such holder to the Issuers in accordance with the
provisions of this Section 11(c), which address initially is, with respect
to the Initial Purchasers, at the address set forth in the Purchase
Agreement and thereafter at the address for such holders of Registrable
Securities set forth in the Security Register applicable to such
Registrable Securities; and
(ii) if to the Issuers, initially at the address set forth in the
Purchase Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 11(c).
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; one Business Day
after being timely delivered to a next-day air courier; and when received, if
telecopied.
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Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including without limitation and without the need for an express
assignment or any consent by the Issuers thereto, subsequent holders of
Registrable Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Each of the parties hereto hereby submits to
the non-exclusive jurisdiction of the Federal and State Courts of the Borough of
Manhattan in the City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, together with the Purchase Agreement, supersedes
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all prior agreements and understandings between the parties with respect to such
subject matter.
(j) Securities Held by the Issuers, etc. Whenever the consent or
approval of holders of a specified percentage of principal amount of Registrable
Securities is required hereunder, Registrable Securities held by the Issuers or
any of their Affiliates (other than subsequent holders of Registrable Securities
if such subsequent holders are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the holders of such required
percentage.
(k) Joint and Several Liability. The obligations of the Issuers
under this Agreement are joint and several.
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Please confirm that the foregoing correctly sets forth this
agreement between the Issuers and you.
Very truly yours,
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
----------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
----------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
Accepted in New York, New York
May 21, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
TD SECURITIES (USA) INC.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ James Bartlett
--------------------------
Name: James Bartlett
Title: Director
Signature Page to Registration Rights Agreement
<PAGE>
- ------------------ COMPARISON OF FOOTERS ------------------
- -FOOTER 1-
275624.04-New YorkS7A
- -FOOTER 2-
Signature Page to Registration Rights Agreement
<PAGE>
Exhibit 4.11
================================================================================
SECOND AMENDED AND RESTATED COMMON AGREEMENT
among
LSP ENERGY LIMITED PARTNERSHIP,
LSP BATESVILLE FUNDING CORPORATION,
THE BANK OF NEW YORK,
as Collateral Agent,
THE BANK OF NEW YORK,
as Administrative Agent
and
THE BANK OF NEW YORK,
as Intercreditor Agent
Dated as of May 21, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms.................................................3
SECTION 1.2 Rules of Interpretation..........................................10
SECTION 1.3 Uniform Commercial Code..........................................10
ARTICLE II
ESTABLISHMENT OF THE ACCOUNTS
SECTION 2.1 Establishment of Accounts........................................10
SECTION 2.2 Termination......................................................12
ARTICLE III
THE ACCOUNTS
SECTION 3.1 Construction Account.............................................12
SECTION 3.2 Revenue Account..................................................17
SECTION 3.3 O&M Account......................................................21
SECTION 3.4 Debt Service Payment Account.....................................22
SECTION 3.5 Major Maintenance Reserve Account................................23
SECTION 3.6 Debt Service Reserve Account.....................................23
SECTION 3.7 DSRA LOC Payment Account.........................................26
SECTION 3.8 Aquila PPA Reserve Account.......................................26
SECTION 3.9 Distribution Suspense Account....................................30
SECTION 3.10 Proceeds Account................................................33
SECTION 3.11 Permitted Investments...........................................38
SECTION 3.12 Events of Default...............................................39
SECTION 3.13 Disposition of Accounts Upon Debt Termination Date..............40
SECTION 3.14 Account Balance Statements......................................40
SECTION 3.15 Instructions to the Administrative Agent........................41
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ARTICLE IV
THE ADMINISTRATIVE AGENT
SECTION 4.1 Appointment of the Administrative Agent, Powers and Immunities...41
SECTION 4.2 Reliance by the Administrative Agent.............................43
SECTION 4.3 Court Orders.....................................................44
SECTION 4.4 Resignation or Removal...........................................45
ARTICLE V
EXPENSES; INDEMNIFICATION; FEES
SECTION 5.1 Expenses.........................................................46
SECTION 5.2 Indemnification..................................................46
SECTION 5.3 Fees.............................................................46
ARTICLE VI
LIMITATION OF LIABILITY
SECTION 6.1 Limitation of Liability..........................................47
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Amendments; Etc..................................................47
SECTION 7.2 Addresses for Notices............................................47
SECTION 7.3 Integration, Etc.................................................47
SECTION 7.4 Headings; Table of Contents; Section References..................47
SECTION 7.5 No Third Party Beneficiaries.....................................48
SECTION 7.6 No Waiver........................................................48
SECTION 7.7 Severability.....................................................48
SECTION 7.8 Successors and Assigns...........................................48
SECTION 7.9 Execution in Counterparts........................................48
SECTION 7.10 Special Exculpation.............................................48
SECTION 7.11 Governing Law...................................................49
SECTION 7.12 Payments in Respect of Bonds....................................49
ii
<PAGE>
This SECOND AMENDED AND RESTATED COMMON AGREEMENT, dated as of May
21, 1999 (this "Agreement"), is by and among LSP ENERGY LIMITED PARTNERSHIP, a
limited partnership duly formed and validly existing under the laws of the State
of Delaware (the "Partnership"), LSP BATESVILLE FUNDING CORPORATION, a
corporation duly formed and validly existing under the laws of the State of
Delaware (the "Funding Corporation"), THE BANK OF NEW YORK, a New York banking
corporation, in its capacity as collateral agent under the Collateral Agency
Agreement (together with its successors and permitted assigns in such capacity,
the "Collateral Agent"), THE BANK OF NEW YORK, a New York banking corporation,
in its capacity as administrative agent (together with its successors and
permitted assigns in such capacity, the "Administrative Agent"), and THE BANK OF
NEW YORK, a New York banking corporation, in its capacity as intercreditor agent
under the Intercreditor Agreement (together with its successors and permitted
assigns in such capacity, the "Intercreditor Agent").
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW natural
gas-fired combined cycle electric generation facility located in Batesville,
Mississippi;
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the "Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial Credit
Agreement and the related financing documents, and as a condition precedent to
the Initial Banks providing the Initial Loans to the Partnership, the
Partnership, the Funding Corporation and LSP Batesville Holding, LLC ("Holding")
entered into the Common Agreement, dated as of August 28, 1998 (the "Initial
Common Agreement"), with Credit Suisse First Boston, as Tranche A Facility Agent
and L/C Facility Agent, and IBJ Schroder Bank & Trust Company, as Administrative
Agent, Collateral Agent, Intercreditor Agent and Securities Intermediary (as
each of such terms were defined in the Initial Common Agreement);
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<PAGE>
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and startup of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the related financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Partnership and Credit Suisse First Boston, as Bank Facility Agent, L/C Facility
Agent, Administrative Agent, Collateral Agent and Securities Intermediary (as
each of such terms were defined in the Supplemental Common Agreement) executed
the Amended and Restated Common Agreement, dated as of December 15, 1998 (the
"Supplemental Common Agreement"), pursuant to which the Initial Common Agreement
was amended and restated in its entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Senior
Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii) $176,000,000
aggregate principal amount of their 8.160% Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, collectively with the Series A Bonds, the
"Bonds") pursuant to the Trust Indenture, dated as of the date hereof (the
"Indenture"), among the Partnership, the Funding Corporation and The Bank of New
York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (ii) pay a portion of the remaining
Project Costs; and
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Partnership, the Funding
Corporation, the Collateral Agent, the Administrative Agent and the
Intercreditor Agent desire to amend and restate the Supplemental Common
Agreement in its entirety.
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<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms.
(a) Each capitalized term used herein and not otherwise defined
herein shall have the definition assigned to that term in the Indenture.
(b) The following terms shall have the following respective
meanings:
"Administrative Claims" means all obligations of the Partnership and
the Funding Corporation, now or hereafter existing, to pay fees, costs and
expenses to any trustee or agent of any Senior Secured Party, including, without
limitation, the Collateral Agent, the Administrative Agent, the Intercreditor
Agent and the Trustee.
"Aquila PPA Reserve Account" shall mean the account established
pursuant to Section 2.1 having the name and account number set forth below the
title "Aquila PPA Reserve Account" in Schedule I hereto.
"Aquila PPA Reserve L/C" shall have the meaning set forth in Section
3.8(a).
"Aquila PPA Reserve L/C Agreement" shall mean any agreement
providing for the issuance of an Aquila PPA Reserve L/C.
"Aquila PPA Reserve L/C Provider" shall mean the bank or other
financial institution providing an Aquila PPA Reserve L/C.
"Aquila PPA Reserve Requirement" shall mean the amount of Credit
Support (as defined in the Aquila Power Purchase Agreement) required to be
provided by
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<PAGE>
the Partnership pursuant to Section 13.6 of the Aquila Power Purchase Agreement
at any given time.
"Available Construction Funds" shall mean, at any time, the sum of
(i) all Monies in the Construction Account (and all subaccount thereunder), (ii)
the Total Equity Amount less all previous Equity Contributions, (iii) any
undisbursed Loss Proceeds which are available for the payment of Project Costs,
(iv) any liquidated damages due but not yet paid under the EPC Contracts, the
Infrastructure Contracts and the Other Construction Contracts which are
available for payment of Project Costs, (v) any proceeds or commitments (without
duplication) in respect of Additional Indebtedness incurred for the purposes of
paying Project Costs and (vi) any proceeds of delay in opening insurance which
are available for the payment of Project Costs.
"Buy-Out Proceeds" shall mean any cash or other proceeds received by
or on behalf of the Partnership in connection with a Buy-Out.
"Completion Date Opening Balance" shall have the meaning set forth
in Section 3.1(f).
"Construction Account" shall mean the account established pursuant
to Section 2.1 having the name and account number set forth below the title
"Construction Account" in Schedule I hereto.
"Construction Requisition" shall have the meaning set forth in
Section 3.1(c)(i).
"Debt Service Payment Account" shall mean the account established
pursuant to Section 2.1 having the name and account number set forth below the
title "Debt Service Payment Account" in Schedule I hereto.
"Debt Service Reserve Account" shall mean the account established
pursuant to Section 2.1 having the name and account number set forth below the
title "Debt Service Reserve Account" in Schedule I hereto.
"Debt Service Reserve L/C" shall have the meaning set forth in
Section 3.6(a).
4
<PAGE>
"Debt Service Reserve L/C Agent" shall mean any agent for the banks
and other financial institutions party to a Debt Service Reserve L/C Agreement.
"Debt Service Reserve L/C Agreement" shall mean any agreement
providing for the issuance of a Debt Service Reserve L/C.
"Debt Service Reserve L/C Provider" shall mean the bank or other
financial institution providing a Debt Service Reserve L/C.
"Debt Service Reserve LOC Bonds" shall mean Debt Service Reserve LOC
Loans converted into substitute loans which (i) amortize, (ii) mature on the
Final Maturity Date and (iii) bear interest at a rate specified in the
applicable Debt Service Reserve L/C Agreement.
"Debt Service Reserve LOC Loans" shall mean any loans made to the
Partnership or the Funding Corporation under a Debt Service Reserve L/C
Agreement.
"Debt Service Reserve Requirement" shall mean, for any date of
determination, an amount equal to (i) one-sixth of the difference between (x)
(1) if the date of determination is not a Scheduled Payment Date for the Bonds,
the principal and interest which will be due or has become due on the Senior
Secured Obligations during the period from and including the day after the
immediately preceding Scheduled Payment Date for the Bonds through and including
the next Scheduled Payment Date for the Bonds and (2) if the date of
determination is a Scheduled Payment Date for the Bonds, the principal and
interest which is due and payable on the Senior Secured Obligations on such date
and (y) the amount of Monies already on deposit in or credited to the Debt
Service Reserve Account and the Drawing Amount of any Debt Service Reserve L/C
on the previous Scheduled Payment Date for the Bonds, plus (ii) any shortfall in
the funding of such amounts from any previous month since the previous Scheduled
Payment Date for the Bonds plus (iii) the amount of any withdrawals from the
Debt Service Reserve Account (including any drawings on any Debt Service Reserve
L/C) during the period from and including the day after the immediately
preceding Scheduled Payment Date for the Bonds through and including such date
of determination for the purposes of paying debt service on any Senior Secured
Obligations.
"Debt Termination Date" means the date on which (i) all Senior
Secured Obligations, other than contingent liabilities and obligations which are
unasserted at such
5
<PAGE>
date, have been paid and satisfied in full (or legally defeased in full in
accordance with the express terms and conditions of the related Financing
Documents), (ii) all Senior Secured Obligations that are letters of credit have
terminated or have expired in accordance with their terms and (iii) all
commitments of the Senior Secured Parties under the Financing Documents have
been terminated.
"Default" shall have the meaning given to such term in the
Intercreditor Agreement.
"Delay Liquidated Damages" shall mean the delay liquidated damages
payable by the EPC Contractor pursuant to Section 12.2 of the EPC Contract, in
the amount and to the extent payable pursuant to the EPC Contract.
"Disbursement Date" shall mean a date on which Monies are withdrawn
or transferred from an Account for the purposes set forth in a Requisition or
Funding Date Certificate.
"Distribution Suspense Account" shall mean the account established
pursuant to Section 2.1 having the name and account number set forth below the
title "Distribution Suspense Account" in Schedule I hereto.
"Drawing Amount" shall mean, with respect to a letter of credit at
any given time, the amount available to be drawn under such letter of credit at
such time.
"DSR LOC Payment Account" shall mean the account established
pursuant to Section 2.1 having the name and account number set forth below the
title "DSR LOC Payment Account" in Schedule I hereto.
"Equity Contribution" shall mean an Ordinary Equity Contribution or
a Default Equity Contribution, as applicable.
"Equity Contributor" shall have the meaning given to such term in
the Equity Contribution Agreement.
"Equity Requisition Certificate" shall have the meaning given to
such term in the Equity Contribution Agreement.
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<PAGE>
"Event of Default" shall have the meaning given to such term in the
Intercreditor Agreement.
"Final Completion Date" shall have the meaning given to such term in
the EPC Contract.
"Funding Date" shall mean, (i) with respect to clauses (i), (ii),
(iii)(C), (iv), (v), (vi), (vii) and (viii) of Section 3.2(b), each Monthly
Date, and (ii) with respect to clause (iii)(A) or (B) of Section 3.2(b), any
date on which any reimbursement obligations (other than reimbursement
obligations which have been converted into one or more term loans) are due under
the VEPCO L/C Agreement or any Aquila PPA Reserve L/C Agreement.
"Maintenance Requisition" shall have the meaning given to such term
in Section 3.5(b).
"Major Maintenance Reserve Account" shall mean the account
established pursuant to Section 2.1 having the name and account number set forth
below the title "Major Maintenance Reserve Account" in Schedule I hereto.
"Major Maintenance Reserve Requirement" shall mean an amount
initially equal to $1,215,000, which may be adjusted as follows and, when so
adjusted, shall mean such adjusted amount. The Partnership may, from time to
time, provide the Independent Engineer with a proposed schedule of monthly
deposits (which may, but need not, be equal monthly deposits) to the Major
Maintenance Reserve Account which provide, in the aggregate (inclusive of
interest estimated to accrue thereon), sufficient funds for the completion of
all turbine overhauls through and including the next Major Overhaul. Such
proposed schedule will become the then applicable schedule, and the monthly
deposits reflected therein will become, for each month, the Major Maintenance
Reserve Requirement, if the Independent Engineer confirms, based on the then
available information, that the Partnership is reasonably expected to have
sufficient funds to fully fund each monthly Major Maintenance Reserve
Requirement through the term of such proposed schedule. In addition, at such
time or times as the Partnership determines that the then applicable schedule
will not provide sufficient funding for the completion of all turbine overhauls
through and including the next major overhaul of the turbines, then the
Partnership will be required to provide the Independent Engineer with a revised
proposed schedule of monthly deposits (which may, but need not, be equal monthly
deposits) which is reasonably
7
<PAGE>
calculated to enable the Partnership to fund the Major Maintenance Reserve
Account in an amount sufficient to provide for the completion of all turbine
overhauls through and including the next major overhaul of the turbines. Such
proposed schedule will become the then applicable schedule, and the monthly
deposits reflected therein will become, for each such month, the Major
Maintenance Reserve Requirement, if the Independent Engineer approves the same
in accordance with the foregoing.
"Monies" shall mean all cash, payments, Permitted Investments and
other amounts (including instruments evidencing such amounts) on deposit in or
credited to any Account.
"Monthly Date" shall mean the 15th day of each calendar month (or if
such day if not a Business Day, the next succeeding Business Day).
"Net Pre-Completion Revenues" shall have the meaning set forth in
Section 3.2(b)(ii).
"O&M Account" shall mean the account established pursuant to Section
2.1 having the name and account number set forth below the title "O&M Account"
in Schedule I hereto.
"Proceeds Account" shall mean the account established pursuant to
Section 2.1 having the name and account number set forth below the title
"Proceeds Account" in Schedule I hereto.
"Project Budget" shall mean a budget in substantially the form of
Annex 1 for all anticipated Project Costs to be incurred in connection with the
construction and start-up of the Project, including in such budget all
construction and non-construction costs, and including all interest, taxes and
other carrying costs, together with a balanced statement of sources and uses of
proceeds (and any other funds necessary to complete the Project), broken down as
to separate construction phases and components.
"Project Schedule" shall mean the schedule for construction and
completion of the Project as a whole, as set forth in the schedule attached as
Annex 2.
"Redeemable Facilities" shall mean, in the context of any redemption
or prepayment obligation, each (i) series of Bonds and (ii) each facility
constituting Senior
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Indebtedness whose agent, trustee or similar representative is party to the
Collateral Agency Agreement and which, pursuant to the terms of its Financing
Documents, has opted to be prepaid pursuant to the terms of the Section hereof
which refers to such prepayment obligation.
"Required Ratio" shall mean (i) with respect to the 100% PPA Period,
1.20/1.00, (ii) with respect to the Two-Thirds PPA Period, 1.35/1.00, (iii) with
respect to the One-Third PPA Period, 1.55/1.00, and (iv) with respect to the
Merchant Period, 1.70/1.00.
"Required Secured Parties" shall have the meaning given to such term
in the Intercreditor Agreement.
"Requisition" shall mean a Construction Requisition, a Maintenance
Requisition or a Restoration Requisition.
"Restoration Requisition" shall have the meaning given to such term
in Section 3.10(a)(iii)(A).
"Retained Amount" shall mean the aggregate amount, if any, required
in the Partnership's opinion to be retained in the Construction Account on the
Completion Date for the payment of remaining Project Costs (if any) necessary to
achieve Final Completion (including, without limitation, estimated punchlist
item expenses) and to provide for reasonable contingency expenses.
"Revenue Account" shall mean the account established pursuant to
Section 2.1 having the name and account number set forth below the title
"Revenue Account" in Schedule I hereto.
"Scheduled Payment Date" shall mean (i) with respect to any Bond,
January 15 and July 15 (or if any such day is not a Business Day, then the next
succeeding Business Day), and (ii) with respect to any other amortizing Senior
Secured Obligation, the date on which any principal thereof is scheduled to
become due, which shall be on January 15, April 15, July 15 and October 15 (or
if any such day is not a Business Day, then the next succeeding Business Day).
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"Senior Secured Obligations Payments" shall mean, on any Funding
Date, for any given facility constituting, or series of, Senior Secured
Obligations (including the Bonds), an amount equal to (i) (a) a fraction the
numerator of which is the number of months from and including such Funding Date
to but excluding the immediately preceding Scheduled Payment Date for such
facility constituting, or series of, Senior Secured Obligations and the
denominator of which is the number of months from but excluding such immediately
preceding Scheduled Payment Date to and including the next succeeding Scheduled
Payment Date for such facility constituting or series of Senior Secured
Obligations (or, if such Funding Date is on a Scheduled Payment Date for such
facility constituting, or series of, Senior Secured Obligations, such Scheduled
Payment Date) multiplied by (b) principal, interest and other amounts due or
coming due in respect of such Senior Secured Obligations on the next succeeding
Scheduled Payment Date therefor (or, if such Funding Date is on a Scheduled
Payment Date for such facility constituting, or series of, Senior Secured
Obligations, such Scheduled Payment Date), minus (ii) the Monies then on deposit
in or credited to the Debt Service Payment Account in respect of such facility
constituting, or series of, Senior Secured Obligations.
"Separate Accounts" shall mean, collectively, the Aquila PPA Reserve
Account, the Panola County Account and the Distribution Account.
"Test Period" shall mean, for any Monthly Date, the period beginning
one year prior to such Monthly Date and ending one year after such Monthly Date;
provided that if the Partnership has received written notice from VEPCO that
VEPCO has elected not to extend the VEPCO Power Purchase Agreement beyond the
VEPCO Initial Term, the "Test Period" for any Monthly Date through the
expiration of the VEPCO Power Purchase Agreement will be the period beginning
one year prior to such Monthly Date and ending two years after such Monthly
Date.
SECTION 1.2 Rules of Interpretation. Except as otherwise expressly
provided herein, the rules of interpretation set forth in the Indenture shall
apply to this Agreement.
SECTION 1.3 Uniform Commercial Code. As used herein, the term "New
York UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of New York. All terms defined in the New York UCC shall have the
respective meanings given to those terms in the New York UCC, except where the
context otherwise requires.
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ARTICLE II
ESTABLISHMENT OF THE ACCOUNTS
SECTION 2.1 Establishment of Accounts. The Administrative Agent has
established the following special, segregated and irrevocable cash collateral
accounts (together with all sub-accounts to be established pursuant to this
Agreement, the "Accounts") in the form of noninterest bearing accounts (each
such Account being (or to be, when established) a "securities account" as such
term is defined in Section 8501(a) of the New York UCC), which shall be
maintained at all times until the termination of this Agreement in accordance
with the Securities Account Control Agreement:
(a) Construction Account;
(b) Revenue Account;
(c) O&M Account;
(d) Debt Service Payment Account;
(e) Debt Service Reserve Account;
(f) DSR LOC Payment Account;
(g) Major Maintenance Reserve Account;
(h) Aquila PPA Reserve Account;
(i) Distribution Suspense Account;
(j) Distribution Account; and
(k) Proceeds Account.
The account numbers of the Accounts established hereunder on the
Closing Date are set forth on Schedule I hereto. The Accounts shall not be
evidenced by passbooks or similar writings.
The Collateral Agent may, with the consent of the Partnership and
upon notice to the Trustee, the VEPCO L/C Agent, any Working Capital Agent, any
Aquila PPA Reserve L/C Agent, any Debt Service Reserve L/C Agent and any
Additional Indebtedness Agent, cause the Administrative Agent to establish and
create sub-accounts within the Accounts. In the event that, in accordance with
this Agreement, the Administrative Agent is required to segregate certain monies
in an Account from any other amounts on deposit in such Account pending transfer
or withdrawal in accordance with this Agreement, the Collateral Agent shall
cause the Administrative Agent to either (i) hold
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such monies in such Account for use solely for such transfer or withdrawal or
(ii) create a separate subaccount for such purpose.
All amounts from time to time held in each Account (other than the
Separate Accounts) shall be held (A) in the name of the Partnership subject to
the lien and security interest of the Collateral Agent for the benefit of the
Senior Secured Parties and (B) in the custody of, and subject to the control of,
the Collateral Agent and the Administrative Agent for the purposes and on the
terms set forth in this Agreement. All such amounts shall constitute a part of
the Senior Collateral and shall not constitute payment of any Indebtedness or
any other obligation of the Partnership until applied as hereinafter provided.
SECTION 2.2 Termination. This Agreement shall remain in full force
and effect until the Debt Termination Date.
ARTICLE III
THE ACCOUNTS
SECTION 3.1 Construction Account.
(a) Deposits into the Construction Account. Except as otherwise
expressly provided herein, the Partnership shall cause the following amounts to
be deposited into the Construction Account directly, or, if received by the
Partnership, as soon as practicable (but no more than three (3) Business Days)
after receipt or otherwise in accordance with the provisions of this Agreement:
(i) all proceeds of the Bonds (other than amounts used to pay
the Closing Date Payments), together with an Officer's Certificate of the
Partnership instructing the Administrative Agent with respect to the deposit of
such proceeds;
(ii) all Net Pre-Completion Revenues;
(iii) all proceeds of delayed opening insurance (as specified
in an Officer's Certificate of the Partnership specifying the type of monies
being deposited);
(iv) (A) all proceeds of Delay Liquidated Damages and (B) all
other amounts received under or in respect of the EPC Contract which are not
required to
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be deposited or retained in any other Account in accordance with this Agreement,
in each case as identified in an Officer's Certificate of the Partnership;
(v) all Ordinary Equity Contributions;
(vi) any income from the investment of the monies on deposit
in the Construction Account in accordance with Section 3.11;
(vii) any proceeds of Additional Indebtedness incurred prior
to the Completion Date for the purposes of paying Project Costs, as identified
in an Officer's Certificate of the Partnership; and
(viii) all other amounts required to be transferred to the
Construction Account in accordance with this Agreement and the other Financing
Documents.
(b) Application of Amounts. Except as otherwise provided in this
Agreement, amounts held in the Construction Account shall be applied only (i)
for the payment of (A) Project Costs due and payable as of any Disbursement Date
(as evidenced by invoices received by the Partnership) and (B) Project Costs
reasonably expected to be due and payable during the 30day period following such
Disbursement Date, (ii) for deposit into a checking account of the Partnership
in an amount not to exceed $200,000 at any time (taking into account Monies
already on deposit therein or credited thereto) for the payment of unanticipated
Project Costs that may become due and payable prior to the submission of the
next Construction Requisition, and (iii) to make a deposit into the Panola
County Account equal to (A) the aggregate of the contract prices under the
Infrastructure Contracts minus (B) (1) the amount paid or payable by the
Partnership for costs associated with the construction of the Infrastructure
prior to April 12, 1999 and (2) the amount advanced by the Partnership for the
payment of costs associated with the construction of the Infrastructure from
April 12, 1999 until the date, if any, on which the Partnership transfers the
Infrastructure to the County in accordance with the Infrastructure Financing
Documents. All monies withdrawn from the Construction Account shall be withdrawn
in accordance with the disbursement procedure hereinafter described in this
Section 3.1.
(c) Conditions Precedent to Withdrawals. As a condition precedent to
any withdrawal from the Construction Account, there shall be delivered by the
Partner-
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ship to the Administrative Agent on or prior to the date which is three (3)
Business Days prior to each Disbursement Date:
(i) a requisition from the Partnership in the form attached
hereto as Exhibit A (a "Construction Requisition") signed by an Authorized
Representative of the Partnership; and
(ii) a certificate of the Independent Engineer in the form
attached hereto as Exhibit B (an "Independent Engineer Construction
Certificate").
In addition, on each Disbursement Date, the Partnership shall
deliver to the Administrative Agent a date-down endorsement of the Title Policy
to such Disbursement Date, insuring the continuing priority of the Deed of Trust
(subject only to Permitted Liens).
(d) Payments. On each Disbursement Date (and from time to time
during the 30day period thereafter), following delivery by the Partnership to
the Administrative Agent of all the documentation relating to such Disbursement
Date described in Section 3.1(c), the Partnership (subject to Section 3.12)
shall be permitted to cause the Administrative Agent to apply, and the
Administrative Agent shall so apply, Monies on deposit in the Construction
Account to make payments in accordance with the related Construction
Requisition.
(e) Equity Contributions.
(i) The Partnership shall, at least three (3) Business Days
prior to any date on which Project Costs are due and payable, the proceeds of
the Bonds have been depleted and the Monies on deposit in or credited to the
Construction Account are insufficient to pay such Project Costs, (A) deliver an
Equity Requisition Certificate to the Equity Contributor requesting an Ordinary
Equity Contribution to be made to the Construction Account on or prior to such
date in an amount greater than or equal to the amount of such insufficiency and
(B) deliver an Officer's Certificate to the Administrative Agent specifying the
amount of such Ordinary Equity Contribution and the date on which such Ordinary
Equity Contribution will be made in accordance with the Equity Contribution
Agreement.
(ii) The Partnership shall deliver an Officer's Certificate to
the Administrative Agent specifying any date on which the Equity Contributor
will be required
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to make an Ordinary Equity Contribution in accordance with Section 2(b)(iii)
through (vii) of the Equity Contribution Agreement and the amount of such
Ordinary Equity Contribution, which Officer's Certificate shall be delivered to
the Administrative Agent three (3) Business Days prior to such date.
(iii) If the Equity Contributor fails to make any Ordinary
Equity Contribution specified in an Officer's Certificate of the Partnership
delivered to the Administrative Agent in accordance with clause (i) or (ii) of
this Section 3.1(e), the Administrative Agent shall notify the Collateral Agent
of such failure and the Collateral Agent shall deliver to the issuer of the
Equity L/C (A) a draw on the Equity L/C in the amount of such Ordinary Equity
Contribution and (B) an appropriate certificate with respect thereto if required
under the Equity L/C. The Collateral Agent shall deposit the amounts received
from the issuer of the Equity L/C in the Construction Account.
(f) Transfers and Withdrawals on the Completion Date. On the
Completion Date, the Partnership shall furnish to the Administrative Agent, the
Collateral Agent, the Trustee and the VEPCO L/C Agent an Officer's Certificate
of the Partnership setting forth: (i) the Completion Date; (ii) the balance of
the Monies on deposit in or credited to the Construction Account (including,
without limitation, any subaccount of the Construction Account established in
accordance with Section 3.1(h)) on the Completion Date after giving effect to
any deposits made or to be made to the Construction Account in accordance with
Section 3.1(e) (such balance, the "Completion Date Opening Balance"); (iii) the
Retained Amount; and (iv) the application of the Completion Date Opening Balance
(including payment instructions, if applicable, which shall be in accordance
with the following paragraph).
On the Completion Date (or as promptly as practicable thereafter,
but no later than three (3) Business Days following the receipt by the
Administrative Agent of any Equity Contribution payable on the Completion Date
in accordance with Section 3.1(e) and the Equity Contribution Agreement in the
event that such Equity Contribution is not so received on the Completion Date),
the Administrative Agent shall in the following manner (and in the following
order of priority):
(1) first, maintain in the Construction Account an amount
equal to the lesser of (x) the Retained Amount and (y) the Completion Date
Opening Balance;
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(2) second, transfer to the Debt Service Reserve Account an
amount not exceeding the lesser of (x) an amount which, together with the
Monies then on deposit therein or credited thereto and the Drawing Amount
of any Debt Service Reserve L/C, is equal to $12,551,000 and (y) the
remaining portion of the Completion Date Opening Balance; and
(3) third, transfer to the Revenue Account any remaining
portion of the Completion Date Opening Balance.
(g) Transfers and Withdrawals on the Final Completion Date. On or
within at least three (3) Business Days of the Final Completion Date, the
Partnership shall furnish to the Collateral Agent, the Administrative Agent, the
Trustee and the VEPCO L/C Agent an Officer's Certificate of the Partnership
setting forth (i) the Final Completion Date and (ii) the application of the
remaining balance in the Construction Account (the "Final Completion Amount")
(including payment instructions, if applicable), which shall be in accordance
with the following sentence. Upon receipt of such Officer's Certificate, the
Administrative Agent shall transfer the Final Completion Amount in the following
manner (and in the following order of priority):
(1) first, to the Debt Service Reserve Account an amount not
exceeding the lesser of (x) an amount which, together with the Monies then
on deposit therein or credited thereto and the Drawing Amount of any Debt
Service Reserve L/C, is equal to $12,551,000 and (y) the remaining portion
of the Final Completion Amount; and
(2) second, to the Revenue Account any remaining portion of
the Final Completion Amount.
In the event that any (i) proceeds of Delay Liquidated Damages, (ii)
proceeds of delayed opening insurance or (iii) other amounts received under or
in respect of the EPC Contract which are not required to be deposited or
retained in an Account other than the Construction Account in accordance with
this Agreement shall be deposited in the Construction Account after the Final
Completion Date, the Partnership shall, promptly after the deposit thereof,
furnish to the Collateral Agent, the Administrative Agent, the Trustee and the
VEPCO L/C Agent an Officer's Certificate of the Partnership setting forth the
application of such proceeds (including payment instructions, if applicable),
which shall be in accordance with the following sentence. Upon receipt of such
Officer's
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Certificate, the Administrative Agent shall transfer such proceeds in the
following manner (and in the following order of priority):
(1) first, to the Debt Service Reserve Account an amount not
exceeding the lesser of (x) an amount which, together with the Monies then
on deposit therein or credited thereto and the Drawing Amount of any Debt
Service Reserve L/C, is equal to $12,551,000 and (y) the remaining portion
of such proceeds; and
(2) second, transfer to the Revenue Account any remaining
portion of such proceeds.
(h) Additional Indebtedness. Upon deposit into the Construction
Account of any proceeds of Additional Indebtedness (as identified in an
Officer's Certificate of the Partnership), the Administrative Agent shall (i)
establish and create a subaccount within the Construction Account in accordance
with Section 2.1 (and no separate consent of the Partnership or the Collateral
Agent or any other Person shall be required for such establishment), (ii)
transfer such proceeds to such subaccount and (iii) transfer such proceeds from
time to time in accordance with Officers' Certificates (and otherwise in
accordance with Section 3.1 and the other conditions (if any) established in the
Additional Indebtedness Documents relating to such Additional Indebtedness) for
application consistent with the purposes for which such Additional Indebtedness
was incurred in accordance with the Indenture.
SECTION 3.2 Revenue Account.
(a) Deposits into the Revenue Account.
(i) Deposits. Except as otherwise expressly provided herein,
the Partnership shall cause the following amounts to be deposited into the
Revenue Account directly, or if received by the Partnership, as soon as
practicable (but no more than three (3) Business Days) after receipt, or
otherwise in accordance with the provisions of this Agreement:
(A) all Operating Revenues received by the Partnership
(other than any income from the investment of monies on deposit in the
Accounts other than the Revenue Account, which shall be applied in
accordance with Section 3.11);
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(B) any proceeds of Additional Indebtedness incurred
after the Completion Date;
(C) all proceeds from the sale of assets by the
Partnership as permitted by Section 5.1(g) of the Indenture and the other
Financing Documents; and
(D) all other income (howsoever earned), revenue
(howsoever generated) and proceeds of any nature whatsoever received by
the Partnership or the Funding Corporation (including, without limitation,
the proceeds of any business interruption insurance or other payments
received for interruption of operations in respect of any Loss Event, but
excluding amounts required by the terms hereof to be deposited into the
Proceeds Account) prior to or after the Completion Date.
(ii) Instructions. The Partnership hereby (A) acknowledges
that it has irrevocably instructed each Project Party party to each Project
Document in effect as of the Closing Date pursuant to which payments may be made
to or received by the Partnership, and agrees that it shall so instruct each
Project Party party to each Project Document entered into after the Closing Date
under which payments may be made to the Partnership, to make all such payments
directly to the Administrative Agent for deposit in the Revenue Account (and to
specify in writing when making such payments the source and nature of such
payments), and (B) acknowledges that it has obtained or will obtain to the
extent required under the Indenture and the other Financing Documents, a Consent
evidencing, among other things, the agreement or acknowledgment of each Project
Party to each Project Document in effect on the Closing Date to make all such
payments directly to the Administrative Agent for deposit in the Revenue
Account. If, notwithstanding the foregoing, any Operating Revenues are remitted
directly to the Partnership or the Funding Corporation, the Partnership or the
Funding Corporation, as the case may be, shall hold such payments in trust for
the Collateral Agent and shall as promptly as practicable (but no more than
three (3) Business Days) after receipt remit such payments to the Administrative
Agent (together with an Officer's Certificate of the Partnership specifying the
source and nature of such payments) for deposit in the Revenue Account in
accordance with the terms of this Agreement, in the form received, together with
any necessary endorsements.
(iii) Certain Transfers of Amounts with respect to Additional
Indebtedness. Upon deposit into the Revenue Account of any proceeds of
Additional
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Indebtedness (as identified in an Officer's Certificate of the Partnership), the
Administrative Agent shall (i) establish and create a subaccount within the
Revenue Account in accordance with Section 2.1 (and no separate consent of the
Partnership or the Collateral Agent shall be required), (ii) transfer such
proceeds to such subaccount and (iii) transfer such proceeds from time to time
in accordance with Officers' Certificates (and in accordance with other
conditions (if any) established in the Additional Indebtedness Documents
relating to such Additional Indebtedness) for application consistent with the
purposes for which such Additional Indebtedness was incurred pursuant to the
terms of the Indenture.
(iv) Identification of Amounts. In the event the
Administrative Agent receives monies without adequate identification or adequate
instruction with respect to the proper Account in which such monies are to be
deposited, the Administrative Agent shall deposit such monies into the Revenue
Account, segregate such monies from all other Monies on deposit in the Revenue
Account and notify the Partnership of the receipt of such monies. Upon receipt
of an Officer's Certificate of the Partnership containing written identification
and instruction from the Partnership regarding such monies, the Administrative
Agent shall (if necessary and in accordance with this Agreement) transfer such
monies from the Revenue Account to the Account in which such monies were to be
deposited in accordance with this Agreement as specified by the Partnership in
such Officer's Certificate.
(b) Applications and Transfers. Subject to Section 3.12, the
Partnership shall, on each Funding Date, cause the Administrative Agent to
transfer Monies to the extent then available in the Revenue Account and not
segregated for any specific purpose as provided in this Section 3.2 (except as
otherwise set forth in this Agreement), and the Administrative Agent shall so
transfer such Monies, in accordance with an Officer's Certificate of the
Partnership to be received by the Administrative Agent at least three (3)
Business Days prior to such Funding Date setting forth the amounts to be applied
or transferred pursuant to this Section 3.2(b) and the Persons referred to in
clauses (i) through (viii) (inclusive) below that are entitled to payment or
Accounts to which amounts withdrawn are to be paid or deposited (with respect to
each Funding Date, the "Funding Date Certificate") in the amounts and order of
priority set forth below. To the extent that applications are not effected on
such Funding Date, the related amounts will be retained in the Revenue Account
pending application at such time as such amounts are due and payable to the
Persons or Accounts entitled thereto (and the Partnership and the Administrative
Agent shall not apply such amounts for any other purpose). The order of priority
of application or transfer of monies from the Revenue Account on each Funding
Date is as follows:
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(i) First: (i) transfer from the Revenue Account to the O&M
Account the amount set forth in such Funding Date Certificate and certified
therein to be the Partnership's good faith estimate of the amounts due and
payable for O&M Costs (other than O&M Costs that will be paid with the proceeds
of Working Capital Loans) on such Funding Date or reasonably expected to be due
and payable within the next thirty (30) days in accordance with Section 3.3 and
(ii) at the election of the Partnership, to the prepayment of amounts
outstanding under any Working Capital Agreement if and to the extent that the
Partnership is entitled to re-borrow such prepaid amounts under such Working
Capital Agreement;
(ii) Second: prior to the Completion Date, transfer from the
Revenue Account to the Construction Account all amounts then remaining in the
Revenue Account (any amounts transferred pursuant to this clause (ii), "Net
Pre-Completion Revenues");
(iii) Third: distribute from the Revenue Account (A) to the
VEPCO L/C Agent an amount (as set forth in such Funding Date Certificate) equal
to the reimbursement obligations (other than reimbursement obligations that have
been converted into one or more term loans) then due and payable under the VEPCO
L/C Agreement, (B) to the agent under any Aquila PPA Reserve L/C Agreement (if
the Partnership or the Funding Corporation is obligated under such agreement to
reimburse draws under any letter of credit issued under such agreement) an
amount (as set forth in such Funding Date Certificate) equal to the
reimbursement obligations (other than reimbursement obligations that have been
converted into one or more term loans) then due and payable under such agreement
and (C) if then required under the Aquila Power Purchase Agreement, transfer to
the Aquila PPA Reserve Account an amount (as set forth in such Funding Date
Certificate) which, together with the Monies on deposit in or credited to the
Aquila PPA Reserve Account on such Funding Date and the Drawing Amount under any
Aquila PPA Reserve L/C as of such Funding Date, is equal to the then current
Aquila PPA Reserve Requirement; provided that if Monies on deposit in the
Revenue Account are insufficient on such Funding Date to make the payments
specified in this clause (iii), distribution of Monies shall be made ratably to
the specified recipients referenced in this clause (iii) based on the respective
amounts specified in each of clauses (A), (B) and (C) of this clause (iii);
(iv) Fourth: transfer from the Revenue Account to the Debt
Service Payment Account an amount (as set forth in such Funding Date
Certificate) equal to the following with respect to each credit facility
(including each series of Bonds)
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constituting Senior Indebtedness: (a) an amount equal to the Senior Secured
Obligations Payments for such month, plus (b) interest, principal and other
amounts scheduled to come due on any Senior Indebtedness during the period from
and including such Funding Date through but excluding the next Funding Date and
not otherwise accounted for under clause (a) (together with such additional
amount under this clause (b) as the Partnership deems prudent to deposit in
respect of Senior Indebtedness not otherwise accounted for under this clause
(b)); provided, however, that principal of Debt Service Reserve LOC Loans shall
not be so paid under this priority Fourth, but principal of Debt Service Reserve
LOC Bonds shall be so paid under this priority Fourth; and provided, further
that if Monies on deposit in the Revenue Account are insufficient on such
Funding Date to make the payments specified in this clause (iv), distribution of
Monies shall be made ratably to the specified recipients referenced in this
clause (iv) based on the respective amounts specified in each of clauses (a) and
(b) of this clause (iv);
(v) Fifth: transfer from the Revenue Account to the Major
Maintenance Reserve Account an amount (as set forth in such Funding Date
Certificate) which is equal to the then current Major Maintenance Reserve
Requirement;
(vi) Sixth: transfer from the Revenue Account to (a) first,
the Debt Service Reserve Account an amount (as set forth in such Funding Date
Certificate) which is equal to the then current Debt Service Reserve Requirement
(unless the Partnership provides one or more Debt Service Reserve L/C's to the
Administrative Agent which comply with the requirements of Section 3.6(b) with
Drawing Amounts which, in the aggregate, equal the current Debt Service Reserve
Requirement), and (b) second, to the DSRA LOC Payment Account an amount (as set
forth in such Funding Date Certificate) which, together with the Monies on
deposit in or credited to the DSRA LOC Payment Account, is equal to the
outstanding principal amount of Debt Service Reserve LOC Loans for which the
Partnership and/or the Funding Corporation is the obligor party;
(vii) Seventh: distribute from the Revenue Account to the
Operator an amount (as set forth in such Funding Date Certificate) equal to the
Operator Fee then due and payable to the Operator; and
(viii) Eighth: transfer to the Distribution Suspense Account
the remaining Monies on deposit in or credited to the Revenue Account after
application of clauses (i) through (vii) above.
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SECTION 3.3 O&M Account. Monies on deposit in or credited to the O&M
Account may be remitted to the Partnership or paid directly to third parties in
an amount set forth in an Officer's Certificate of the Partnership (which
Officer's Certificate shall be delivered to the Administrative Agent no later
than three (3) Business Days before the date on which such Monies are to be
remitted or paid directly to third parties) as being the amount of O&M Costs due
and payable on such date or reasonably expected to be due and payable by the
Partnership within the next thirty (30) days, less any amounts previously
transferred in respect of such O&M Costs; provided, however, that Monies may be
disbursed from the O&M Account more often than monthly if necessary to pay O&M
Costs which are due and payable on the date of disbursement. An Officer's
Certificate of the Partnership delivered to the Administrative Agent pursuant to
this Section 3.3 shall indicate (a) the name of each Person (including the
Partnership or any third parties) to whom payment of any O&M Costs requested
under such Officer's Certificate is to be made and (b) the payment or wire
transfer instructions for the payment or transfer of such amounts by the
Administrative Agent to each such Person. The Administrative Agent shall
transfer to the Revenue Account any amounts on deposit in or credited to the O&M
Account which are not needed to pay O&M Costs due or payable hereunder on or
prior to the next Funding Date, as certified by an Authorized Officer of the
Partnership.
SECTION 3.4 Debt Service Payment Account. Monies on deposit in or
credited to the Debt Service Payment Account shall be allocated ratably (based
on an Officer's Certificate of the Partnership provided to the Administrative
Agent) among sub-accounts of the Debt Service Payment Account for each credit
facility (including each series of Bonds) constituting Senior Indebtedness,
based on the principal of, premium, if any, and interest due or becoming due,
and fees, indemnities or other amounts owed in respect of such credit facility
on the next succeeding Scheduled Payment Date therefor (other than the principal
of any Debt Service Reserve LOC Loans). On any date that amounts for the payment
of such Senior Indebtedness are due and payable and have been specified in a
Funding Date Certificate delivered to the Administrative Agent in accordance
with Section 3.2(b)(iv) (or if such day is not a Business Day, then on the next
succeeding Business Day) and have been allocated to a subaccount of the Debt
Service Payment Account applicable to such Senior Indebtedness, the
Administrative Agent shall remit such amounts to the Persons specified in such
Funding Date Certificate for the payment of such Senior Indebtedness; provided,
however, that the Administrative Agent shall segregate such amounts from any
other monies on deposit in the Debt Service Payment Account until such time as
payment is made to the Persons entitled thereto. The Partnership and the Funding
Corporation hereby instruct the Collateral Agent and the Administrative Agent to
make all such payments in respect of the Bonds directly to the Trustee for
deposit into the
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Bond Fund in accordance with the terms of Section 3.3 of the Indenture, and the
Collateral Agent and the Administrative Agent hereby acknowledge receipt of such
instruction. The Administrative Agent shall transfer to the Revenue Account any
Monies on deposit in or credited to the Debt Service Payment Account which are
not needed to pay amounts due or payable hereunder on or prior to the next
Funding Date, as certified by an Authorized Officer of the Partnership.
SECTION 3.5 Major Maintenance Reserve Account.
(a) Application of Amounts. Except as otherwise provided in this
Agreement, amounts held in the Major Maintenance Reserve Account shall be
applied solely for the payment of Major Maintenance Expenditures due and payable
as of any Disbursement Date or the reimbursement for Major Maintenance
Expenditures paid prior to such Disbursement Date (as evidenced by invoices
received by the Partnership). All Monies withdrawn from the Major Maintenance
Reserve Account shall be withdrawn in accordance with the disbursement procedure
hereinafter described in this Section 3.5.
(b) Conditions Precedent to Withdrawals. As a condition precedent to
any withdrawal from the Major Maintenance Reserve Account, there shall be
delivered by the Partnership to the Administrative Agent on or prior to the date
three (3) Business Days prior to each Disbursement Date a requisition from the
Partnership in the form attached hereto as Exhibit C (a "Maintenance
Requisition") signed by an Authorized Representative of the Partnership; and
(c) Payments. On each Disbursement Date following delivery by the
Partnership to the Administrative Agent of all the documentation relating to
such Disbursement Date described in Section 3.5(b), the Partnership (subject to
Section 3.12) shall cause the Administrative Agent to apply, and the
Administrative Agent shall so apply, monies to make payments in accordance with
the related Maintenance Requisition.
SECTION 3.6 Debt Service Reserve Account.
(a) The Partnership may provide one or more letters of credit (each,
a "Debt Service Reserve L/C") in substitution for all or any portion of the
Monies on deposit in or credited to the Debt Service Reserve Account, provided
that any such Debt Service Reserve L/Cs comply with the requirements set forth
in clause (b) of this Section 3.6. So long as neither the Partnership nor the
Funding Corporation has any reimbursement or other obligation in respect of any
such Debt Service Reserve L/C provided in substitution
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for an amount of Monies on deposit in or credited to the Debt Service Reserve
Account, the Administrative Agent shall release such amount of Monies to or as
directed by the Partnership in an Officer's Certificate delivered to the
Administrative Agent. If the Partnership or the Funding Corporation does have a
reimbursement or other obligation in respect of any Debt Service Reserve L/C,
the Administrative Agent shall release such amount of Monies in accordance with
clauses (vii) and (viii) of Section 3.2(b). In addition, if the calculation of
the Debt Service Reserve Requirement for any Funding Date results in a negative
number, the absolute value, in Dollars, of such negative number shall be
transferred from the Debt Service Reserve Account to the Revenue Account.
(b) The Partnership shall ensure that each Debt Service Reserve L/C
shall: (i) be an irrevocable direct pay letter of credit naming the Collateral
Agent for the benefit of the Senior Secured Parties as beneficiary; (ii) be
issued by a bank or other financial institution rated at least "A3" by Moody's
and at least "A" by S&P; (iii) if the Partnership or the Funding Corporation is
obligated to reimburse drawings or pay other costs thereunder, be issued under a
Debt Service Reserve L/C Agreement with payment terms which are consistent with
the terms of this Agreement and with other terms customary for debt service
reserve obligations similar to those described herein, including, without
limitation, (A) a requirement that any drawing under such Debt Service Reserve
L/C be converted into a Debt Service Reserve LOC Loan which matures not less
than five (5) years after the date of such drawing, and (B) a provision which
permits the Debt Service Reserve L/C Provider to convert outstanding Debt
Service Reserve LOC Loans into Debt Service Reserve LOC Bonds in accordance with
the terms of the applicable Debt Service Reserve L/C Agreement; and (iv) name a
Person other than the Partnership or the Funding Corporation as the party
responsible for reimbursement or other obligations in respect of such Debt
Service Reserve L/C, provided that the condition set forth in this clause (iv)
shall not apply if the Partnership delivers to the Administrative Agent at least
three (3) Business Days prior to the date on which a Debt Service Reserve L/C
naming the Partnership or the Funding Corporation as the party responsible for
reimbursement or other obligations in respect thereof will be posted (a) an
Officer's Certificate, concurred with in writing by the Independent Engineer,
stating that, after giving effect to the naming of the Partnership or the
Funding Corporation, as the case may be, as the party responsible for
reimbursement or other obligations in respect of such Debt Service Reserve L/C,
the minimum Projected Senior Debt Service Coverage Ratio for each Fiscal Year
during the remaining term of the Bonds is greater than or equal to 1.45/1.00,
and (b) written confirmation from each Rating Agency that the naming of the
Partnership or the Funding Corporation, as the case may be, as the party
responsible for reimbursement or other
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obligations in respect of such Debt Service Reserve L/C will not result in a
Rating Downgrade by such Rating Agency.
(c) On each date on which the Administrative Agent is required to
withdraw or transfer amounts from the Debt Service Payment Account to make
payments with respect to Senior Indebtedness under Section 3.4, the
Administrative Agent shall first withdraw or transfer (for and only for the
purposes described in Section 3.4) amounts then held in the Debt Service Payment
Account. To the extent that amounts then held in the Debt Service Payment
Account at 12:00 p.m. (noon) two (2) Business Days prior to the date of the
requested withdrawal or transfer are insufficient to fund such withdrawal or
transfer, as evidenced by an Officer's Certificate of the Partnership, one (1)
Business Day prior to such date the Administrative Agent shall (on a pro rata
basis between the following clauses (i) and (ii), to the extent practicable,
based upon the aggregate amount of Monies then on deposit in or credited to the
Debt Service Reserve Account and the aggregate Drawing Amounts of all Debt
Service Reserve L/Cs then credited to the Debt Service Reserve Account) (i)
transfer the Monies on deposit in or credited to the Debt Service Reserve
Account, if any, to the Debt Service Payment Account, and (ii) deliver to any
Debt Service Reserve L/C Provider, if any, on such date (x) a draft on its Debt
Service Reserve L/C, together with an appropriate certificate with respect
thereto if required under such Debt Service Reserve L/C in an amount in the
aggregate between clauses (i) and (ii) above equal such insufficiency. The
Administrative Agent shall deposit the amounts received from the Debt Service
Reserve L/C Provider in the Debt Service Payment Account.
(d) Forty-five (45) days (or if such day is not a Business Day, on
the next succeeding Business Day) prior to the expiration of any Debt Service
Reserve L/C delivered to the Administrative Agent in respect of the Debt Service
Reserve Account, provided that such Debt Service Reserve L/C has not been
previously renewed, extended or replaced, the Administrative Agent shall deliver
to the Debt Service Reserve L/C Provider providing such Debt Service Reserve L/C
on such date (i) a draft on such Debt Service Reserve L/C in an amount equal to
the the Drawing Amount of such Debt Service Reserve L/C and (ii) an appropriate
certificate with respect thereto if required by such Debt Service Reserve L/C.
The Administrative Agent shall deposit the amounts received from such Debt
Service Reserve L/C Provider in payment of such draft in the Debt Service
Reserve Account to be applied in accordance with this Section 3.6.
(e) Forty-five (45) days (or if such day is not a Business Day, on
the next succeeding Business Day) after receipt of notice that any Debt Service
Reserve L/C
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Provider is rated less than "A" by S&P and "A3" by Moody's, provided that the
Debt Service Reserve L/C issued by such Debt Service Reserve L/C Provider has
not been replaced with a Debt Service Reserve L/C issued by a new Debt Service
Reserve L/C Provider, the Administrative Agent shall deliver to such Debt
Service Reserve L/C Provider on such date (i) a draft on such Debt Service
Reserve L/C in an amount equal to the Drawing Amount of such Debt Service
Reserve Account L/C and (ii) an appropriate certificate with respect thereto if
required by such Debt Service Reserve L/C. The Administrative Agent shall
deposit the amounts received from such Debt Service Reserve L/C Provider in
payment of such draft in the Debt Service Reserve Account to be applied in
accordance with this Section 3.6.
(f) Upon receipt of a notice from any Debt Service Reserve L/C
Provider that the Debt Service Reserve L/C provided by such Debt Service Reserve
L/C Provider will be terminated prior to its stated expiration date, if, not
less than fifteen (15) Business Days prior to the termination date as provided
in such notice of termination, such Debt Service Reserve L/C has not been
replaced with a new Debt Service Reserve L/C, the Administrative Agent shall
deliver to such Debt Service Reserve L/C Provider (i) a draft on such Debt
Service Reserve L/C in an amount equal to the Drawing Amount of such Debt
Service Reserve L/C and (ii) an appropriate certificate with respect thereto if
required by such Debt Service Reserve L/C. The Administrative Agent shall
deposit the amounts received from such Debt Service Reserve L/C Provider in
payment of such draft in the Debt Service Reserve Account to be applied in
accordance with this Section 3.6.
SECTION 3.7 DSRA LOC Payment Account. (a) Monies on deposit in or
credited to the DSRA LOC Payment Account shall be used for the payment of
principal of outstanding Debt Service Reserve LOC Loans. On any date that such
amounts have been specified in a Funding Date Certificate in accordance with
Section 3.2(b)(vi), the Administrative Agent shall withdraw the monies on
deposit in or credited to the DSRA LOC Payment Account and remit such monies to
the Debt Service Reserve L/C Agent for the payment of such amounts.
(b) In the event that Monies on deposit in or credited to the DSRA
LOC Payment Account exceed the amount of Monies required by this Agreement to be
deposited therein or credited thereto after giving effect to the payments made
pursuant to this Section 3.7, the Administrative Agent shall transfer such
excess amounts from the DSRA LOC Payment Account to the Revenue Account at the
written direction of the Partnership.
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SECTION 3.8 Aquila PPA Reserve Account.
(a) The Partnership may provide one or more letters of credit (each,
an "Aquila PPA Reserve L/C") in substitution for all or any portion of the
Monies on deposit in or credited to the Aquila PPA Reserve Account, provided
that any such Aquila PPA Reserve L/Cs comply with the requirements set forth in
clause (b) of this Section 3.8. So long as neither the Partnership nor the
Funding Corporation has any reimbursement or other obligation in respect of any
such Aquila PPA Reserve L/C provided in substitution for an amount of Monies on
deposit in or credited to the Aquila PPA Reserve Account, the Administrative
Agent shall release such amount of Monies to or as directed by the Partnership
in an Officer's Certificate delivered to the Administrative Agent.
(b) Each Aquila PPA Reserve Account L/C shall: (i) be an irrevocable
direct pay letter of credit naming the Collateral Agent for the benefit of the
Senior Secured Parties as beneficiary; (ii) be issued by a bank or other
financial institution rated at least "A3" by Moody's and at least "A" by S&P;
(iii) if the Partnership or the Funding Corporation is obligated to reimburse
drawings or pay other costs thereunder, be issued under a Aquila PPA Reserve L/C
Agreement with payment terms which are consistent with the terms of this
Agreement and with other terms customary for project contract reserve
obligations similar to those described herein; and (iv) name a Person other than
the Partnership or the Funding Corporation as the party responsible for
reimbursement or other obligations in respect of such Aquila PPA Reserve L/C,
provided that the condition set forth in this clause (iv) shall not apply if the
Partnership delivers to the Administrative Agent at least three (3) Business
Days prior to the date on which an Aquila PPA Reserve L/C naming the Partnership
or the Funding Corporation as the party responsible for reimbursement or other
obligations in respect thereof will be posted (a) an Officer's Certificate,
concurred with in writing by the Independent Engineer, stating that, after
giving effect to the naming of the Partnership or the Funding Corporation, as
the case may be, as the party responsible for reimbursement or other obligations
in respect of such Aquila PPA Reserve L/C, the minimum Projected Senior Debt
Service Coverage Ratio for each Fiscal Year during the remaining term of the
Bonds is greater than or equal to 1.45/1.00, and (b) written confirmation from
each Rating Agency that the naming of the Partnership or the Funding
Corporation, as the case may be, as the party responsible for reimbursement or
other obligations in respect of such Aquila PPA Reserve L/C will not result in a
Rating Downgrade by such Rating Agency.
(c) On each day on which the Partnership is required to make any
payments to Aquila pursuant to the Aquila Power Purchase Agreement, as stated in
an
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Officer's Certificate of the Partnership delivered to the Administrative Agent
three (3) Business Days prior to the date on which such payments are required to
be made, the Administrative Agent shall first withdraw and pay to Aquila (in
accordance with the Aquila Power Purchase Agreement) cash deposits then held in
the Aquila PPA Reserve Account. To the extent that Monies then held in the
Aquila PPA Reserve Account at 12:00 p.m. (noon) two (2) Business Days prior to
the date of the requested payment are insufficient to fund such payment, as
evidenced by an Officer's Certificate of the Partnership, one (1) Business Day
prior to such date the Administrative Agent shall deliver to any Aquila PPA
Reserve L/C Provider, if any, on such date, a draft on its Aquila PPA Reserve
L/C, together with an appropriate certificate with respect thereto if required
under such Aquila PPA Reserve L/C, in an amount equal to such insufficiency. The
Administrative Agent shall deposit the amounts received from the Aquila PPA
Reserve L/C Provider in the Aquila PPA Reserve Account.
(d) A determination as to (i) the Monies on deposit in or credited
to the Aquila PPA Reserve Account, (ii) the Drawing Amount of each outstanding
Aquila PPA Reserve L/C, and (iii) the then current Aquila PPA Reserve
Requirement shall be made by the Partnership on each Monthly Date and
immediately following any withdrawal of amounts in the Aquila PPA Reserve
Account pursuant to clause (c) above. As soon as practicable after making any
such determination, the Partnership shall deliver to the Administrative Agent
and the Collateral Agent an Officer's Certificate setting forth such
determination and the then current Aquila PPA Reserve Requirement. If such
determination indicates that the sum of Monies on deposit in or credited to the
Aquila PPA Reserve Account at such time plus the aggregate Drawing Amounts of
all outstanding Aquila PPA Reserve L/Cs exceeds the then current Aquila PPA
Reserve Requirement, the Administrative Agent shall transfer such excess Monies
to the Revenue Account.
(e) Forty-five (45) days (or if such day is not a Business Day, on
the next succeeding Business Day) prior to the expiration of any Aquila PPA
Reserve L/C delivered to the Administrative Agent in respect of the Aquila PPA
Reserve Account, provided that such Aquila PPA Reserve L/C has not been
previously renewed, extended or replaced, the Administrative Agent shall deliver
to the Aquila PPA Reserve L/C Provider providing such Aquila PPA Reserve L/C on
such date (i) a draft on such Aquila PPA Reserve L/C in an amount equal to the
lesser of (A) the Drawing Amount of such Aquila PPA Reserve Account L/C and (B)
an amount which, together with the Monies then on deposit in or credited to the
Aquila PPA Reserve Account, equals the then current Aquila PPA Reserve
Requirement and (ii) an appropriate certificate with respect thereto if required
by such Aquila PPA Reserve L/C. The Administrative Agent shall deposit the
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amounts received from such Aquila PPA Reserve L/C Provider in payment of such
draft in the Aquila PPA Reserve Account to be applied in accordance with this
Section 3.8.
(f) Forty-five (45) days (or if such day is not a Business Day, on
the next succeeding Business Day) after receipt of notice that any Aquila PPA
Reserve L/C Provider is rated less than "A" by S&P and "A3" by Moody's, provided
that the Aquila PPA Reserve Account L/C issued by such Aquila PPA Reserve L/C
Provider has not been replaced with a Aquila PPA Reserve L/C issued by a new
Aquila PPA Reserve L/C Provider, the Administrative Agent shall deliver to such
Aquila PPA Reserve L/C Provider on such date (i) a draft on such Aquila PPA
Reserve L/C in an amount equal to the lesser of (A) the Drawing Amount of such
Aquila PPA Reserve L/C and (B) an amount which, together with the Monies then on
deposit in or credited to the Aquila PPA Reserve Account, equals the then
current Aquila PPA Reserve Requirement and (ii) an appropriate certificate with
respect thereto if required by such Aquila PPA Reserve L/C. The Administrative
Agent shall deposit the amounts received from such Aquila PPA Reserve L/C
Provider in payment of such draft in the Aquila PPA Reserve Account to be
applied in accordance with this Section 3.8.
(g) Upon receipt of a notice from any Aquila PPA Reserve L/C
Provider that the Aquila PPA Reserve L/C provided by such Aquila PPA Reserve L/C
Provider will be terminated prior to its stated expiration date, if, not less
than fifteen (15) Business Days prior to the termination date as provided in
such notice of termination, such Aquila PPA Reserve L/C has not been replaced
with a new Aquila PPA Reserve L/C, the Administrative Agent shall deliver to
such Aquila PPA Reserve L/C Provider (i) a draft on such Aquila PPA Reserve L/C
in an amount equal to the lesser of (A) the Drawing Amount of such Aquila PPA
Reserve L/C and (B) an amount which, together with the Monies then on deposit in
or credited to the Aquila PPA Reserve Account, equals the then current Aquila
PPA Reserve Requirement and (ii) an appropriate certificate with respect thereto
if required by such Aquila PPA Reserve L/C. The Administrative Agent shall
deposit the amounts received from such Aquila PPA Reserve L/C Provider in
payment of such draft in the Aquila PPA Reserve Account to be applied in
accordance with this Section 3.8.
SECTION 3.9 Distribution Suspense Account.
(a) On any Monthly Date on which all of the conditions set forth in
clause (b) of this Section 3.9 (the "Distribution Conditions") are satisfied,
upon delivery to the Collateral Agent, the Administrative Agent, the Trustee and
the VEPCO L/C Agent of
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an Officer's Certificate of the Partnership certifying as such three (3)
Business Days prior to such Monthly Date, the Administrative Agent shall
transfer Monies from the Distribution Suspense Account to the Distribution
Account in accordance with clause (b) of this Section 3.9 in an amount equal to
the lesser of (i) the Monies on deposit in or credited to the Distribution
Suspense Account and (ii) the Account Balance Amount less the Account Reserve
Requirement.
(b) Subject to Section 3.9(c), the transfer of Monies on any Monthly
Date from the Distribution Suspense Account to the Distribution Account as
described in clause (a) of this Section 3.9 is subject to the following
conditions (the "Distribution Conditions"):
(i) all required transfers and payments described in clauses
(i) through (viii) of Section 3.2(b) shall have been completed;
(ii) immediately after giving effect to the proposed transfer
of Monies to the Distribution Account, the Account Balance Amount shall be
greater than or equal to the Account Reserve Requirement; provided that this
Distribution Condition shall apply only if such Monthly Date is not a Scheduled
Payment Date for the Bonds;
(iii) no Default or Event of Default shall have occurred and
be continuing or shall result from such transfer of Monies to the Distribution
Account;
(iv) if the Test Period consists entirely of the Two-Thirds
PPA Period and/or the 100% PPA Period, (A) the Senior Debt Service Coverage
Ratio shall be greater than or equal to the Required Ratio for the six-month
period (or, with respect to the Monthly Dates that occur within six months after
the Commercial Operation Date, the period commencing on the Commercial Operation
Date and ending on such Monthly Date) preceding such Monthly Date, and (B) the
Projected Senior Debt Service Coverage Ratio shall be greater than or equal to
the Required Ratio for the six-month period succeeding such Monthly Date;
(v) if a portion of the Test Period consists of the 100% PPA
Period and/or the Two-Thirds PPA Period and a portion of the Test Period
consists of the One-Third PPA Period and/or the Merchant Period: (A) for the
portion of the Test Period which consists of the 100% PPA Period and/or the
Two-Thirds PPA Period, (1) the Senior Debt Service Coverage Ratio for such
portion shall be greater than or equal to the Required Ratio during the period
beginning on the date which is six months prior to
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such Monthly Date and ending on such Monthly Date, and (2) the Projected Senior
Debt Service Coverage Ratio for such portion shall be greater than or equal to
the Required Ratio during the period beginning on such Monthly Date and ending
on the date which is six months after such Monthly Date; and (B) for the portion
of the Test Period which consists of the One-Third PPA Period and/or the
Merchant Period, (1) the Senior Debt Coverage Ratio for such portion shall be
greater than or equal to the Required Ratio during the period beginning on the
date which is one year prior to such Monthly Date and ending on such Monthly
Date, provided that such portion will not be taken into account unless it
consists of at least two fiscal quarters, and (2) the Projected Senior Debt
Service Coverage Ratio for the portion of the period described below which
consists of the One-Third PPA Period and/or the Merchant Period shall be greater
than or equal to the Required Ratio during the period beginning on such Monthly
Date and ending on the later of (x) the date which is two years after such
Monthly Date if such portion includes at least one year which consists entirely
of the One-Third PPA Period and/or the Merchant Period and (y) the earliest date
after the date described in clause (x) which results in such portion including
at least one year which consists entirely of the One-Third PPA Period and/or the
Merchant Period;
(vi) if the Test Period consists entirely of the One-Third PPA
Period and/or the Merchant Period, (A) the Senior Debt Service Coverage Ratio
shall be greater than or equal to the Required Ratio for the one-year period
preceding such Monthly Date, and (B) the Projected Senior Debt Service Coverage
Ratio shall be greater than or equal to the Required Ratio for the two-year
period succeeding such Monthly Date;
(vii) the Monies remaining on deposit in or credited to the
Revenue Account, the O&M Account, the Major Maintenance Account and, after
giving effect to the proposed transfer of Monies to the Distribution Account,
the Distribution Suspense Account, shall be sufficient, in the Partnership's
reasonable judgment, to meet the Partnership's ongoing working capital needs;
(viii) the Completion Date shall have occurred; and
(ix) such Monthly Date is the last Business Day of September
2000.
(c) If (A) any Monies remain on deposit in or credited to the
Distribution Suspense Account for twelve (12) months continuously without being
transferred to
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the Distribution Account pursuant to clause (a) of this Section 3.9, (B) the
Partnership delivers a Partnership Request to the Trustee requesting the Trustee
to call a vote of the Holders to determine whether to apply such funds to a
redemption or prepayment, as applicable, of the Redeemable Facilities, and (C)
Holders holding at least 66 2/3% of the Outstanding Bonds vote to apply such
funds to such redemption and prepayment, then the Monies that have so remained
on deposit in or credited to the Distribution Suspense Account for twelve (12)
consecutive months without being transferred to the Distribution Account
pursuant to clause (a) of this Section 3.9 shall be used to redeem or prepay, as
applicable, the Redeemable Facilities on a pro rata basis, as among the
Redeemable Facilities, based upon the then outstanding principal amounts of each
of the Redeemable Facilities, at the prices for redemption or prepayment set
forth in the Indenture or the applicable facility agreement in respect of such
Redeemable Facility, as applicable, and the Partnership shall provide the
Administrative Agent a certificate (an "Allocation Certificate") setting forth
the amount to be so allocated to each Redeemable Facility and the account or
accounts into which each Redeemable Facility's allocable share shall be
deposited in accordance with the terms of the Indenture or the applicable
Additional Indebtedness Agreement, as applicable. Within two (2) Business Days
of its receipt of an Allocation Certificate, the Administrative Agent shall make
the transfers specified therein. The Partnership and the Funding Corporation
hereby instruct the Collateral Agent and the Administrative Agent to make all
such payments in respect of the Bonds directly to the Trustee for deposit into
the Bond Fund in accordance with the terms of Section 3.3 of the Indenture, and
the Collateral Agent and the Administrative Agent hereby acknowledge receipt of
such instruction. If (A) any Monies remain on deposit in or credited to the
Distribution Suspense Account for twelve (12) consecutive months without being
transferred to the Distribution Account pursuant to clause (a) of this Section
3.9, (B) the Partnership delivers a Partnership Request to the Trustee
requesting the Trustee to call a vote of the Holders to determine whether to
apply such funds to the redemption or prepayment of the Redeemable Facilities,
(C) Holders holding at least 66 2/3% of the Outstanding Bonds do not vote to
apply such funds to such redemption and prepayment, and (D) each of the
conditions set forth in Section 3.9(b), other than those set forth in clauses
(iv), (v) and (vi) thereof, are satisfied, then the Monies that have so remained
on deposit in or credited to the Distribution Suspense Account for twelve (12)
consecutive months without being transferred to the Distribution Account
pursuant to clause (a) of this Section 3.9 shall be transferred to the
Distribution Account on the next Monthly Date, provided, however, that if the
Administrative Agent receives written notice prior to such next Monthly Date
from any agent, trustee or similar representative in respect of any Redeemable
Facility which instructs the Administrative Agent to apply a portion of such
Monies that have remained on deposit in or credited to the Distribution Suspense
Account
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for such twelve (12) consecutive months to the prepayment of such Redeemable
Facility in accordance with the terms thereof (such portion not to exceed the
amount that would have been applied to the prepayment of such Redeemable
Facility had the requisite number of Holders voted in favor of the redemption
and prepayment of the Redeemable Facilities pursuant to the first sentence of
this Section 3.9(c)), then the Administrative Agent shall apply such portion of
such Monies on deposit in the Distribution Suspense Account as so provided in
such written notice and shall transfer the remainder of such Monies on deposit
in the Distribution Suspense Account to the Distribution Account.
(d) Pending any other application of Monies on deposit in or
credited to the Distribution Suspense Account as provided herein, the
Administrative Agent shall, on any Funding Date, withdraw and transfer Monies on
deposit in or credited to the Distribution Suspense Account to the Debt Service
Payment Account if and to the extent such amounts on deposit in the Debt Service
Payment Account and the Debt Service Reserve Account are insufficient to pay any
amounts due on the Senior Indebtedness on such Funding Date.
(e) The Administrative Agent shall withdraw and transfer Monies on
deposit in or credited to the Distribution Account to such Persons as may be
directed in an Officer's Certificate of the Partnership delivered to the
Administrative Agent three (3) Business Days prior to the date of such
withdrawal and transfer. Such Officer's Certificate shall state that all
conditions precedent provided for in this Section 3.11 have been complied with.
SECTION 3.10 Proceeds Account.
(a) Loss Events. Except as otherwise expressly provided herein, all
Loss Proceeds shall be deposited into the Proceeds Account directly, or if
received by the Partnership, as soon as practicable (but no more than three (3)
Business Days) after receipt, in either case in accordance with this Section
3.10(a). The Administrative Agent shall separately segregate such Loss Proceeds
for distribution in the manner as set forth below:
(i) If (A) a Loss Event occurs, (B) the Partnership receives
more than $5,000,000 of Loss Proceeds in respect of such Loss Event and (C)
either (x) the Partnership determines not to Restore the Project or (y) the
Partnership determines that the Project cannot be Restored to permit operation
of the Project on a Commercially Feasible Basis, upon delivery to the
Administrative Agent and the Collateral Agent of an
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Officer's Certificate of the Partnership certifying to the foregoing (together
with, in the case of clause (y) immediately above, a certificate signed by an
authorized representative of the Independent Engineer concurring with such
Officer's Certificate), then the Loss Proceeds received in connection with such
Loss Event shall be used to redeem or prepay, as applicable, the Redeemable
Facilities on a pro rata basis among the Redeemable Facilities, based upon the
then outstanding principal amounts of each of the Redeemable Facilities, at the
prices for redemption or prepayment set forth in the applicable Financing
Document, and the Partnership shall provide the Administrative Agent an
Allocation Certificate setting forth the amount to be so allocated to each
Redeemable Facility and the account or accounts into which each Redeemable
Facility's allocable share shall be deposited in accordance with the terms of
the applicable Financing Document. Within three (3) Business Days of its receipt
of an Allocation Certificate, the Administrative Agent shall make the transfers
specified therein. The Partnership and the Funding Corporation hereby instruct
the Collateral Agent and the Administrative Agent to make all such payments in
respect of the Bonds directly to the Trustee for deposit into the Bond Fund in
accordance with the terms of Section 3.3 of the Indenture, and the Collateral
Agent and the Administrative Agent hereby acknowledge receipt of such
instruction.
(ii) If (A) a Loss Event occurs, (B) the Partnership receives
Loss Proceeds in respect of such Loss Event and (C) the Partnership determines
that the Project can be Restored to permit operation of the Project on a
Commercially Feasible Basis, the Partnership shall deliver to the Administrative
Agent and the Collateral Agent an Officer's Certificate of the Partnership
certifying to the foregoing and a certificate signed by an authorized
representative of the Independent Engineer concurring with such Officer's
Certificate, and such Loss Proceeds shall be applied as set forth in paragraphs
(iii), (iv) and (v) below.
(iii) Before any withdrawal or transfer shall be made from the
Proceeds Account with respect to any Restoration, there shall be filed with the
Administrative Agent three (3) Business Days prior to any Disbursement Date:
(A) a requisition from the Partnership substantially in
the form attached hereto as Exhibit D (a "Restoration Requisition") and
signed by an Authorized Representative of the Partnership;
(B) a certificate of the Independent Engineer
substantially in the form attached hereto as Exhibit E (an "Independent
Engineer Restoration Certificate").
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(iv) On the Disbursement Date referred to in Section
3.10(a)(iii) or as soon thereafter as practicable following receipt of the
documents described in Sections 3.10(a)(iii)(A) and (B) above, the
Administrative Agent shall withdraw and transfer from the Proceeds Account and
shall make available to the Partnership the amount set forth in the Restoration
Requisition and, thereafter, the Partnership shall remit such amount to the
applicable payees with respect to the Restoration Work (or, in the case of
reimbursement for the costs of Restoration Work theretofore paid by the
Partnership, the Partnership shall instruct the Administrative Agent to transfer
the amount of such reimbursement to the Revenue Account and the Administrative
Agent shall so make such transfer).
(v) Upon completion of any Restoration Work, there shall be
filed with the Administrative Agent and the Collateral Agent (A) an Officer's
Certificate of the Partnership certifying the completion of such Restoration
Work and the amount, if any, required in its opinion to be retained in the
Proceeds Account for the payment of any costs of such Restoration Work not then
due and payable or the liability for payment of which is being contested or
disputed by the Partnership, and for the payment of reasonable contingencies
following completion of such Restoration Work and (B) an officer's certificate
of the Independent Engineer stating that completion of the Restoration has
occurred and concurring with the amounts to be retained in the Proceeds Account.
Upon receipt of such Officer's Certificate and such officer's certificate of the
Independent Engineer, the Administrative Agent shall first, transfer the amount
remaining in the Proceeds Account in excess of the amounts to remain in the
Proceeds Account as stated in such Officer's Certificate to the applicable
payees with respect to such Restoration Work, and second, segregate the
remaining excess in the Proceeds Account from any other amounts therein. If (A)
such remaining excess exceeds $5,000,000 and (B) any Rating Agency does not
confirm in writing that the Loss Event for which such Loss Proceeds were
received (after taking into consideration such Restoration) will not result in a
Rating Downgrade by such Rating Agency, then the Loss Proceeds received in
connection with such Loss Event in excess of $5,000,000, after giving effect to
the cost of the Restoration, shall be used to redeem or prepay, as applicable,
the Redeemable Facilities on a pro rata basis among the Redeemable Facilities,
based upon the then outstanding principal amounts of each of the Redeemable
Facilities, at the prices for redemption or prepayment set forth in the
applicable Financing Document, and the Partnership shall provide the
Administrative Agent an Allocation Certificate setting forth the amount to be so
allocated to each Redeemable Facility and the account or accounts into which
each Redeemable Facility's allocable share shall be deposited in accordance with
the terms of the applicable Financing
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Document. Within three (3) Business Days of its receipt of an Allocation
Certificate, the Administrative Agent shall make the transfers specified
therein. The Partnership and the Funding Corporation hereby instruct the
Collateral Agent and the Administrative Agent to make all such payments in
respect of the Bonds directly to the Trustee for deposit into the Bond Fund in
accordance with the terms of Section 3.3 of the Indenture, and the Collateral
Agent and the Administrative Agent hereby acknowledge receipt of such
instruction. If (A) the remaining excess is equal to or less than $5,000,000 or
(B) each Rating Agency confirms in writing that the Loss Event for which such
Loss Proceeds were received (after taking into consideration such Restoration
Work) will not result in a Rating Downgrade by such Rating Agency, the
Administrative Agent shall transfer such monies to the Revenue Account.
Thereafter, upon receipt of an Officer's Certificate of the Partnership
certifying payment of all costs of Restoration Work for the Project, the
Administrative Agent shall transfer any amounts remaining in the Proceeds
Account to the Revenue Account.
(vi) If (A) a Loss Event occurs, (B) the Partnership receives
$5,000,000 or less of Loss Proceeds in respect of such Loss Event and (C) either
(x) the Partnership determines not to Restore the Project or (y) the Partnership
determines that the Project cannot be Restored to permit operation of the
Project on a Commercially Feasible Basis, upon delivery to the Administrative
Agent and the Collateral Agent of an Officer's Certificate of the Partnership
certifying to the foregoing (together with, in the case of clause (y)
immediately above, a certificate of an authorized representative of the
Independent Engineer concurring with such Officer's Certificate), the
Administrative Agent shall withdraw from the Loss Proceeds Account the Monies
representing such Loss Proceeds and transfer such Monies to the Revenue Account.
(b) Receipt of Performance Liquidated Damages. All Performance
Liquidated Damages shall be deposited into the Proceeds Account directly, or, if
received by the Partnership, as soon as practicable (but no more than three (3)
Business Days) after receipt, in either case in accordance with this Section
3.10(b). As soon as possible after the date on which all obligations of the EPC
Contractor to pay Performance Liquidated Damages under the EPC Contract have
been satisfied in full and all such Performance Liquidated Damages have been
deposited in the Proceeds Account, the Administrative Agent shall calculate the
aggregate amount of Performance Liquidated Damages then on deposit in the
Proceeds Account (such aggregate amount, the "Total Performance Liquidated
Damages"). If (A) the Total Performance Liquidated Damages are less than or
equal to $10,000,000 or (B) the Total Performance Liquidated Damages are greater
than $10,000,000 and each Rating Agency confirms in writing that the
circumstance which
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resulted in the Partnership's receipt of Performance Liquidated Damages will not
result in a Rating Downgrade by such Rating Agency, the Administrative Agent
shall transfer all Performance Liquidated Damages then on deposit in the
Proceeds Account to the Construction Account for application in accordance with
Section 3.1. If (A) the Total Performance Liquidated Damages exceed $10,000,000
and (B) any Rating Agency does not confirm in writing that the circumstance
which resulted in the Partnership's receipt of Performance Liquidated Damages
will not result in a Rating Downgrade by such Rating Agency, then the
Performance Liquidated Damages so received by the Partnership shall be used to
redeem or prepay, as applicable, the Redeemable Facilities on a pro rata basis
among the Redeemable Facilities, based upon the then outstanding principal
amounts of each of the Redeemable Facilities, at the prices for redemption or
prepayment set forth in the applicable Financing Document, and the Partnership
shall provide the Administrative Agent an Allocation Certificate setting forth
the amount to be so allocated to each Redeemable Facility and the account or
accounts into which each Redeemable Facility's allocable share shall be
deposited in accordance with the terms of the applicable Financing Document.
Within three (3) Business Days of its receipt of an Allocation Certificate, the
Administrative Agent shall make the transfers specified therein.
(c) Receipt of BuyOut Proceeds. All BuyOut Proceeds shall be
deposited into the Proceeds Account directly, or, if received by the
Partnership, as soon as practicable (but no more than three (3) Business Days)
after receipt, in either case in accordance with this Section 3.10(c). If (i)
the aggregate amount of BuyOut Proceeds received by or on behalf of the
Partnership is less than or equal to $10,000,000 or (ii) the aggregate amount of
BuyOut Proceeds received by or on behalf of the Partnership exceeds $10,000,000
and the Administrative Agent receives written confirmation from each Rating
Agency that the related BuyOut or BuyOuts will not result in a Rating Downgrade
by such Rating Agency, then the Administrative Agent shall transfer the Monies
representing such BuyOut Proceeds to the Revenue Account. If (A) the aggregate
amount of BuyOut Proceeds received by or on behalf of the Partnership exceeds
$10,000,000 and (B) any Rating Agency does not confirm in writing that the
BuyOuts will not result in a Rating Downgrade by such Rating Agency, then the
BuyOut Proceeds so received by the Partnership shall be used to redeem or
prepay, as applicable, the Redeemable Facilities on a pro rata basis among the
Redeemable Facilities, based upon the then outstanding principal amounts of each
of the Redeemable Facilities, at the prices for redemption or prepayment set
forth in the applicable Financing Document, and the Partnership shall provide
the Administrative Agent an Allocation Certificate setting forth the amount to
be so allocated to each Redeemable Facility and the account or accounts into
which each Redeemable Facility's allocable share shall be deposited in
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accordance with the terms of the applicable Financing Document. Within three (3)
Business Days of its receipt of an Allocation Certificate, the Administrative
Agent shall make the transfers specified therein.
(d) Default Equity Contributions. All Default Equity Contributions
shall be deposited into the Proceeds Account directly, or, if received by the
Partnership, as soon as practicable (but no more than three (3) Business Days)
after receipt, in either case in accordance with this Section 3.10(d). If the
Senior Secured Parties, acting in accordance with the Intercreditor Agreement,
determine to apply such Default Equity Contributions to the redemption or
prepayment of, as applicable, of the Redeemable Facilities, then the Default
Equity Contributions so deposited into the Proceeds Account shall be used to
redeem or prepay, as applicable, the Redeemable Facilities on a pro rata basis
among the Redeemable Facilities, based upon the then outstanding principal
amounts of each of the Redeemable Facilities, at the prices for redemption or
prepayment set forth in the applicable Financing Document, and the Partnership
shall provide the Administrative Agent an Allocation Certificate setting forth
the amount to be so allocated to each Redeemable Facility and the account or
accounts into which each Redeemable Facility's allocable share shall be
deposited in accordance with the terms of the applicable Financing Document.
Within three (3) Business Days of its receipt of an Allocation Certificate, the
Administrative Agent shall make the transfers specified therein.
SECTION 3.11 Permitted Investments. Amounts held in any Account
created by and held under this Agreement (other than the Separate Accounts)
shall be invested and reinvested in Permitted Investments at the written
direction (which may be in the form of a standing instruction) of an Authorized
Representative of the Partnership; provided, however, that at any time when (a)
an Authorized Officer of the Administrative Agent has received written notice
from the Collateral Agent or any other Senior Secured Party that an Event of
Default shall have occurred and be continuing or (b) an Authorized
Representative of the Partnership has not timely furnished such a written
direction or, after a request by the Administrative Agent, has not so confirmed
a standing instruction to the Administrative Agent, the Administrative Agent
shall invest such monies only in Permitted Investments of the type referred to
in clause (vi) of the definition of "Permitted Investments" of a maturity of (x)
180 days or less prior to the Completion Date and (y) one year or less after the
Completion Date. Any written direction of an Authorized Representative of the
Partnership with respect to the investment or reinvestment of monies held in any
Account (other than the Separate Accounts) shall direct investment or
reinvestment only in Permitted Investments that shall mature in such amounts and
have maturity dates or be subject to redemption at the option of the holder
thereof on or prior to maturity thereof as
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needed for the purposes of such Accounts, but in no event shall such Permitted
Investments mature more than (x) prior to the Completion Date, 180 days after
the date acquired and (y) after the Completion Date, one year after the date
acquired. The Administrative Agent shall have no duty to determine whether any
investment or reinvestment shall satisfy the criteria set forth in the
definition of "Permitted Investment" in the Indenture or the other criteria set
forth in this Section 3.11 and neither the Administrative Agent nor the
Collateral Agent shall have any liability in the event that the value of any
Permitted Investment decreases. The Administrative Agent shall at any time and
from time to time liquidate any or all of such investments prior to the maturity
as needed in order to effect the transfers and withdrawals contemplated by this
Agreement in accordance with an Officer's Certificate of the Partnership;
provided that, in the absence of timely receipt of such an Officer's
Certificate, the Administrative Agent shall liquidate all such investments as
necessary in order to effect the transfers and withdrawals contemplated by this
Agreement. In the event any such investments are redeemed prior to the maturity
thereof, the Administrative Agent shall not be liable for any loss or penalties
relating thereto. Any income or gain realized from such investments shall be
deposited into the Account (or the sub-Account or sub account) from which such
Monies came. For purposes of any income tax payable on account of any income or
gain on an investment, such income or gain shall be for the account of the
Partnership.
SECTION 3.12 Events of Default. (a) On and after any date on which
the Administrative Agent receives written notice from the Intercreditor Agent
pursuant to Section 2.4 of the Intercreditor Agreement that an Event of Default
has occurred (the date of receipt of such notice, the "Event of Default Date"),
the Administrative Agent shall thereafter accept all notices and instructions
required to be given to the Administrative Agent pursuant to the terms of this
Agreement only from the Collateral Agent (acting upon instructions from the
Intercreditor Agent, acting pursuant to the Intercreditor Agreement) and not
from any other Person and the Administrative Agent shall not withdraw, transfer,
pay or otherwise distribute any monies in any of the Accounts (other than the
Separate Accounts) except pursuant to such notices and instructions from the
Collateral Agent (acting upon instructions from the Intercreditor Agent, acting
pursuant to the Intercreditor Agreement). On the Event of Default Date, the
Administrative Agent shall render an accounting of all monies in the Accounts
(other than the Separate Accounts) as of the Event of Default Date to the
Collateral Agent and the Intercreditor Agent.
SECTION 3.13 Disposition of Accounts Upon Debt Termination Date. In
the event that the Administrative Agent shall have received a certificate of a
Responsible Officer of the Collateral Agent stating that the Debt Termination
Date shall have occurred,
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all Administrative Claims of which the Collateral Agent is aware shall have been
paid in full and all fees, charges and expenses of the Independent Consultants
and all other amounts required to be paid hereunder and under the other
Financing Documents of which the Collateral Agent is aware shall have been paid
in full, all amounts remaining in the Accounts shall, upon receipt of a
certificate of a Responsible Officer of the Collateral Agent authorizing such
payments from the Accounts, be remitted to or as directed by the Partnership.
SECTION 3.14 Account Balance Statements. The Administrative Agent
shall, on a monthly basis, provide to the Collateral Agent and the Partnership
account balance statements in respect of each of the Accounts and amounts
segregated in any of the Accounts. Such balance statement shall also include
deposits, withdrawals and transfers from and to any Account and segregated
amounts. At such other times as the Collateral Agent or the Partnership may from
time to time reason ably request (but not more frequently than once each week
unless an Event of Default shall have occurred and is continuing), the
Administrative Agent shall provide written informal account information
regarding (a) balances in respect of each of the Accounts and, to the extent
reasonably available, amounts segregated in any of the Accounts and (b)
deposits, withdrawals and transfers from and to any Account and, to the extent
reasonably available, segregated amounts.
SECTION 3.15 Instructions to the Administrative Agent. Each
direction to the Administrative Agent under this Agreement to transfer or
withdraw amounts in a Account shall sufficiently identity (a) the Account from
which such amounts are to be withdrawn or transferred, (b) the Account in which
such amount is to be deposited or Person to whom such amount is to be
transferred and (c) the applicable provision of this Agreement which authorizes
such transfer or withdrawal. In the event that the Administrative Agent believes
that it lacks sufficient information to make a transfer or withdrawal or to
determine whether it has authority under this Agreement to make such transfer or
withdrawal, it may refrain from making such transfer or withdrawal until it has
received the information required to make such transfer or confirmed its
authority to its satisfaction. In no event shall the Administrative Agent be
responsible for making calculations relating to deposits to or withdrawals from
the Accounts.
ARTICLE IV
THE ADMINISTRATIVE AGENT
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The provisions of this Article IV are solely for the benefit of the
Senior Secured Parties, the Administrative Agent and the Collateral Agent and,
except to the extent expressly provided in this Article IV, neither the
Partnership nor the Funding Corporation shall have any rights under this Article
IV against the Administrative Agent, the Collateral Agent or any other Senior
Secured Party; provided that the Administrative Agent shall be liable to the
Partnership and the Funding Corporation for its gross negligence or willful
misconduct.
SECTION 4.1 Appointment of the Administrative Agent, Powers and
Immunities. The Collateral Agent hereby irrevocably appoints and authorizes The
Bank of New York to act as Administrative Agent hereunder, with such powers as
are expressly delegated to the Administrative Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
The Bank of New York hereby agrees to act as Administrative Agent under this
Agreement. Each of the Partnership and the Funding Corporation hereby
acknowledges the appointment of the Administrative Agent to act as the agent of
the Collateral Agent hereunder, with such powers as are expressly delegated to
the Administrative Agent by the terms of this Agreement, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
shall not have any duties or responsibilities to any Person except those
expressly set forth in this Agreement and shall not have any fiduciary
relationship with any other Senior Secured Party (and no implied covenants,
functions or responsibilities shall be read into this Agreement or otherwise
exist with respect to the Administrative Agent). Without limiting the generality
of the foregoing, the Administrative Agent shall take all actions as the
Collateral Agent shall direct it to perform in accordance with the express
provisions of this Agreement. Notwithstanding anything to the contrary contained
herein, the Administrative Agent shall not be required to take any action which
is contrary to this Agreement or Applicable Law. Neither the Administrative
Agent nor any of its affiliates shall be responsible to any other Senior Secured
Party for any recitals, statements, representations or warranties made by the
Partnership, the Funding Corporation or the Collateral Agent contained in this
Agreement or any other Transaction Document or in any certificate or other
document referred to or provided for in, or received by any other Senior Secured
Party under, this Agreement or any other Transaction Document for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Transaction Document or any other document referred to or
provided for herein or therein or for any failure by the Partnership or the
Funding Corporation to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be required to ascertain or inquire as to the
performance by the Partnership or the Funding Corporation of any of its
obligations under this Agreement or any other Transaction Document or any other
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document or agreement contemplated hereby or thereby. The Administrative Agent
shall not be (a) required to initiate or conduct any litigation or collection
proceeding hereunder or under any other Transaction Document or (b) responsible
for any action taken or omitted to be taken by it hereunder (except for its own
gross negligence or willful misconduct) or in connection with any other
Transaction Document. Except as otherwise expressly set forth in this Agreement,
the Administrative Agent shall take action under this Agreement only as it shall
be directed in writing by the Collateral Agent. Whenever in the administration
of this Agreement the Administrative Agent shall deem it necessary or desirable
that a factual matter be proved or established in connection with the
Administrative Agent taking, suffering or omitting to take any action hereunder,
such matter (unless other evidence in respect thereof is herein specifically
prescribed) may be deemed to be conclusively proved or established by an
Officer's Certificate or a certificate of any Responsible Officer of the
Collateral Agent, if appropriate. The Administrative Agent shall have the right
at any time to seek instructions concerning the administration of this Agreement
from the Collateral Agent, legal counsel or any court of competent jurisdiction.
The Administrative Agent shall not be deemed to have actual, constructive,
direct or indirect knowledge or notice of the occurrence of an Event of Default
unless and until a Responsible Officer of the Administrative Agent has received
an Officer's Certificate of the Partnership or a written notice or certificate
from a Senior Secured Party stating that an Event of Default has occurred.
Each of the Senior Secured Parties expressly acknowledges that
neither the Administrative Agent nor any of its officers, directors, employees,
agents or attorneys-in-fact has made any representations or warranties to it and
that no act by the Administrative Agent hereinafter taken, including, without
limitation, any review of the Project or of the affairs of the Partnership or
the Funding Corporation, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any other Senior Secured Party. Each
Senior Secured Party (other than any other Senior Secured Party that has no
obligation to make appraisals, investigations or credit analyses under the
Financing Documents to which it is a party, including, without limitation, the
Collateral Agent and the Administrative Agent) represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Senior Secured Party, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Project, the Partnership and the Funding
Corporation. Each Senior Secured Party (other than a Senior Secured Party that
has no obligation to make appraisals, investigations or credit analyses under
the Financing Documents to which it is a party, including, without limitation,
the Collateral
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Agent and the Administrative Agent) also represents that it will, independently
and without reliance upon the Administrative Agent or any other Senior Secured
Party, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and credit worthiness of the
Project, the Partnership and the Funding Corporation. Except for notices,
reports and other documents expressly required to be furnished to the other
Senior Secured Parties by the Administrative Agent hereunder, the Administrative
Agent shall not have any duty or responsibility to provide any other Senior
Secured Party with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Project, the Partner ship and Funding Corporation which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents or attorneys-in-fact.
SECTION 4.2 Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely upon any Officer's Certificate, officer's
certificate of an Authorized Officer of any Senior Secured Party, Independent
Engineer's certificate, certificate of a Responsible Officer of the Collateral
Agent or any other certificate, notice or other document (including any cable,
telegram or telecopy) believed by it to be genuine and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice of legal
counsel, independent accountants and other experts selected by the
Administrative Agent and shall have no liability for its actions taken
thereupon, unless due to the Administrative Agent's willful misconduct or gross
negligence. Without limiting the foregoing, the Administrative Agent shall be
required to make payments to the Senior Secured Parties or other Persons only as
set forth herein. The Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement or the Intercreditor
Agreement (i) if such action would, in the opinion of the Administrative Agent,
be contrary to Applicable Law or the terms of this Agreement or the
Intercreditor Agreement, (ii) if such action is not specifically provided for in
this Agreement or the Intercreditor Agreement and it shall not have received any
such advice or concurrence of the Collateral Agent as it deems appropriate or
(iii) if, in connection with the taking of any such action that would constitute
an exercise of remedies under any Financing Document (whether such action is or
is intended to be an action of the Administrative Agent or the Collateral
Agent), it shall not first be indemnified to its satisfaction against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Financing Document in
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accordance with a request of the Collateral Agent (to the extent that the
Collateral Agent is expressly authorized to direct the Administrative Agent to
take or refrain from taking such action), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Senior Secured
Parties. In the event that the Administrative Agent is required to perform any
action on a particular date only following the delivery of an Officer's
Certificate or other document, the Administrative Agent shall be fully justified
in failing to perform such action if it has not first received such Officer's
Certificate or other document and shall be fully justified in continuing to fail
to perform such action until such time as it has received such Officer's
Certificate or other document.
SECTION 4.3 Court Orders. The Administrative Agent is hereby
authorized, in its exclusive discretion, to obey and comply with all writs,
orders, judgments or decrees issued by any court or administrative agency
affecting any money, documents or things held by the Administrative Agent. The
Administrative Agent shall not be liable to any of the parties hereto or any
other Senior Secured Party, their successors, heirs or personal representatives
by reason of the Administrative Agent's compliance with such writs, orders,
judgments or decrees, notwithstanding such writ, order, judgment or decree is
later reversed, modified, set aside or vacated.
SECTION 4.4 Resignation or Removal. Subject to the appointment and
acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving 30 days' prior written
notice thereof to the Collateral Agent, the Partnership and the Funding
Corporation, and the Administrative Agent may be removed at any time with cause
by the Collateral Agent. In the event that the Administrative Agent shall
decline to take any action without first receiving adequate indemnity and,
having received adequate indemnification, shall continue to decline to take such
action, the Collateral Agent shall be deemed to have sufficient cause to remove
the Administrative Agent. Prior to the occurrence of an Event of Default, the
Partnership shall have the right to remove the Administrative Agent upon 30
day's notice to the Senior Secured Parties with or without cause, subject to the
appointment and acceptance of a successor Administrative Agent as provided
below. Upon any such resignation or removal, the Collateral Agent shall have the
right to appoint a successor Administrative Agent which shall be a single bank
or trust company that (i) has an office in New York, New York, (ii) has capital,
surplus and undivided profits of at least $50,000,000, (iii) is experienced in
administering sophisticated financing transactions, and (iv) so long as no Event
of Default has occurred and is continuing, is reasonably acceptable to the
Partnership. If no successor Administrative Agent shall have been appointed by
the Collateral Agent and shall have accepted such appointment within 30 days
after the retiring
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Administrative Agent's giving of notice of resignation or the removal of the
retiring Administrative Agent, then the retiring Administrative Agent may
appoint a successor Administrative Agent, which shall be a single bank or trust
company that (i) has an office in New York, New York, (ii) has capital, surplus
and undivided profits of at least $50,000,000, (iii) is experienced in
administering sophisticated financing transactions, and (iv) so long as no Event
of Default has occurred and is continuing, is reasonably acceptable to the
Partnership. Upon the acceptance of any appointment as Administrative Agent
hereunder by the successor Administrative Agent, (a) such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and (b) the retiring Administrative Agent shall promptly
transfer all Accounts within its possession or control to the possession or
control of the successor Administrative Agent and the retiring Administrative
Agent shall execute and deliver such notices, instructions and assignments as
may be necessary or desirable to transfer the rights of the retiring
Administrative Agent with respect to such Accounts to the successor
Administrative Agent. After the retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article IV and
of Article V shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while acting as Administrative Agent.
Further, a corporation into which the Administrative Agent is merged or
converted or with which it is consolidated or which results from a merger,
conversion or consolidation to which it is a party shall, to the extent
permitted by Applicable Law, be the successor Administrative Agent under this
Agreement without further formality and shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the Administrative
Agent with which such corporation was merged, converted or consolidated. The
Administrative Agent shall forthwith notify such event to the Partnership, the
Funding Corporation and the Collateral Agent.
ARTICLE V
EXPENSES; INDEMNIFICATION; FEES
SECTION 5.1 Expenses. The Partnership agrees to pay or reimburse all
reasonable out-of-pocket expenses of the Administrative Agent (including,
without limitation, the reasonable fees and disbursements of outside counsel
engaged by the Administrative Agent) in respect of, or incidental to, the
administration or enforcement of any of the provisions of this Agreement or in
connection with any amendment, waiver or consent relating to this Agreement.
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SECTION 5.2 Indemnification. The Partnership agrees to indemnify the
Administrative Agent in its capacity as such, and, in their capacity as such,
its officers, directors, shareholders, controlling persons, employees, agents
and servants in accordance with and in the manner contemplated by Article 7.17
of the Intercreditor Agreement.
SECTION 5.3 Fees. On the Closing Date, and on each anniversary of
the Closing Date to and including the Debt Termination Date, the Partnership
shall pay the Administrative Agent an annual fee in an amount mutually agreed on
by the Partnership and the Administrative Agent in writing on or prior to the
date of appointment of the Administrative Agent.
The provisions of this Article V shall survive the termination of
this Agreement or the resignation or removal of the Administrative Agent.
ARTICLE VI
LIMITATION OF LIABILITY
SECTION 6.1 Limitation of Liability. Section 14.1 of the Indenture
is incorporated herein by reference as if set forth in full herein.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Amendments; Etc. No amendment or waiver of, or consent
with respect to, any provision of this Agreement shall in any event be effective
unless the same shall be made in accordance with the Intercreditor Agreement.
SECTION 7.2 Addresses for Notices. All notices, requests and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy) delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
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SECTION 7.3 Integration, Etc. This Agreement and the other Financing
Documents to which the parties hereto are a party constitute the entire
agreement and understanding among the parties hereto and supersede any and all
prior agreements and understandings, written or oral, relating to the subject
matter hereof. This Agreement shall become effective at such time as the
Collateral Agent shall have received counterparts hereof signed by all of the
intended parties hereto.
SECTION 7.4 Headings; Table of Contents; Section References.
Headings used in this Agreement, and the table of contents included in this
Agreement, are for convenience of reference only and do not constitute part of
this Agreement for any purpose. Unless otherwise specified in this Agreement,
section references shall refer to sections of this Agreement.
SECTION 7.5 No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the Partnership, the Funding
Corporation, the Collateral Agent, the Administrative Agent, the Intercreditor
Agent and the other Senior Secured Parties and their respective successors and
assigns and no Person (other than the parties hereto and such other Senior
Secured Parties) shall have any rights hereunder.
SECTION 7.6 No Waiver. No failure on the part of the Administrative
Agent, the Collateral Agent or any other Senior Secured Party or any of their
nominees or representatives to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Administrative Agent, the Collateral Agent or any other Senior Secured Party or
any of their nominees or representatives of any right, power or remedy.
SECTION 7.7 Severability. If any provision of this Agreement or the
application thereof shall be invalid or unenforceable to any extent, (a) the
remainder of this Agreement and the application of such remaining provisions
shall not be affected thereby and (b) each such remaining provision shall be
enforced to the greatest extent permitted by law.
SECTION 7.8 Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by the Administrative Agent,
the Collateral Agent, the Intercreditor Agent, the Partnership and the Funding
Corporation shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
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SECTION 7.9 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 7.10 Special Exculpation. No claim may be made by the
Partnership, the Funding Corporation or any other person against the
Administrative Agent, the Collateral Agent, the Intercreditor Agent or any other
Senior Secured Party or the affiliates, directors, officers, employees,
attorneys or agents of any of them for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or relating to this Agreement or any other
Transaction Document or the transactions contemplated hereby or thereby, or any
act, omission or event occurring in connection therewith, and each of the
Partnership and the Funding Corporation hereby waives, releases and agrees not
to sue upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
SECTION 7.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the lien and security interest hereunder, or the
remedies hereunder, are governed by the law of any jurisdiction other than the
State of New York. Regardless of any provision in any other agreement, for
purposes of the New York UCC, the "securities intermediary's jurisdiction" of
the Administrative Agent with respect to the Accounts in respect of which the
Collateral Agent has been granted a security interest under the Partnership
Security Agreement is the State of New York.
SECTION 7.12 Payments in Respect of Bonds. The Partnership and the
Funding Corporation hereby instruct the Collateral Agent and the Administrative
Agent to make all payments to be made in respect of the Bonds hereunder directly
to the Trustee for deposit into the Bond Fund in accordance with the terms of
Section 3.3 of the Indenture, and the Collateral Agent and the Administrative
Agent hereby acknowledge receipt of such instruction.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
-----------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
and Secretary
Address for Notices:
c/o LS Power Management, LLC
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
Attn: General Counsel
Telephone No.: (732) 249-6750
Telecopy No.: (732) 249-7290
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
-----------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
Address for Notices:
c/o LS Power Management, LLC
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
Attn: General Counsel
Telephone No.: (732) 249-1736
Telecopy No.: (732) 249-7290
<PAGE>
THE BANK OF NEW YORK,
as Collateral Agent
By: /s/ Mary Beth Lewicki
-----------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Address for Notices:
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
THE BANK OF NEW YORK,
as Administrative Agent
By: /s/ Mary Beth Lewicki
-----------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Address for Notices:
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
<PAGE>
THE BANK OF NEW YORK,
as Intercreditor Agent
By: /s/ Mary Beth Lewicki
-----------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Address for Notices:
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
<PAGE>
Each undersigned party acknowledges and agrees that the Supplemental
Common Agreement is amended and restated as set forth herein and that from and
after the date hereof, such party is not a party hereto.
CREDIT SUISSE FIRST BOSTON,
as Bank Facility Agent, Administrative Agent,
Collateral Agent and Securities Intermediary
By: /s/ Brian T. Caldwell
-------------------------------
Name: Brian T. Caldwell
Title:
By: /s/ Pilarcita V. Naval
-------------------------------
Name: Pilarcita V. Naval
Title: Associate
<PAGE>
Annex 1
to Common Agreement
PROJECT BUDGET
See attached.
<PAGE>
Annex 2
to Common Agreement
PROJECT SCHEDULE
See attached.
<PAGE>
Exhibit A
to Common Agreement
CONSTRUCTION REQUISITION
No. ______
[Date]
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Second Amended and Restated Common Agreement, dated as of May 21, 1999
(the "Common Agreement"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation, The Bank of New York,
in its capacity as Collateral Agent, The Bank of New York, in its capacity
as Administrative Agent, and The Bank of New York, in its capacity as
Intercreditor Agent.
Ladies and Gentlemen:
This requisition (this "Construction Requisition") is delivered to
you pursuant to Section 3.1(c) of the Common Agreement. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned thereto in the
Common Agreement (including defined terms incorporated therein by reference from
the Indenture). The information relating to this Construction Requisition is as
follows:
1. The aggregate amount requested to be withdrawn from the
Construction Account in accordance with this Construction Requisition is
$____________.
<PAGE>
2. The Disbursement Date upon which the withdrawals and
transfers pursuant to this Construction Requisition are to be made is
________ __ ____.
3. [Set forth on Schedule I attached hereto is the name of
each Person to whom any payment is to be made, the aggregate amount
incurred on the Disbursement Date or reasonably expected to be incurred
within the thirty (30) day period following the Disbursement Date by such
Person and a summary description of the work performed, services rendered,
materials, equipment or supplies delivered or any other purpose for which
each payment was or is to be made.](1) [The aggregate amount requested to
be withdrawn from the Construction Account in accordance with this
Construction Requisition will be deposited into the Panola County Account
pursuant to Section 3.1(b)(iii) of the Common Agreement.](2)
4. As of the date hereof, no Default or Event of Default has
occurred and is continuing.
[5. The Partnership has reviewed the work performed, services
rendered and materials, equipment or supplies delivered in connection with
the Project and the Infrastructure, and confirms that the activities
associated with the construction of the Project and the Infrastructure are
proceeding in accordance with the Project Budget and the Project
Schedule.](3)
[6. As of the date hereof, after the amount requested by the
Construction Requisition is withdrawn from the Construction Account, the
Available Construction Funds are sufficient to achieve Completion on or
prior to the Date Certain.](3)
[7. As of the date hereof, the Partnership has not received
any written notice of any Lien, right to lien or attachment upon or claim
affecting the
- ----------
(1) Insert for any withdrawal from the Construction Account other than a
withdrawal made pursuant to Section 3.1(b)(iii) of the Common Agreement.
(2) Insert for any withdrawal made pursuant to Section 3.1(b)(iii) of the
Common Agreement (a "Panola County Withdrawal").
(3) Not applicable to a Panola County Withdrawal.
<PAGE>
Partnership's right to receive any portion of this Construction
Requisition (other than in respect of Permitted Liens), or in the event
that the Partnership has received notice of any such Lien, right to Lien,
attachment or claim (other than a Permitted Lien), each such Lien, right
to Lien, attachment or claim has been discharged or is expected to be
released or discharged upon payment of the costs for which payment is
requested pursuant to this Construction Requisition or is subject to a
Good Faith Contest.](4)
[8. This Construction Requisition contains no items that
represent payment on account of any retained percentages that the
Partnership is entitled to retain on the date hereof or that will be used
to make a payment of an amount in dispute that the Partnership is entitled
to retain or hold.](4)
9. This Construction Requisition contains no items for which
payment is requested hereunder that have been the basis for any prior
requisition by the Partnership.
[10. An Independent Engineer's Construction Certificate is
being delivered with this Construction Requisition.](4)
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________________
Name:
Title:
- ----------
(4) Not applicable to a Panola County Withdrawal.
<PAGE>
Schedule I
to Construction Requisition
Amount
Name of Payment Purpose
---- ---------- -------
<PAGE>
Exhibit B
to Common Agreement
INDEPENDENT ENGINEER'S CONSTRUCTION CERTIFICATE
No. _____
[Date]
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Second Amended and Restated Common Agreement, dated as of May 21, 1999
(the "Common Agreement"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation, The Bank of New York,
in its capacity as Collateral Agent, The Bank of New York, in its capacity
as Administrative Agent, and The Bank of New York, in its capacity as
Intercreditor Agent.
Ladies and Gentlemen:
This Certificate (this "Independent Engineer's Construction
Certificate") is delivered to you pursuant to Section 3.1(c)(ii) of the Common
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned thereto in the Common Agreement (including defined
terms incorporated therein by reference from the Indenture).
We hereby certify to the Administrative Agent as of the date hereof
that:
1. We have reviewed the Construction Requisition dated
________ __, ____ (the "Construction Requisition") of the Partnership
relating to the Project and the Infrastructure and no errors in the
Construction Requisition came to our attention during the course of our
review.
<PAGE>
2. We have discussed matters believed pertinent to this
Independent Engineer's Construction Certificate with the Partnership, the
EPC Contractor and appropriate third parties and have reviewed the
Partnership's and the EPC Contractor's progress reports available to the
date of this Independent Engineer's Construction Certificate. We have also
observed the status of construction progress and startup activities at the
Site. Our review and observations were performed in accordance with
generally accepted consulting practices consisting to the extent deemed
necessary of a walk-through of the Site conducted on [________],
observation of installed equipment and material, and attendance at the
construction monthly progress review meeting.
3. Based on our review of the aforementioned information and
data provided to us by others which we have not independently verified,
and such other investigation as is referenced on Annex 1 hereto, and the
understanding and assumption that we have been provided true, correct and
complete information, we are of the opinion that, as of the date hereof:
a. The activities associated with the construction of
the Project and the Infrastructure are proceeding in a workmanlike
manner in accordance with the Project Budget and Project Schedule;
b. The Completion Date is estimated to occur on or prior
to the Date Certain;
c. The costs and expenses set forth on Schedule I to the
Construction Requisition are due and payable on the Disbursement
Date specified therein or are reasonably anticipated to be incurred
during the 30day period following such Disbursement Date or
represent the up to $200,000 permitted by the terms of the Common
Agreement to be transferred to a checking account of the
Partnership;
d. The construction of the Project is proceeding in a
satisfactory manner in accordance with the EPC Contract;
e. The payments to be made with respect to the
Construction Requisition are in accordance with the Project Budget
and Project Schedule.
<PAGE>
4. As of the date hereof, after the amount requested by the
Construction Requisition is withdrawn from the Construction Account, the
Available Construction Funds are reasonably expected to be sufficient to
achieve Completion on or prior to the Date Certain.
The information contained herein is for the benefit of the
Administrative Agent, acting on behalf of the Senior Secured Parties, and may be
relied upon for the purposes of making disbursements from the Construction
Account pursuant to the Common Agreement.
The person signing this Independent Engineer's Construction
Certificate is a duly qualified representative of the Independent Engineer and
as such is authorized to execute this Independent Engineer's Construction
Certificate on behalf of the Independent Engineer.
Very truly yours,
R.W. BECK, INC.
By: ____________________________________
Name:
Title:
<PAGE>
Annex 1
to Independent Engineer's Construction Certificate
OTHER INVESTIGATION
<PAGE>
Exhibit C
to Common Agreement
MAINTENANCE REQUISITION
No. ______
[Date]
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Second Amended and Restated Common Agreement, dated as of May 21, 1999
(the "Common Agreement"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation, The Bank of New York,
in its capacity as Collateral Agent, The Bank of New York, in its capacity
as Administrative Agent, and The Bank of New York, in its capacity as
Intercreditor Agent.
Ladies and Gentlemen:
This requisition (this "Maintenance Requisition") is delivered to
you pursuant to Section 3.5(b) of the Common Agreement. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned thereto in the
Common Agreement (including defined terms incorporated therein by reference from
the Indenture). The information relating to this Maintenance Requisition is as
follows:
1. The aggregate amount requested to be withdrawn from the Proceeds
Account in accordance with this Maintenance Requisition is
$____________.
2. The Disbursement Date on which the withdrawals and transfers
pursuant to this Maintenance Requisition are to be made is _________
__, ____.
<PAGE>
3. Set forth on Schedule I attached hereto is the name of each Person
to whom any payment is to be made, the aggregate amount incurred on
or prior to the Disbursement Date or reasonably expected to be
incurred within the thirty (30) day period following the
Disbursement Date by such Person and a summary description of the
work performed, services rendered, materials, equipment or supplies
delivered or any other purpose for which each payment was or is to
be made.
4. The proceeds of this Maintenance Requisition withdrawn from the
Major Maintenance Reserve Account will be used to pay Major
Maintenance Expenditures due and payable as of the Disbursement Date
or to reimburse the costs of Major Maintenance Expenditures paid
prior to the Disbursement Date (as evidenced by invoices received by
the Partnership).
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ____________________________________
Name:
Title:
<PAGE>
Schedule I to Exhibit C
to Common Agreement
Amount
Name of Payment Purpose
---- ---------- -------
<PAGE>
Exhibit D
to Common Agreement
RESTORATION REQUISITION
No. ______
[Date]
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Second Amended and Restated Common Agreement, dated as of May 21, 1999
(the "Common Agreement"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation, The Bank of New York,
in its capacity as Collateral Agent, The Bank of New York, in its capacity
as Administrative Agent, and The Bank of New York, in its capacity as
Intercreditor Agent.
Ladies and Gentlemen:
This requisition (this "Restoration Requisition") is delivered to
you pursuant to Section 3.10(a)(iii)(A) of the Common Agreement. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
thereto in the Common Agreement (including defined terms incorporated therein by
reference from the Indenture). The information relating to this Restoration
Requisition is as follows:
1. The aggregate amount requested to be withdrawn from the Proceeds
Account in accordance with this Restoration Requisition is
$____________.
2. The Disbursement Date on which the withdrawals and transfers
pursuant to this Restoration Requisition are to be made is _________
__, ____.
<PAGE>
3. Set forth on Schedule I attached hereto is the name of each Person
to whom any payment is to be made, the aggregate amount incurred on
or prior to the Disbursement Date or reasonably expected to be
incurred within the thirty (30) day period following the
Disbursement Date by such Person and a summary description of the
work performed, services rendered, materials, equipment or supplies
delivered or any other purpose for which each payment was or is to
be made.
4. The proceeds of this Restoration Requisition withdrawn from the
Proceeds Account will be used to pay the costs of rebuilding,
restoration or repair of the Project in accordance with the budget
and schedule for the Restoration, and the Administrative Agent may
properly charge such costs against the Proceeds Account.
5. The rebuilding, restoration or repair costs which have been paid or
for which payment is requested under this Restoration Requisition
are in accordance with the budget and schedule for the Restoration
Work.
6. The costs of rebuilding, restoration or repair for which payment is
requested under this Restoration Requisition from the Proceeds
Account have not been the basis for any prior requisition by the
Partnership.
7. As of the date hereof, the Partnership has not received any written
notice of any lien, right to lien or attachment upon, or claim
affecting the right of the Partnership to receive any portion of the
amount of this Restoration Requisition (other than in respect of
Permitted Liens), or in the event that the Partnership has received
notice of any such lien, right to lien, attachment or claim (other
than a Permitted Lien), such lien, right to lien, attachment or
claim has been released or discharged as of the date hereof or is
expected to be released or discharged upon payment of the costs for
which payment is requested under this Restoration Requisition, or is
subject to a Good Faith Contest.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
<PAGE>
By: ____________________________________
Name:
Title:
<PAGE>
Schedule I to Exhibit D
to Common Agreement
Amount
Name of Payment Purpose
---- ---------- -------
<PAGE>
Exhibit E
to Common Agreement
INDEPENDENT ENGINEER RESTORATION CERTIFICATE
No. _____
[Date]
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Second Amended and Restated Common Agreement, dated as of May 21, 1999
(the "Common Agreement"), among LSP Energy Limited Partnership (the
"Partnership"), LSP Batesville Funding Corporation, The Bank of New York,
in its capacity as Collateral Agent, The Bank of New York, in its capacity
as Administrative Agent, and The Bank of New York, in its capacity as
Intercreditor Agent.
Ladies and Gentlemen:
This Certificate (this "Independent Engineer's Restoration
Certificate") is delivered to you pursuant to Section 3.10(a)(iii)(B) of the
Common Agreement and in connection with the requisition for payment dated
__________ __, ____ (the "Restoration Requisition") delivered together with this
Independent Engineer's Restoration Certificate. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned thereto in the
Common Agreement (including defined terms incorporated therein by reference from
the Indenture).
We hereby certify to the Depositary Agent as of the date hereof
that:
1. We have reviewed the material and data made available to us by the
Partnership with respect to [describe rebuilding, repair or
restoration of project] and have performed such other investigation
as is referenced in
<PAGE>
Annex 1 attached hereto (the "Review"). Our Review was performed in
accordance with generally accepted engineering and construction
practices and included such investigation, [insert customary
exceptions and qualifications] and review as we in our professional
capacity deemed necessary or appropriate in the circumstances and
within the scope of our appointment [insert customary exceptions and
qualifications]. We have also reviewed the Restoration Requisition
and any appendices, schedules and requisitions and/or invoices
attached thereto or delivered therewith.
2. Based on our Review and the understanding and assumption that we
have been provided true, correct and complete information, and
[insert customary exceptions and qualifications] we are of the
opinion that, as of the date hereof:
a. After giving effect to the payments requested under the
Restoration Requisition, the undisbursed moneys in the
Proceeds Account together with any other amounts that the
Partnership is willing to commit or cause to be committed to
such rebuilding, repair or restoration is reasonably estimated
to equal or exceed the amount necessary to pay for (i) all
work, labor or services performed and all materials, supplies
or equipment furnished for which payment has not yet been made
and (ii) all other reasonably anticipated costs of rebuilding,
repair or restoration ("Restoration Costs") which have yet to
----------------- be paid in order to achieve operation of
[all] [a portion] of the Project. [Alternative if applicable:
After giving effect to the payments requested under the
Restoration Requisition, the undisbursed moneys in the
Proceeds Account may be less than the amount necessary to pay
for (i) all work, labor or services performed and all
materials, supplies or equipment furnished for which payment
has not yet been made and (ii) all other reasonably
anticipated Restoration Costs which have yet to be paid in
order to achieve operation of [all] [a portion] of the
Project; however, in our opinion, such insufficiency could not
reasonably be expected to result in a Material Adverse
Effect.]
b. The major rebuilding, repair and restoration activities and
the progress of the rebuilding, repair and restoration of the
Project through the date of this Independent Engineer's
Restoration
<PAGE>
Certificate are proceeding in a satisfactory manner in
accordance with the budget and the schedule for the
Restoration.
c. The Restoration Costs set forth on Schedule I to the
Restoration Requisition not incurred on or prior to the
Disbursement Date are reasonably anticipated to be incurred
during the thirty (30) day period following the Disbursement
Date.
d. The payments made with respect to the Restoration Requisition
are in accordance with the budget and schedule for the
Restoration.
The person signing this Independent Engineer's Restoration
Certificate is a duly qualified representative of the Independent Engineer and
as such is authorized to execute this Independent Engineer's Restoration
Certificate on behalf of the Independent Engineer.
Very truly yours,
R.W. Beck, Inc.
By: ____________________________________
Name:
Title:
<PAGE>
Exhibit 4.12
================================================================================
INTERCREDITOR AGREEMENT
Dated as of May 21, 1999
among
LSP ENERGY LIMITED PARTNERSHIP,
LSP BATESVILLE FUNDING CORPORATION,
THE BANK OF NEW YORK,
as Trustee,
CREDIT SUISSE FIRST BOSTON,
as VEPCO L/C Agent,
THE OTHER SENIOR SECURED PARTIES
(OR REPRESENTATIVES THEREOF) PARTY HERETO,
THE BANK OF NEW YORK,
as Collateral Agent, Intercreditor Agent and
Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1: DEFINITIONS; RULES OF INTERPRETATION ............................ 2
1.1 Definitions ............................................... 2
1.2 Rules of Interpretation ................................... 7
ARTICLE 2: INTERCREDITOR AGENT ............................................. 7
2.1 Appointment of the Intercreditor Agent .................... 7
2.2 Intercreditor Agent's Rights and Obligations .............. 7
2.3 Intercreditor Agent ....................................... 9
2.4 Defaults .................................................. 11
2.5 Nonliability .............................................. 12
2.6 Resignation of the Intercreditor Agent .................... 12
2.7 Removal of the Intercreditor Agent ........................ 14
2.8 Authorization ............................................. 14
2.9 Intercreditor Agent as Senior Secured Party;
Other Banking Business .................................... 14
2.10 Notice of Amounts Owed .................................... 14
ARTICLE 3: SHARING ......................................................... 15
3.1 Payments Received by Intercreditor Agent or Collateral
Agent ..................................................... 15
3.2 Payments Received by Any Other Senior Secured Party ....... 15
3.3 Amounts Not Subject to Sharing ............................ 16
3.4 Presumption Regarding Payments ............................ 16
3.5 No Separate Security ...................................... 17
3.6 Subordinated Affiliate Bonds .............................. 17
ARTICLE 4: VOTING AND DECISION MAKING ...................................... 17
4.1 Decision Making ........................................... 17
4.2 Voting Generally; Intercreditor Votes ..................... 18
4.3 Intercreditor Votes; Each Party's Entitlement to Vote ..... 19
4.4 Intercreditor Votes; Votes Allocated to Each Party ........ 19
ARTICLE 5: DEFAULTS AND REMEDIES ........................................... 20
5.1 Notice of Defaults ........................................ 20
5.2 Election to Pursue Remedies Following Events of Default ... 20
5.3 Exercise of Remedies ...................................... 22
i
<PAGE>
Page
----
ARTICLE 6: MODIFICATIONS; INSTRUCTIONS; OTHER
RELATIONSHIPS ................................................... 23
6.1 100% Voting Issues: Modifications of, and Instructions
with Respect to, Fundamental Aspects of the Financing
Documents ................................................. 23
6.2 Majority Voting Issues: Modifications of, and
Instructions with Respect to, Material Aspects of
the Financing Documents ................................... 23
6.3 Certain Procedures Relating to Modifications,
Instructions and Exercises of Discretion .................. 23
6.4 Modifications by Senior Secured Parties to their
Respective Facilities ..................................... 25
6.5 Effect of Modification on Intercreditor Agent ............. 25
6.6 Provision of Information; Meetings ........................ 25
ARTICLE 7: MISCELLANEOUS ................................................... 27
7.1 Addresses ................................................. 27
7.2 Delay and Waiver .......................................... 29
7.3 Entire Agreement .......................................... 29
7.4 Governing Law ............................................. 29
7.5 Severability .............................................. 30
7.6 Headings .................................................. 30
7.7 Successors and Assigns .................................... 30
7.8 Reinstatement ............................................. 30
7.9 Counterparts .............................................. 31
7.10 Termination ............................................... 31
7.11 No Partnership ............................................ 31
7.12 No Reliance ............................................... 31
7.13 Third-Party Beneficiaries ................................. 31
7.14 Obligations of Obligors Unaffected ........................ 31
7.15 Action without the Intercreditor Agent .................... 31
7.17 Indemnification ........................................... 32
7.18 Additional Senior Secured Parties ......................... 35
7.19 Amendments ................................................ 36
Schedule A - Fundamental Decisions
ii
<PAGE>
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT (this "Agreement"), dated as of May 21,
1999, is by and among LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Partnership"), LSP BATESVILLE FUNDING CORPORATION, a Delaware
corporation (the "Funding Corporation"), CREDIT SUISSE FIRST BOSTON, as VEPCO
L/C Agent, THE BANK OF NEW YORK, as Trustee, Collateral Agent, Administrative
Agent and Intercreditor Agent, and each other Senior Secured Party (or
representative thereof) that becomes a party to this Agreement pursuant to
Section 7.18.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW natural
gas-fired combined cycle electric generation facility located in Batesville,
Mississippi;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Senior
Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii) $176,000,000
aggregate principal amount of their 8.160% Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, collectively with the Series A Bonds, the
"Bonds") pursuant to the Trust Indenture, dated as of the date hereof (the
"Indenture"), among the Partnership, the Funding Corporation and The Bank of New
York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Amended and Restated Bank Facility Credit Agreement, dated as of December
15, 1998, among the Partnership, the bank facility lenders party thereto and
Credit Suisse First Boston as agent for the bank facility lenders, and (ii) pay
a portion of the remaining Project Costs; and
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the parties hereto wish to
enter into this Agreement in order to set forth certain intercreditor
provisions, including the method of voting and decision making for the Senior
Secured Parties, the arrangements applicable to joint consultation and actions
in respect of approval rights and waivers, the limitations on
<PAGE>
rights of enforcement upon default and the appointment of the Intercreditor
Agent for the purposes set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS; RULES OF INTERPRETATION
1.1 Definitions. Except as otherwise expressly provided herein,
capitalized terms used in this Agreement and its exhibits and schedules shall
have the meanings given thereto in the Indenture. In addition, the terms set
forth below shall have the respective meanings given such terms below. To the
extent such terms are defined by reference to other Transaction Documents, for
purposes hereof such terms shall continue to have their original definitions
(but will bear the governing law of this Agreement) notwithstanding any
termination, expiration or amendment of such agreements except to the extent the
parties hereto agree to the contrary.
1.1.1 "Acceleration Event" has the meaning set forth in
Section 6.6.3.
1.1.2 "Additional Indebtedness Facility" means the aggregate
amount of the Combined Exposure outstanding under any Additional Indebtedness
Agreement.
1.1.3 "Bond Facility" means the aggregate amount of the
Combined Exposure outstanding under the Indenture.
1.1.4 "Combined Exposure" means, as of any date of
calculation, the sum (calculated without duplication) of the following, to the
extent the same is held by a Senior Secured Party: (i) the aggregate amount of
Indebtedness out standing under the Facility Documents; (ii) the aggregate
amount of all available undrawn financing commit-
2
<PAGE>
ments under the Facility Documents which the Senior Secured Parties party
thereto have no right to terminate other than upon the occurrence of an event
of default (howsoever defined) thereunder (including, without limitation, the
Letter of Credit Commitment under and as defined in the VEPCO L/C Agreement);
and (iii) the maximum amount available to be drawn under all letters of credit
issued pursuant to the Facility Documents (including, without limitation, the
amount available for drawing under any issued VEPCO Letter of Credit).
1.1.5 "Decision Period" means the period of time determined by
the Intercreditor Agent and designated in any notice delivered by the
Intercreditor Agent for the Designated Voting Parties to make any decision
hereunder, subject to the following: (i) any such period of time may be extended
by any Designated Voting Party for a period not to exceed thirty (30) days on a
one time basis only for any notice; (ii) if there is no period for giving of
notice, passage of time or cure of the event or circumstance that is the subject
of such notice (each, a "Cure Period"), if the Cure Period has expired, or if
the remaining Cure Period is less than fifteen (15) days after the date of such
notice, the Decision Period shall end not earlier than fourteen (14) days nor
later than twenty-one (21) days after the date of such notice; and (iii) in all
other cases, the Decision Period shall end not earlier than fourteen (14) days
after the date of such notice nor later than the end of the Cure Period;
provided that the Intercreditor Agent may designate a lesser period (being at
least seven (7) days) as it may consider necessary or advisable in circumstances
where the interests of the Senior Secured Parties or any of them would otherwise
be likely to be prejudiced.
1.1.6 "Default" means any event or condition that, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
1.1.7 "Designated Voting Party" means, at any time, with
respect to any Voting Facility, the Person then entitled to cast the votes under
this Agreement for such Voting Facility. The Designated Voting Party for each
Voting Facility is as follows:
(a) with respect to the Bond Facility, the Designated
Voting Party is the Trustee acting in accordance with the terms and
provisions of the Indenture;
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(b) with respect to the VEPCO L/C Facility, the
Designated Voting Party is the VEPCO L/C Agent acting in accordance
with the terms and provisions of the VEPCO L/C Agreement;
(c) with respect to any Working Capital Facility, the
Designated Voting Party is the Working Capital Agent therefor acting
in accordance with the terms and provisions of the applicable
Working Capital Agreement;
(d) with respect to any Reserve Account L/C Facility,
the Designated Voting Party is the Reserve Account L/C Agent
therefor, acting in accordance with the terms and provisions of the
applicable Reserve Account L/C Agreement; and
(e) with respect to any Additional Indebtedness
Facility, the Designated Voting Party is the Additional Indebtedness
Agent therefor, acting in accordance with terms and provisions of
the applicable Additional Indebtedness Agreement.
1.1.8 "Event of Default" means an "event of default" under any
Facility Document.
1.1.9 "Facility Documents" means, collectively, the Indenture,
the VEPCO L/C Agreement, any Working Capital Agreement, any Reserve Account L/C
Agreement and any Additional Indebtedness Agreement.
1.1.10 "Fundamental Decisions" has the meaning set forth in
Section 6.1.
1.1.11 "Initiating Percentage" means Designated Voting Parties
representing, in the aggregate, (i) in the case of an Event of Default under
Section 8.1(a) of the Indenture or any similar Event of Default under any other
Financing Document, Senior Secured Parties holding at least thirty-three and
one-third percent (33 1/3%) of the aggregate Combined Exposure, and (ii) in the
case of any other Event of Default, Senior Secured Parties holding greater than
fifty percent (50%) of the aggregate Combined Exposure.
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1.1.12 "Intercreditor Vote" means, at any time, a vote
conducted in accordance with the procedures set forth in Article 4 of this
Agreement among the Designated Voting Parties with respect to the particular
decision at issue at such time.
1.1.13 "Loan Party" means any of the Intercreditor Agent, the
Administrative Agent, the Collateral Agent or any Designated Voting Party, as
applicable.
1.1.14 "Majority Secured Parties" means Senior Secured Parties
holding greater than fifty percent (50%) of the aggregate Combined Exposure.
1.1.15 "Modification" means, with respect to any Financing
Document, any amendment, supplement, Waiver or other modification of the terms
and provisions thereof.
1.1.16 "Notice of Default" has the meaning set forth in
Section 5.1.
1.1.17 "Obligors" means, collectively, the Partnership and the
Funding Corporation.
1.1.18 "One Hundred Percent Secured Parties" means Senior
Secured Parties holding one hundred percent (100%) of the aggregate Combined
Exposure; provided, however, that with respect to any decision regarding clause
(a) of Schedule A hereto, "One Hundred Percent Secured Parties" shall mean all
of the Senior Secured Parties affected by such decision.
1.1.19 "Other Unit" has the meaning set forth in Section
2.2.3.
1.1.20 "Proposed Remedies" has the meaning set forth in
Section 5.2.1.
1.1.21 "Relevant Person" means any Project Party, any
Designated Voting Party, any other Senior Secured Party or any other advisor or
other Person with respect to any of the Transaction Documents.
1.1.22 "Remedies Commencement Date" has the meaning set forth
in Section 5.2.2.
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1.1.23 "Remedies Initiation Notice" has the meaning set forth
in Section 5.2.1.
1.1.24 "Remedies Instruction" has the meaning set forth in
Section 5.3.1. 1.1.25 "Required Secured Parties" has the following meaning:
(a) Designated Voting Parties representing, in the
aggregate, the One Hundred Percent Secured Parties with respect to
any Modification, instruction or exercise of discretion pursuant to
Section 6.1;
(b) Designated Voting Parties representing, in the
aggregate, the Majority Secured Parties with respect to any
Modification, instruction or exercise of discretion pursuant to
Section 6.2, except as otherwise provided therein;
(c) the Initiating Percentage with respect to any
decision to exercise remedies made pursuant to Section 5.2.3; or
(d) Designated Voting Parties representing, in the
aggregate, the Majority Secured Parties with respect to any other
action not otherwise described or dealt with in this definition of
"Required Secured Parties" or elsewhere in this Agreement and not
otherwise specifically delegated to the Intercreditor Agent.
1.1.26 "Reserve Account L/C Facility" means the aggregate
amount of the Combined Exposure outstanding under any Reserve Account L/C
Agreement.
1.1.27 "Subordinated Affiliate Bonds" means Bonds which are
beneficially or legally held by any Obligor, any equity participant in any
Obligor or any of their respective Affiliates and which are purchased after a
Default or an Event of Default shall exist and be continuing.
1.1.28 "VEPCO L/C Facility" means the aggregate amount of the
Combined Exposure outstanding under the VEPCO L/C Agreement.
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1.1.29 "Voting Facility" means any of the Bond Facility, the
VEPCO L/C Facility, any Working Capital Facility, any Reserve Account L/C
Facility or any Additional Indebtedness Facility, as applicable.
1.1.30 "Waiver" means, with respect to any particular conduct,
event or other circumstance, any change to an obligation of any Person under any
Transaction Document requiring the consent of one or more Senior Secured
Parties, which consent has the effect of excusing performance of or compliance
with such obligation, or any Default or Event of Default with respect thereto to
the extent relating to such conduct, event or circumstance, provided that any
Waiver shall be limited solely to the particular conduct, event or circumstance
and shall not purport, directly or indirectly, to alter or otherwise modify the
relevant obligation with respect to future occurrences of the same conduct,
event or circumstance.
1.1.31 "Working Capital Facility" means the aggregate amount
of the Combined Exposure outstanding under any Working Capital Agreement.
1.2 Rules of Interpretation. Except as otherwise expressly provided
herein, the principles of construction set forth in the Indenture shall apply to
this Agreement.
ARTICLE 2
INTERCREDITOR AGENT
2.1 Appointment of the Intercreditor Agent. Each of the Senior
Secured Parties that is a party hereto (for itself, each party on whose behalf
it executes this Agreement and any Person claiming through it) hereby appoints
The Bank of New York to act as its intercreditor agent in connection with the
Project and the Transaction Documents and authorizes it to exercise such rights,
powers, authorities and discretion as are specifically delegated to the
Intercreditor Agent by the terms hereof and any of the other Financing Documents
together with all such rights, powers, authorities and discretion as are
reasonably incidental thereto. By its signature hereto, The Bank of New York
accepts such appointment.
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2.2 Intercreditor Agent's Rights and Obligations.
2.2.1 In the course of its duties hereunder, the Intercreditor
Agent may at all times:
(a) assume, absent written notice to the contrary, that
(i) any representation made by the Partnership, the Funding
Corporation or any Project Party in connection with any Transaction
Document is true, (ii) no Default or Event of Default exists; and
(iii) neither the Partnership, the Funding Corporation nor any
Project Party is in breach or default of its obligations under any
Transaction Document;
(b) assume any notice or certificate given by any
Relevant Person has been validly given by a Person authorized to do
so and act upon such notice or certificate unless the same is
revoked or superseded by a further such notice or certificate;
(c) assume that the address, telecopy and telephone
numbers for the giving of any written notice to any Person hereunder
are those identified in Section 7.1 until it has received from such
Person a written notice designating some other office of such Person
to replace any such address, telecopy or telephone number, and act
upon any such notice until the same is superseded by a further such
written notice;
(d) pay reasonable fees and expenses for the advice or
services of any lawyers, accountants, engineers, consultants or
other experts whose advice or services the Intercreditor Agent may
determine are necessary, expedient or desirable and rely upon any
advice so obtained, and, if it so decides to make any such payment,
such fees and expenses shall be reimbursed to the Intercreditor
Agent pursuant to Section 7.16; provided that it shall be under no
obligation to act upon such advice if it does not deem such action
to be appropriate;
(e) rely upon a certificate signed by or on behalf of
any Relevant Person with respect to any matters of fact which might
reasonably be expected to be within the knowledge of such Relevant
Person;
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(f) rely upon any communication or document from any
Person reasonably believed by it to be genuine;
(g) refrain from acting or continuing to act in
accordance with any instructions of the Required Secured Parties to
begin any legal action or proceeding arising out of or in connection
with any Transaction Document until it shall have received such
indemnity, security or undertaking for costs from the Senior Secured
Parties as it may require (whether by payment in advance or
otherwise) for all costs, claims, losses and expenses (including
reasonable legal fees and expenses) and liabilities which it will or
may expend or incur in complying or continuing to comply with such
instructions; and
(h) seek instructions from the Required Secured Parties
as to the exercise of any of its rights, powers or discretion
hereunder and in the event that it does so it shall not be
considered as having acted unreasonably when acting in accordance
with such instructions or, in the absence of any (or any clear)
instructions, when refraining from taking any action or exercising
any right, power or discretion hereunder.
2.2.2 The Intercreditor Agent shall, subject to Section 2.2.1:
(a) promptly provide each Designated Voting Party with a
copy of any material notice or document which it, in its capacity as
Intercreditor Agent, receives from or delivers to: (i) any Obligor;
(ii) any Project Party; (iii) the Administrative Agent; (iv) the
Collateral Agent; (v) any other Designated Voting Party; (vi) any
Independent Consultant; or (vii) any Governmental Authority;
(b) except as otherwise provided herein, act as
Intercreditor Agent hereunder in accordance with any instructions
given to it by the Required Secured Parties; and
(c) if so instructed by the Required Secured Parties,
refrain from exercising any right, power or discretion vested in it
as the Intercreditor Agent hereunder.
2.2.3 The relevant branch(es), division(s) or department(s) of
the Person serving as the Intercreditor Agent hereunder shall be treated as a
separate entity
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from any other of its branches, divisions or departments ("Other Units") and, if
any Other Unit should act for any Senior Secured Party in any capacity in
relation to any other matter, any information given by such Senior Secured Party
to such Other Unit in such other capacity may be treated as confidential by such
Person.
2.3 Intercreditor Agent.
2.3.1 Notwithstanding anything to the contrary expressed or
implied herein, the Intercreditor Agent shall not:
(a) be bound to inquire as to (i) whether or not any
representation made by any Person in connection with any
Transaction Document is true, (ii) the occurrence or otherwise of
any Default or Event of Default, (iii) the performance by any Person
of its obligations under any of the Trans action Documents or (iv)
any breach of or default by any Person of its obligations under any
of the Transaction Documents;
(b) be bound to account to any Person for any sum or the
profit element of any sum received by it for its own account;
(c) be bound to disclose to any other Person any
information relating to the Project or any Person if such disclosure
would, or might, constitute a breach of any law or regulation or be
otherwise actionable at the suit of any Person;
(d) be under any fiduciary duties or obligations other
than those for which express provision is made herein or in any of
the other Financing Documents to which it is a party; or
(e) whether at the direction of the Required Secured
Parties (pursuant to a Remedies Instruction or otherwise), and
regardless of whether it is indemnified with respect thereto, be
required to take or direct the Collateral Agent to take any action
which it believes, based on a written opinion of counsel, is in
conflict with any Applicable Law, any Governmental Approval, this
Agreement or any other Financing Document or any order of any court
or administrative agency.
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2.3.2 The Intercreditor Agent is not responsible for and does
not accept any responsibility for: (i) any recitals, statements, representations
or warranties made by any Obligor, any Project Party or any Senior Secured Party
(other than itself in its capacity as Intercreditor Agent) contained in this
Agreement or any other Transaction Document or in any certificate or other
document referred to or provided for in, or received by any Senior Secured Party
under, this Agreement or any other Transaction Document; (ii) the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Transaction Document or any other document referred to or
provided for hereunder or thereunder; (iii) the value, validity, perfection,
priority or enforceability of any Lien purported to be created by any Senior
Security Document; or (iv) any failure by any Obligor, any Project Party or any
Senior Secured Party (other than itself in its capacity as Intercreditor Agent)
to perform its obligations under this Agreement or any other Transaction
Document; provided, however, that nothing in this Section 2.3.2 shall be deemed
or construed as limiting the rights of the Intercreditor Agent or any Senior
Secured Party or the obligations of any Project Party, in each case as is set
forth in the applicable Transaction Documents.
2.3.3 Each of the Senior Secured Parties that is a party
hereto (for itself, each party on whose behalf it executes this Agreement and
any Person claiming through it) understands and agrees that it has itself been,
and will continue to be, solely responsible for making its own independent
appraisal of, and investigations into, the financial condition,
creditworthiness, condition, affairs, status and nature of each Obligor and each
Project Party and, accordingly, each such Senior Secured Party warrants to the
Intercreditor Agent that it has not relied on and will not hereafter rely on the
Intercreditor Agent:
(a) to check or inquire on its behalf into the adequacy,
accuracy or completeness of any information provided by any Relevant
Person in connection with any of the Transaction Documents or the
transactions therein contemplated (whether or not such information
has been or is hereafter circulated to such Relevant Person by the
Intercreditor Agent); or
(b) to assess or keep under review on its behalf the
financial condition, creditworthiness, condition, affairs, status or
nature of any Relevant Person.
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It is agreed and understood that the Trustee makes no representation as to
itself but only in its capacity as the Trustee and based only on the
authorization and representations set forth in the Indenture.
2.4 Defaults. The Intercreditor Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Intercreditor Agent has received a written notice (i) from a Designated
Voting Party, referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "Notice of Default", (ii) from any
Obligor referring to a Transaction Document, describing such Default or Event
of Default, (iii) from a Project Party stating that a default exists pursuant to
any Transaction Document to which it is a party or (iv) from the Collateral
Agent stating that it has received a notice from a Project Party that a default
exists pursuant to a Transaction Document to which such Project Party is a
party. If the Intercreditor Agent receives such a notice of the occurrence of a
Default or an Event of Default, the Intercreditor Agent shall give prompt notice
thereof to each Designated Voting Party (and each Designated Voting Party shall,
in turn, give prompt notice thereof to each party to its respective Facility
Document). The Intercreditor Agent shall take such action with respect to any
Default or Event of Default as is provided in this Intercreditor Agreement;
provided, however, that unless and until the Intercreditor Agent shall have
received directions from the Required Secured Parties, the Intercreditor Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as is in the best
interest of the Senior Secured Parties.
2.5 Nonliability. Each of the Senior Secured Parties that is a party
hereto (for itself, each party on whose behalf it executes this Agreement and
any Person claiming through it) agrees that neither the Intercreditor Agent nor
any of its officers, directors, employees, affiliates or agents shall be liable
to any Senior Secured Party or any other Relevant Person for any action taken or
omitted under this Agreement or under the other Financing Documents or in
connection herewith or therewith except to the extent directly caused by the
Intercreditor Agent's gross negligence or willful misconduct, as finally
determined by a court of competent jurisdiction. Each of the Senior Secured
Parties that is a party hereto (for itself, each party on whose behalf it
executes this Agreement and any Person claiming through it) hereby releases,
waives, discharges and exculpates the Intercreditor Agent for any action taken
or omitted under this Agreement or under the other Financing Documents and from
any cost, claim, loss, expense or liability resulting therefrom, except to the
extent directly caused by the Intercreditor Agent's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction.
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2.6 Resignation of the Intercreditor Agent.
2.6.1 The Intercreditor Agent may resign its appointment
hereunder at any time without providing any reason therefor by giving not less
than thirty (30) days prior written notice to that effect to each of the other
parties hereto, provided that neither such resignation or a removal of the
Intercreditor Agent pursuant to Section 2.7, shall be effective until:
(a) a successor for the Intercreditor Agent is appointed
in accordance with (and subject to) the succeeding provisions of
this Section 2.6;
(b) the resigning or removed Intercreditor Agent has
transferred to its successor all of its rights and obligations in
its capacity as Intercreditor Agent under this Agreement and the
other Financing Documents; and
(c) the successor Intercreditor Agent has executed and
delivered an agreement to be bound by the terms hereof and of the
other Financing Documents and to perform all duties required of the
Intercreditor Agent hereunder and under the other Financing
Documents.
2.6.2 If the Intercreditor Agent has given notice of its
resignation pursuant to this Section 2.6 or if the Required Secured Parties
give the Intercreditor Agent notice of removal pursuant to Section 2.7, then a
successor to the Intercreditor Agent may be appointed by the Required Secured
Parties during the period of such notice but, if no such successor is so
appointed within thirty (30) days after the above notice, the Intercreditor
Agent may petition a court of competent jurisdiction or it may appoint such a
successor which (a) is authorized under the laws of the jurisdiction of its
incorporation to exercise corporation trust powers, (b) shall have a combined
capital and surplus of at least fifty million Dollars (US$50,000,000), (c) shall
be rated "Baa3" or better by Moody's or "BBB-" or better by S&P and (d) shall be
acceptable to the Required Secured Parties (provided that, if the Required
Secured Parties do not confirm such acceptance in writing within thirty (30)
days following selection of such successor by the Intercreditor Agent or select
another Intercreditor Agent within such thirty (30) day period, then they shall
be deemed to have given such acceptance and such successor shall be deemed
appointed as the Intercreditor Agent hereunder) and, so long as no Default or
Event of Default has occurred and is continuing, the Partnership and the Funding
Corporation.
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2.6.3 If a successor to the Intercreditor Agent is appointed
under the provisions of Section 2.6.1 or Section 2.6.2, then:
(a) the predecessor Intercreditor Agent shall be
discharged from any further obligation hereunder (but without
prejudice to any accrued liabilities);
(b) notwithstanding the predecessor Intercreditor
Agent's resignation pursuant to this Section 2.6 or removal pursuant
to Section 2.7, the provisions of this Agreement shall continue to
inure to its benefit as to any actions taken or omitted to be taken
by it under this Agreement and the other Financing Documents while
it was the Intercreditor Agent; and
(c) the successor Intercreditor Agent and each of the
other parties hereto shall have the same rights and obligations
among themselves as they would have had if such successor
Intercreditor Agent originally had been a party to this Agreement.
2.7 Removal of the Intercreditor Agent. Designated Voting Parties
representing, in the aggregate, Senior Secured Parties holding at least
thirty-three percent (33%) of the Combined Exposure may remove the Intercreditor
Agent from its appointment hereunder with or without cause by giving not less
than ninety (90) days prior written notice to that effect to the Intercreditor
Agent and the Obligors; provided that no such removal shall be effective until a
successor for the Intercreditor Agent is appointed in accordance with Section
2.6.
2.8 Authorization. The Intercreditor Agent is hereby authorized by
each of the Senior Secured Parties that is a party hereto (for itself, each
party on whose behalf it executes this Agreement and any Person claiming through
it) to execute, deliver and perform each of the Financing Documents to which the
Intercreditor Agent is a party and each Senior Secured Party that is a party
hereto (for itself, each party on whose behalf it executes this Agreement and
any Person claiming through it) agrees to be bound by all of the agreements of
the Intercreditor Agent contained in the Financing Documents.
2.9 Intercreditor Agent as Senior Secured Party; Other Banking
Business. With respect to any Senior Secured Obligations held by it, the Person
serving as
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Intercreditor Agent hereunder shall have the same rights and powers under the
Financing Documents as any other Senior Secured Party and may exercise the same
as though it were not the Intercreditor Agent. The term "Senior Secured Party",
"Senior Secured Parties", "Holder" or "Holders", and any other similar terms,
when used with respect to such Person, shall, unless otherwise expressly
indicated, include such Person in its individual capacity. Such Person and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with any Obligor or
any other Person without any duty to account therefor to the Senior Secured
Parties.
2.10 Notice of Amounts Owed. Upon the request of the Intercreditor
Agent, in connection with the taking of any action hereunder by the
Intercreditor Agent, each Senior Secured Party hereto shall promptly notify the
Intercreditor Agent in writing, as of any time that the Intercreditor Agent may
specify in such request, of (i) the aggregate amount of Senior Secured
Obligations owing under its respective Facility Document as of such date, (ii)
the principal, interest, expenses and other components of such Senior Secured
Obligations, and (iii) such other information as the Intercreditor Agent may
reasonably request.
ARTICLE 3
SHARING
3.1 Payments Received by Intercreditor Agent or Collateral Agent.
Subject to the provisions of Section 3.3 and the provisions set forth in each
Facility Document which affect the allocation of funds among the Senior Secured
Parties party to such Facility Document, all amounts paid to the Collateral
Agent or realized by the Collateral Agent that are to be redistributed to the
Senior Secured Parties (other than the Designated Voting Parties in their
respective capacities as agents) shall be paid, to the extent funds are
available, to each Senior Secured Party (without priority of any one over any
other except as set forth in Section 3.3) in accordance with Article 4 of the
Collateral Agency Agreement.
3.2 Payments Received by Any Other Senior Secured Party. Except as
excluded in Section 3.3 or otherwise provided under this Agreement, if any
Senior Secured Party (other than the Collateral Agent as contemplated by Section
3.1 above) shall obtain any amount (whether (i) by way of voluntary or
involuntary payment, (ii) by
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virtue of an exercise of any right of set-off, banker's lien or counterclaim,
(iii) as proceeds of any insurance policy covering any properties or assets of
any Obligor, (iv) from proceeds of liquidation or dissolution of any Obligor or
distribution of its assets among its creditors, however such liquidation,
dissolution or distribution may occur, (v) as payment of any Senior Secured
Obligations following the acceleration thereof, whether in whole or in part,
(vi) as consideration for the agreement of such Senior Secured Party or as part
of any transaction or series of related transactions in which such Senior
Secured Party shall have agreed to waive or amend any provision of any Financing
Document, (vii) from any realization on any Senior Collateral, (viii) by virtue
of the application of any provision of any of the Financing Documents (other
than this Agreement), or (ix) in any other manner) other than amounts obtained
from or through the Collateral Agent pursuant to the Financing Documents or
amounts representing capitalized interest in respect of any Financing Document,
such Senior Secured Party shall forthwith notify the Intercreditor Agent thereof
and shall promptly, and in any event within ten (10) Banking Days of its so
obtaining the same, pay such amount (less any reasonable costs and expenses
incurred by such Senior Secured Party in obtaining such amount) to the
Collateral Agent for the account of the Senior Secured Parties, to be shared
among the Senior Secured Parties in accordance with Section 3.1. Upon receipt of
any such payment, the Collateral Agent shall distribute the appropriate amount
to each Senior Secured Party as provided in the previous sentence.
3.3 Amounts Not Subject to Sharing. Notwithstanding any other
provision of this Agreement or any other Financing Document, no Senior Secured
Party shall have any obligation to share:
(a) any payment made to a Senior Secured Party pursuant
to any provision of any Financing Document which is in the nature of
a closing or commitment fee or an indemnity against or reimbursement
for (i) additional funding costs and similar costs incurred by such
Senior Secured Party including, without limitation, payments with
respect to increased reserve provisions, capital adequacy
provisions, make-whole premiums, breakage provisions or other
similar provisions, (ii) costs with respect to taxes incurred or
payable by such Senior Secured Party on principal, interest and
other payments payable to it under the Financing Documents, and
(iii) costs, liabilities, claims and other expenses incurred by such
Senior Secured Party which are the subject of any indemnity or
reimbursement provision contained in the Financing Documents;
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(b) any non pro rata prepayment made to any Senior
Secured Party pursuant to any Financing Document; and
(c) any payment of fees made to the Intercreditor Agent
pursuant to any separate fee arrangement between the Intercreditor
Agent and the Obligors.
Notwithstanding the foregoing, sharing of payments made with respect to a
particular Voting Facility shall be subject to the sharing provisions of the
applicable Facility Document.
3.4 Presumption Regarding Payments. For purposes hereof, any payment
received by a Senior Secured Party pursuant to this Article 3 may be presumed by
such Senior Secured Party to have been properly received by such Senior Secured
Party in accordance with this Article 3 unless such Senior Secured Party
receives notice from any other Senior Secured Party that such payment was not
made in accordance herewith. If any such distributed or shared payment is
rescinded or must otherwise be restored by the Senior Secured Party that first
obtained it, each other Senior Secured Party that shares the benefit of such
payment shall return to such Senior Secured Party its portion of the payment so
rescinded or required to be restored.
3.5 No Separate Security. Each Senior Secured Party that is a party
hereto (for itself, each party on whose behalf it executes this Agreement and
any Person claiming through it) (a) agrees that all collateral security pledged
under the Senior Security Documents is for the joint benefit of all the Senior
Secured Parties and (b) represents and warrants to each other Senior Secured
Party that, in respect of the Senior Secured Obligations owing to it, it has
received no security or guarantees from the Obligors or any of their respective
Affiliates other than its interest in the Senior Collateral as provided in the
Senior Security Documents.
3.6 Subordinated Affiliate Bonds. Notwithstanding any provision of
this Article 3 or any Financing Document to the contrary, so long as any Default
or Event of Default shall exist and be continuing, no sharing or other payment
shall be made in respect of any Subordinated Affiliate Bonds until the remainder
of the Senior Secured Obligations have been indefeasibly paid in full in cash or
in cash equivalents. Any proceeds otherwise payable as contemplated by this
Agreement and the Collateral Agency Agreement in
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respect of any Subordinated Affiliate Bonds shall be distributed to the
remainder of the Senior Secured Parties in accordance with Article 4 of the
Collateral Agency Agreement.
ARTICLE 4
VOTING AND DECISION MAKING
4.1 Decision Making.
4.1.1 Each Senior Secured Party that is a party hereto (for
itself, each party on whose behalf it executes this Agreement and any Person
claiming through it) agrees that no Senior Secured Party shall, except in
accordance with the provisions of this Agreement, but without prejudice to any
separate rights expressly granted to a Designated Voting Party under the
Facility Documents, exercise or enforce any right, remedy or power under any
Financing Document where such right, remedy or power arises as a result of a
Default or an Event of Default under such Financing Document (it being agreed
that no acceleration in respect of an Event of Default or termination or
suspension of a commitment under a Facility Document shall be deemed to be a
remedy for any purposes of this Agreement).
4.1.2 Each Senior Secured Party that is a party hereto (for
itself, each party on whose behalf it executes this Agreement and any Person
claiming through it) agrees that each decision made in accordance with the terms
of this Agreement shall be binding upon each Senior Secured Party that is a
party hereto (for itself, each party on whose behalf it executes this Agreement
and any Person claiming through it) and each other party to the Financing
Documents.
4.1.3 Notwithstanding Section 4.1.2 or any other term or
provision of this Agreement, no term or provision of any Facility Document may
be Modified except with the written consent of the applicable Designated Voting
Party party thereto (acting in accordance with the terms of the relevant
Facility Document), but any Modification of a provision of any other Financing
Document made in accordance with the terms of this Agreement and such Financing
Document that is incorporated by reference into such Facility Document shall
also be deemed to modify such Facility Document, mutatis mutandis, without such
written consent of such Designated Voting Party.
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4.2 Voting Generally; Intercreditor Votes. Where, in accordance with
this Agreement or any other Financing Document, any Modification, direction or
other decision of the Intercreditor Agent, the Collateral Agent or the
Administrative Agent is required (other than as otherwise provided in Section
5.2), the granting or withholding of such Modification, the giving of such
direction, or the making of such other decision shall be determined through an
Intercreditor Vote; provided, however, that the Intercreditor Agent shall (or
shall instruct any party it is entitled to instruct to), at the request of the
Partnership, the Funding Corporation or any Designated Voting Party, make such
corrections to any Financing Document so long as the corrections are of patent
errors in the document and reflective of the clear intent of the parties to such
document (for example, errant cross-references and misspelled defined terms) and
do not involve any material change whatsoever (the Intercreditor Agent being
entitled to rely on the advice of counsel and having all of the rights provided
to it under Article 2 hereof).
4.3 Intercreditor Votes; Each Party's Entitlement to Vote.
4.3.1 Each Designated Voting Party shall be entitled to vote
in each Intercreditor Vote conducted under this Agreement.
4.3.2 For all purposes of voting under this Agreement, no
actual vote need be taken in respect of any Bond if the Indenture permits the
Trustee to rely on a certificate, report of an expert or Rating Agency
confirmation in deter mining how to cast its votes in any Intercreditor Vote.
Upon receipt of such certificate, report or confirmation the Trustee shall cast
its votes in accordance therewith.
4.3.3 Except (i) for the limitation on the enforcement of
rights, remedies and powers under Section 4.1.1, (ii) for matters requiring an
Intercreditor Vote under Section 4.2 or this Section 4.3 or (iii) as otherwise
expressly provided for in a Facility Document, the respective Designated Voting
Parties may make all decisions, determine the acceptability of and rely on
certificates, exercise discretion, execute Modifications and grant Waivers as
are contemplated by such Facility Document.
4.4 Intercreditor Votes; Votes Allocated to Each Party.
4.4.1 Each Person that is a Designated Voting Party for any
Intercreditor Vote shall have a number of votes in such Intercreditor Vote equal
to the portion of the Combined Exposure represented by its Voting Facility.
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4.4.2 In calculating the percentage of the Combined Exposure
in any Intercreditor Vote consenting to, approving, waiving or otherwise
providing direction with respect to a decision which requires an Intercreditor
Vote, the total dollar amount of the Combined Exposure voting, through the
Designated Voting Parties, in any one direction with respect to such decision
shall be divided by the aggregate Combined Exposure. Each Designated Voting
Party and each of the Senior Secured Parties that is a party hereto (for itself,
each party on whose behalf it executes this Agreement and any Person claiming
through it) hereby waives any and all rights it may have to object to or seek
relief from the decision of the Designated Voting Parties voting with respect to
such matter and agrees to be bound by such decision. Nothing contained in this
Section 4.4.2 shall preclude any Designated Voting Party from participating in
any re-voting or further voting relating to such matter.
4.4.3 No Bonds held by any Obligor, any partner, shareholder
or member of any Obligor or any of their respective Affiliates shall have any
vote in respect of any matter and such Bonds shall be disregarded for all
purposes of any such vote.
ARTICLE 5
DEFAULTS AND REMEDIES
5.1 Notice of Defaults. Promptly after any Designated Voting Party
obtains knowledge of the occurrence of any Default or Event of Default under any
Financing Document to which it is a party or that any Default or Event of
Default under any Financing Document to which it is a party has ceased to exist
or has been rescinded, such Designated Voting Party shall notify the
Intercreditor Agent in writing thereof (such notice, a "Notice of Default").
Each such Notice of Default shall specifically refer to this Section 5.1 and
shall describe such Default or Event of Default (or its cessation or rescission)
in reasonable detail (including the date of occurrence of the same). Upon
receipt by the Intercreditor Agent of any such Notice of Default, it shall
promptly send copies thereof to each Designated Voting Party.
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5.2 Election to Pursue Remedies Following Events of Default.
5.2.1 At any time after the occurrence of an Event of Default,
any Designated Voting Party in respect of a Facility Document under which an
Event of Default has occurred and is continuing may serve a notice (such notice,
a "Remedies Initiation Notice") on the Intercreditor Agent which describes the
Event of Default with respect to which such Designated Voting Party is seeking
to pursue remedies as well as the various remedies (the "Proposed Remedies")
that such Designated Voting Party wishes the Intercreditor Agent to pursue.
5.2.2 If the Intercreditor Agent receives any Remedies
Initiation Notice from any Designated Voting Party pursuant to Section 5.2.1,
and if such notice has not been withdrawn by such Designated Voting Party prior
to the end of the fifth Business Day after the day on which the Intercreditor
Agent receives such notice, the Intercreditor Agent shall promptly after such
fifth Business Day provide each Designated Voting Party with a copy of such
notice and inform each of them of the date (such date, which shall be the 30th
day after the date that the Intercreditor Agent receives the Remedies Initiation
Notice, the "Remedies Commencement Date") on which the Intercreditor Agent will
commence the exercise of the Proposed Remedies if so directed by Designated
Voting Parties constituting the Initiating Percentage. Unless the Remedies
Initiation Notice was executed by Designated Voting Parties constituting the
Initiating Percentage, the Intercreditor Agent shall request instructions from
the Designated Voting Parties as to whether the Intercreditor Agent should
exercise the Proposed Remedies or other remedies on the Remedies Commencement
Date or no remedies.
5.2.3 If, on or prior to the Remedies Commencement Date (as
that date may be extended pursuant to the definition of Decision Period),
Designated Voting Parties constituting the Initiating Percentage direct the
Intercreditor Agent to exercise remedies (which direction may include an
instruction to exercise the Proposed Remedies or an instruction to exercise
other remedies), the Intercreditor Agent shall exercise any such remedies in
accordance with Section 5.4 below beginning on the Remedies Commencement Date as
directed by Designated Voting Parties constituting Initiating Percentage,
provided that the Event of Default which is the subject of such Remedies
Initiation Notice has not been previously cured or waived (by Modification of
the provisions giving rise to such Event of Default in accordance with the terms
of Article 6 of this Agreement).
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5.2.4 During the period prior to the Remedies Commencement
Date with respect to any Event of Default, no Senior Secured Party (other than
the Intercreditor Agent as provided in the proviso to Section 2.4) shall be
entitled to exercise any remedy in connection with such Event of Default, nor
shall any Senior Secured Party instruct the Intercreditor Agent to exercise any
remedy in connection with such Event of Default.
5.2.5 A Designated Voting Party may serve only one Remedies
Initiation Notice with respect to any Event of Default and each Remedies
Initiation Notice served by such Designated Voting Parties shall be deemed to
have been served with respect to all Events of Default in existence on the date
such Remedies Initiation Notice is served.
5.2.6 Nothing in this Section 5.2 shall be construed to
restrict the right of the Required Secured Parties to elect at any time to agree
to any Modification of the Financing Documents in accordance with Article 6
that could have the effect of waiving or rescinding such Event of Default.
5.3 Exercise of Remedies.
5.3.1 If the Required Secured Parties pursuant to Section
5.2.3 above elect to exercise remedies, then subject to Section 5.3.3 the
Intercreditor Agent shall follow the written instruction regarding the exercise
of remedies delivered by the Required Secured Parties which may be in the form
of an Intercreditor Vote (the "Remedies Instruction"). Each Remedies Instruction
shall specify the particular action that the Required Secured Parties propose to
cause the Intercreditor Agent to take.
5.3.2 At the direction of the Required Secured Parties
pursuant to a Remedies Instruction, the Intercreditor Agent shall exercise the
remedies provided therein (provided that the relevant Senior Security Documents
permit such remedy) including, if so directed, to promptly instruct the
Collateral Agent to seek to enforce the Senior Security Documents, to realize
upon the Senior Collateral or, in the case of a proceeding against an Obligor
under the Bankruptcy Code, to seek to enforce the claims of the Senior Secured
Parties thereunder.
5.3.3 Each Remedies Instruction shall, except as otherwise
provided herein, be effective on the date set forth in such notice. In the event
that more
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than one group of Senior Secured Parties constituting the Required Secured
Parties delivers a Remedies Instruction, then the Remedies Instruction from the
group representing the greatest percentage of the Combined Exposure shall
control unless the Intercreditor Agent has already commenced action called for
by another Remedies Instruction having an earlier effective date, and the
Intercreditor Agent shall be entitled to ignore any Remedies Instruction
provided by any other group of Senior Secured Parties.
5.3.4 Allocation of Collateral Proceeds. Upon the occurrence
of an Acceleration Event, the proceeds of any collection, recovery, receipt,
appropriation, realization or sale of any or all of the Senior Collateral or
the enforcement of any Senior Security Document ("Collateral Proceeds") shall be
applied in accordance with Article 4 of the Collateral Agency Agreement.
5.3.5 No Remedies. No Bonds held by any Obligor, any partner,
shareholder or member of any Obligor or any of their respective Affiliates shall
have the benefit of any remedies until the remainder of the Senior Secured
Obligations are indefeasibly paid in full in cash or cash equivalents.
ARTICLE 6
MODIFICATIONS; INSTRUCTIONS; OTHER RELATIONSHIPS
6.1 100% Voting Issues: Modifications of, and Instructions with
Respect to, Fundamental Aspects of the Financing Documents. With respect to any
of the matters listed on the attached Schedule A (the "Fundamental Decisions"),
(i) no Modification shall be agreed to by the Intercreditor Agent, the
Collateral Agent or the Administrative Agent under any Financing Document, (ii)
no instruction shall be given to the Intercreditor Agent under or with respect
to any Financing Document, and (iii) no discretion shall be exercised by the
Intercreditor Agent under or with respect to any Financing Document, unless, in
each case, an Intercreditor Vote is taken in accordance with the procedures set
forth in Section 6.4 and the One Hundred Percent Secured Parties, through the
Designated Voting Parties, authorize the Intercreditor Agent to agree to such
Modification, provide the Intercreditor Agent with such instruction or authorize
the Intercreditor Agent to exercise such discretion, as the case may be.
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6.2 Majority Voting Issues: Modifications of, and Instructions with
Respect to, Material Aspects of the Financing Documents. Except as expressly
provided for in Section 6.1 and Section 6.4 and except as set forth in the
proviso to Section 4.2, (i) no Modification shall be agreed to by the
Intercreditor Agent, the Collateral Agent or the Administrative Agent under any
Financing Document, (ii) no instruction shall be given to the Intercreditor
Agent under or with respect to any Financing Document, and (iii) no discretion
shall be exercised by the Intercreditor Agent under or with respect to any
Financing Document, unless, in each case, an Intercreditor Vote is taken in
accordance with the procedures set forth in Section 6.3 and the Majority Secured
Parties authorize the Intercreditor Agent to agree to such Modification, provide
the Intercreditor Agent with such instruction or authorize the Intercreditor
Agent to exercise such discretion, as the case may be.
6.3 Certain Procedures Relating to Modifications, Instructions and
Exercises of Discretion.
6.3.1 If, at any time:
(a) the Intercreditor Agent (i) proposes to agree to a
Modification or proposes to authorize any Senior Secured Party to
agree to a Modification under any Financing Document or (ii)
proposes to exercise any discretion conferred on it under the
Financing Documents; or
(b) any Designated Voting Party or any Obligor (i) pro
poses that there should be a Modification under any Financing
Document, (ii) proposes to provide the Intercreditor Agent with
instructions regarding the Financing Documents, or (iii) proposes a
matter with respect to which it believes the Intercreditor Agent
should exercise its discretion, and, in each case, notifies the
Intercreditor Agent to that effect;
then the Intercreditor Agent shall promptly notify each Designated Voting Party
of the matter in question specifying:
(i) the nature of the Modification, instruction or
exercise of discretion that is at issue (which shall be
conspicuously stated);
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(ii) the Required Secured Parties applicable to the
decision; and
(iii) the Decision Period determined by the
Intercreditor Agent by which the Designated Voting Parties must
provide the Intercreditor Agent with their votes with respect to
such decision.
6.3.2 Each Designated Voting Party shall, within the specified
Decision Period pursuant to Section 6.3.1, provide a certificate to the
Intercreditor Agent setting forth its vote with respect to the matter for which
its instructions were sought by the Intercreditor Agent under Section 6.3.1.
6.3.3 If (i) a Designated Voting Party fails to provide such a
certificate to the Intercreditor Agent setting forth its vote within the
specified Decision Period and (ii) the matter for which its instructions were
sought by the Intercreditor Agent requires a vote of the One Hundred Percent
Secured Parties, then the Intercreditor Agent shall notify such Designated
Voting Party on or before the close of business on the next Business Day
following the last day of the Decision Period of such Designated Voting Party's
failure to provide such certificate and request that it provide such certificate
no later than 11:00 a.m. on the third Business Day after the last day of the
Decision Period; provided that the Intercreditor Agent shall not be held liable
for any failure by it to provide such notice to such Designated Voting Party;
and provided, further that if such Designated Voting Party does not provide such
certificate by 11:00 a.m. on the third Business Day after the last day of the
Decision Period, such Designated Voting Party shall be deemed to have cast its
votes against the subject decision.
6.4 Modifications by Senior Secured Parties to their
Respective Facilities. Notwithstanding any provision contained herein to the
contrary, each Senior Secured Party (other than the Intercreditor Agent, the
Administrative Agent and the Collateral Agent) may, at any time and from time to
time, without any consent of or notice to any other Senior Secured Party and
without impairing or releasing the obligations of any Person under this
Agreement: (a) make any Modifications under the Facility Document to which such
Person is a party (and to which none of the Intercreditor Agent, the Collateral
Agent or the Administrative Agent is a party); or (b) release anyone liable in
any manner under, or in respect of the Senior Secured Obligations owing under,
such Facility Document (but only in respect of such Senior Secured Obligations).
The rights of each
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Senior Secured Party pursuant to the foregoing sentence are subject to the
provisions of its respective Facility Document regarding such Modifications and
releases.
6.5 Effect of Modification on Intercreditor Agent. No Modifications
shall be made to any Financing Document by any party hereto that adversely
affects the Intercreditor Agent without the written consent of the Intercreditor
Agent.
6.6 Provision of Information; Meetings.
6.6.1 Each Senior Secured Party that is a party hereto (for
itself, each party on whose behalf it executes this Agreement and any Person
claiming through it) agrees that it will, from time to time (as it deems
reasonably necessary or appropriate in its sole judgment), consult with the
other Senior Secured Parties with respect to the Senior Secured Obligations, the
Project, the Senior Collateral or the affairs of the Obligors in general.
6.6.2 Any Designated Voting Party may, at any time following
the occurrence and during the continuation of an Event of Default, request that
a meeting or meetings of the Designated Voting Parties be convened, at
reasonable times and locations, and with reasonable frequency, and upon such
request having been given in accordance herewith, such meetings shall be
convened as provided herein. Such a request for a meeting shall be made by
written notice given to each Designated Voting Party in accordance herewith.
Each such notice shall state the date of such meeting (which shall be not less
than fifteen (15) nor more than thirty (30) days after the date of such notice,
unless otherwise agreed by the Designated Voting Parties) and a general outline
of the issues to be discussed at such meeting. Any Designated Voting Party shall
have the right to appoint any Person (including, without limitation, another
Designated Voting Party) to act as its representative at any such meeting of
Designated Voting Parties. No Person shall be obligated to attend any such
meetings, and no votes shall be taken at such meeting unless consented to by the
Required Secured Parties. Any costs or expenses incurred by any Senior Secured
Party in connection with the meetings described in this Section 6.6.2 shall be
reimbursed to such Senior Secured Party in accordance with Section 7.16.
6.6.3 Each Designated Voting Party shall use reasonable
efforts to make available promptly to each other Designated Voting Party any
material information received by it regarding the occurrence of any Default or
Event of Default or any determination to accelerate the Indebtedness under its
Facility Document (an "Acceleration
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Event") or other event requiring joint action; provided, however, that this
Section 6.6.3 shall not require any Designated Voting Party to make available to
any other Person (a) information subject to confidentiality restrictions or
governmental or security clearance requirements prohibiting such disclosure, (b)
analyses, data or reports prepared solely for internal use, or (c) information
that any Obligor is obligated to provide. No Designated Voting Party shall have
any liability for any failure to make available to any other party such
information or for any inaccuracy or incompleteness of any such information made
available in good faith.
6.6.4 Each Designated Voting Party further agrees that it will
from time to time provide such information to each other Designated Voting Party
as may be necessary to enable such Designated Voting Party to make any
calculation required under the Financing Documents.
6.6.5 Each Designated Voting Party shall provide copies of any
Modifications to the Financing Documents to the Intercreditor Agent.
ARTICLE 7
MISCELLANEOUS
7.1 Addresses. Any communications between the parties hereto or
notices provided herein to be given shall be deemed to have been given only if
such notice is in writing and delivered personally, or by registered or
certified first-class mail with postage prepaid, or made, given or furnished in
writing by confirmed telecopy or facsimile transmission, or by prepaid courier
service to the appropriate party as set forth below:
Funding Corporation: LSP Batesville Funding Corporation
Two Tower Center
20th Floor East
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-1736
Telecopy No.: (732) 249-7290
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Partnership: LSP Energy Limited Partnership
Two Tower Center
20th Floor East
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-6750
Telecopy No.: (732) 249-7290
Trustee: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
VEPCO L/C Agent: Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10022
Attn: Steven Hughes
Telephone No.: (212) 325-9144
Telecopy No.: (212) 325-8321
Collateral Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
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Intercreditor Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Administrative Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Senior Secured
Parties Becoming
Party Hereto After
the Date Hereof: To be specified at the time of execution of a
counterpart hereto pursuant to Section 7.18
hereof.
Any party may change its address by giving notice of such change in the manner
set forth herein. Any notice given to a party by mail or by courier shall be
deemed delivered upon receipt thereof (unless the party refuses to accept
delivery, in which case the party shall be deemed to have accepted delivery upon
presentation). Any notice given to a party by telecopy or facsimile transmission
shall be deemed effective on the date it is actually sent to the intended
recipient by confirmed telecopy or facsimile transmission to the telecopier
number specified above.
7.2 Delay and Waiver. No delay or omission to exercise any right,
power or remedy accruing upon the occurrence of any Default or Event of Default
or any other breach or default of any Obligor under this Agreement shall impair
any such right, power or remedy of any Senior Secured Party nor shall it be
construed to be a waiver of
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any such breach or default, or an acquiescence therein, or in any similar breach
or default thereafter occurring, nor shall any single or partial exercise by any
such party of any right, power or remedy hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or remedy, nor shall
any waiver of any single Default, Event of Default or other breach or default be
deemed a waiver of any other Default, Event of Default or other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any Senior Secured Party of any
Default, Event of Default or other breach or default under this Agreement or any
other Financing Document, or any waiver on the part of any Senior Secured Party,
of any provision or condition of this Agreement or any other Transaction
Document must be in writing and signed by such Senior Secured Party and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or any other Financing Document or by law
or otherwise afforded to any Senior Secured Party, shall be cumulative and not
alternative.
7.3 Entire Agreement. This Agreement and the other Financing
Documents integrate all the terms and conditions mentioned herein or incidental
hereto and supersede all oral negotiations and prior writings in respect to the
subject matter hereof. In the event of any conflict between the terms,
conditions and provisions of this Agreement and any Financing Document the
terms, conditions and provisions of this Agreement shall prevail.
7.4 Governing Law. This Agreement shall be governed by the laws of
the State of New York of the United States of America and shall for all purposes
be governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law; provided, however, that, to the extent any terms
of this Agreement are incorporated in and made part of any other Financing
Document, any such term so incorporated shall for all purposes be governed by
and construed in accordance with the law governing the Financing Document into
which such term is so incorporated.
7.5 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby, and the parties hereto
shall enter into good faith negotiations to replace the invalid, illegal or
unenforceable provision with a view to obtaining the same commercial
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effect as this Agreement would have had if such provision had been legal, valid
and enforceable.
7.6 Headings. Section headings have been inserted in this Agreement
as a matter of convenience for reference only and it is agreed that such section
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
7.7 Successors and Assigns.
7.7.1 The provisions of this Agreement shall be binding upon
and inure to the benefit of each party hereto and their respective successors
and assigns; provided that no Obligor shall assign any of its rights or
obligations hereunder without the consent of the Required Secured Parties.
7.7.2 Any Senior Secured Party may transfer, assign or grant
all or such relevant part of its rights and obligations hereunder in connection
with an assignment or transfer of all or any part of its interest in its Senior
Secured Obligations in accordance with the applicable Financing Documents,
provided that each assignee and participant shall be bound by the terms of this
Agreement and each applicable Financing Document.
7.8 Reinstatement. This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Obligors' obligations hereunder, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any Senior Secured Party. In the event that any payment or any part thereof
is so rescinded, reduced, restored or returned, such obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
7.9 Counterparts. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below shall
constitute a single binding agreement.
7.10 Termination. Upon the indefeasible payment in full in cash of
the Senior Secured Obligations in respect of each Financing Document and the
termination of all of the commitments of the Senior Secured Parties under the
Financing Documents, and
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except as provided in Section 7.8, this Agreement shall terminate and be of no
further force and effect.
7.11 No Partnership. Nothing contained in this Agreement and no
action by any Senior Secured Party is intended to constitute or shall be deemed
to constitute such Senior Secured Parties (or any of them) a partnership,
association, joint venture or other entity.
7.12 No Reliance. No Senior Secured Party has relied on any
representation or warranty of any other Senior Secured Party with respect to
this Agreement and the transactions contemplated hereunder unless such
representation or warranty has been set forth expressly in this Agreement.
7.13 Third-Party Beneficiaries. This Agreement is for the benefit of
the parties hereto (and the Senior Secured Parties claiming through such
parties) and their respective successors and permitted assigns, and nothing
herein shall give any other Person any benefit or any legal or equitable right
or remedy under this Agreement.
7.14 Obligations of Obligors Unaffected. The obligations of the
Obligors under the Financing Documents are absolute and shall be unaffected by
this Agreement.
7.15 Action without the Intercreditor Agent. If the Intercreditor
Agent shall not, in accordance with Section 2.2.1(g), be required to take action
as permitted by Section 2.2.1(g), the Senior Secured Parties may then elect,
upon written notice to the Collateral Agent, the Partnership and the Funding
Corporation (provided that if a Bankruptcy Event shall have occurred with
respect to the Partner ship or the Funding Corporation, such notice shall not be
required and shall be deemed to have been given upon the election by the Senior
Secured Parties to take action hereunder), to take action hereunder, including
pursuing remedies directly and not acting through the Intercreditor Agreement,
if such remedies or other actions are otherwise permitted by the terms of this
Agreement.
7.16 Costs and Expenses. The Partnership and the Funding Corporation
shall pay to each Designated Voting Party all of their costs and expenses
incurred in connection with the preparation, negotiation and closing of this
Agreement and the documents contemplated hereby, including the reasonable fees,
expenses and
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disbursements of counsel retained by the Designated Voting Parties in connection
with the preparation of such documents and any amendments hereof or thereof, the
reasonable fees, expenses and disbursements of the Independent Consultants and
any other engineering, insurance and construction consultants to the Senior
Secured Parties subsequent to the Closing Date, and the costs of the Designated
Voting Parties in administering the Senior Secured Obligations, including the
reasonable travel and reasonable out-of-pocket costs incurred by the Designated
Voting Parties following the Closing Date. The Partnership and the Funding
Corporation shall reimburse the Collateral Agent and the Intercreditor Agent for
all reasonable costs and expenses, including reasonable attorneys' fees and
Independent Consultant expenses, expended or incurred by the Collateral Agent
and the Intercreditor Agent in enforcing the Financing Documents in connection
with a Default or an Event of Default, in actions for declaratory relief in any
way related to the Financing Documents or in collecting any sum which becomes
due on the Senior Secured Obligations.
7.17 Indemnification.
7.17.1 Except as provided in Section 7.17.2, the Partnership
and the Funding Corporation shall indemnify, defend and hold harmless each of
the Intercreditor Agent, the Collateral Agent and the Administrative Agent and
their respective officers, directors, shareholders, affiliates, controlling
persons, employees, agents and servants (collectively, the "Indemnitees") from
and against and reimburse the Indemnitees for:
(a) any and all claims, obligations, liabilities,
losses, damages, injuries (to person, property, or natural
resources), penalties, stamp or other similar taxes, actions, suits,
judgments, costs and expenses (including attorneys' fees subject to
commercially reasonable limitations) of whatever kind or nature,
whether or not well founded, meritorious or unmeritorious, which are
demanded, asserted or claimed against any such Indemnitee
(collectively, "Subject Claims") in any way relating to, or arising
out of or in connection with this Agreement, the other Transaction
Documents or the Project, except for claims by the Partnership or
the Funding Corporation against an Indemnitee (other than such
claims determined against the Partner ship or the Funding
Corporation, as the case may be);
33
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(b) any and all Subject Claims arising in connection
with the release or presence of any Environmentally Regulated
Materials at the Project, whether foreseeable or unforeseeable,
including all costs of removal and disposal of such Environmentally
Regulated Materials, all reasonable costs required to be incurred in
(i) determining whether the Project is in compliance and (ii)
causing the Project to be in compliance, with all Applicable Laws,
all reasonable costs associated with claims for damages to persons
or property, and reasonable attorneys' and consultants' fees and
court costs; and
(c) any and all Subject Claims in any way relating to,
or arising out of or in connection with any claims, suits,
liabilities against an Obligor, any Partner or any of their
Affiliates (it being understood that this Section 7.17 shall not
entitle an Indemnitee to compensation for the costs of monitoring
claims or suits against an Obligor, any Partner or any of their
Affiliates by third persons other than the Indemnitees except to the
extent reasonably required in such a claim or suit where
participation therein by the Indemnitee is reasonably deemed
necessary to protect a material right or interest of the
Indemnitee).
7.17.2 The foregoing indemnities shall not apply with respect
to an Indemnitee, to the extent arising as a result of the gross negligence,
willful misconduct or bad faith of such Indemnitee or its officers or employees,
but shall continue to apply to other Indemnitees (e.g., willful misconduct by an
Intercreditor Agent employee will bar indemnification to the Intercreditor
Agent, but not to the Collateral Agent or the Administrative Agent).
7.17.3 With respect to Subject Claims arising prior to the
payment in full of all Senior Secured Obligations of the Partnership under this
Agreement and the other Financing Documents, the provisions of this Section 7.17
shall survive foreclosure of the Senior Security Documents and satisfaction or
discharge of the Partnership's and the Funding Corporation's obligations under
the Financing Documents, and shall be in addition to any other rights and
remedies of the Senior Secured Parties.
7.17.4 In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall promptly notify the Partnership
and the Funding Corporation of the commencement thereof, and the Partnership and
the Funding Corporation shall be entitled, at its expense, acting through
counsel reason ably acceptable to such Indemnitee, to participate in, and, to
the extent that the Partnership and the
34
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Funding Corporation desire, to assume and control the defense thereof. Such
Indemnitee shall be entitled, at its expense, to participate in any action, suit
or proceeding the defense of which has been assumed by the Partnership or the
Funding Corporation. Notwithstanding the foregoing, the Partnership and the
Funding Corporation and the Indemnitee shall each be entitled to participate
with their own counsel, and the Partnership and the Funding Corporation shall
not be accorded control over the defenses of any such action, suit or
proceedings, if and to the extent that, in the reasonable opinion of such
Indemnitee and its counsel, such action, suit or proceeding involves the genuine
threat of the imposition of criminal liability upon such Indemnitee or a
fundamental conflict of interest between such Indemnitee and the Partnership and
the Funding Corporation or between such Indemnitee and another Indemnitee, and
in such event (other than with respect to disputes between such Indemnitee and
another Indemnitee) the Partnership and the Funding Corporation shall pay the
reasonable expenses of such Indemnitee in such defense.
7.17.5 The Partnership and the Funding Corporation shall
report to such Indemnitee on the status of such action, suit or proceeding as
develop ments shall occur and at least within 60 days of the previous report.
The Partnership and the Funding Corporation shall deliver to such Indemnitee a
copy of each document filed or served on any party in such action, suit or
proceeding.
7.17.6 Notwithstanding the Partnership's and the Funding
Corporation's rights hereunder to control certain actions, suits or proceedings,
any Indemnitee against whom any Subject Claim is made shall be entitled to
compromise or settle any such Subject Claim if (a) failure to compromise or
settle such Subject Claim could reasonably be expected to have a material
adverse effect on such Indemnitee, the Project or such Indemnitee's interest in
the Project and (b) the Partnership and the Funding Corporation refuse to pursue
diligent, good faith and timely efforts, in consultation with the Indemnitee, to
settle such claim; provided that prior to entering into any final and binding
compromise or settlement of any such Subject Claim without the Partnership's and
the Funding Corporation's consent such Indemnitee shall provide notice to, and
shall consult with, the Partnership and the Partnership. Any such compromise or
settlement by the Indemnitee in accordance with this Section 7.17 shall be
binding upon the Partnership and the Funding Corporation for purposes of this
Section 7.17.
7.17.7 Upon payment of any Subject Claim by the Partner ship
and the Funding Corporation pursuant to this Section 7.17 or other similar
indemnity
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provisions contained herein to or on behalf of an Indemnitee, the Partner ship
and the Funding Corporation, without any further action, shall be subrogated to
any and all claims that such Indemnitee may have relating thereto, and such
Indemnitee shall cooperate with the Partnership and the Funding Corporation and
give such further assurances as are necessary or advisable to enable the
Partnership and the Funding Corporation vigorously to pursue such claims.
7.17.8 Any amounts payable by the Partnership and the Funding
Corporation pursuant to this Section 7.17 shall be regularly payable after the
Partnership receives an invoice for such amounts from any applicable Indemnitee.
7.17.9 Notwithstanding anything to the contrary set forth
herein, the Partnership and the Funding Corporation shall not, in connection
with any one legal proceeding or claim, or separate but related proceedings or
claims arising out of the same general allegations or circumstances, in which
the interests of the Indemnitees do not materially differ, be liable to the
Indemnitees (or any of them) under any of the provisions set forth in this
Section 7.17 for the fees and expenses of more than one separate firm of
attorneys (which firm shall be selected by the affected Indemnitees) subject to
the Partnership's and the Funding Corporation's reasonable approval.
The provisions of Sections 7.16 and 7.17 hereunder shall survive
termination of this Agreement and the other Financing Documents and the
resignation or removal of each Senior Secured Party.
7.18 Additional Senior Secured Parties. Each of the parties to this
Agreement agrees that any Person which becomes a Senior Secured Party (or
representative thereof) after the Closing Date shall become a party to this
Agreement upon execution and delivery by such Person of a counterpart to this
Agreement. Any Person that becomes a party to this Agreement pursuant to this
Section 7.18 shall be bound by and subject to the terms and conditions hereof
and the covenants, stipulations and agreements contained herein.
7.19 Amendments. Amendments hereof shall be in writing, shall be
made in accordance with Article VI and shall require the written consent of the
Partnership and the Funding Corporation.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their officers thereunto duly authorized as of the day and year
first above written.
THE BANK OF NEW YORK,
in its capacity as the Intercreditor Agent
By: /s/ Mary Beth Lewicki
----------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Collateral Agent
By: /s/ Mary Beth Lewicki
----------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Administrative Agent
By: /s/ Mary Beth Lewicki
----------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Trustee
By: /s/ Mary Beth Lewicki
----------------------------------------
Name: Mary Beth Lewicki
<PAGE>
Title: Assistant Vice President
CREDIT SUISSE FIRST BOSTON,
in its capacity as the VEPCO L/C Agent
By: /s/ Brian T. Caldwell
-----------------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
------------------------------------
Name: Pilarcita V. Naval
Title: Associate
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
----------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
----------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
Additional SENIOR SECURED PARTY
pursuant to Section 7.18
<PAGE>
By:_______________________________________
Name:
Title:
<PAGE>
Schedule A to Intercreditor Agreement
Fundamental Decisions
The following Fundamental Decisions require the vote of the One
Hundred Percent Secured Parties:
(a) any Modification of the Financing Documents to which the
Intercreditor Agent, the Collateral Agent or the Administrative Agent is a party
that has the effect of changing the date for (including any changes to mandatory
or voluntary prepayments), changing the method of calculation contained in,
altering the amount of, or changing the currency of, any payment of principal,
interest or of any other fee, commission or any other amount payable to any
Senior Secured Party under any Financing Document;
(b) any Modification of the Financing Documents to which the
Intercreditor Agent, the Collateral Agent or the Administrative Agent is a party
that has the effect of releasing Senior Collateral from the Lien of any of the
Senior Security Documents or releasing funds held by the Collateral Agent or the
Administrative Agent, in each case other than as expressly permitted in
accordance with the terms of the Financing Documents;
(c) except as set forth in the proviso to Section 4.2 of the
foregoing Intercreditor Agreement, any Modification of Section 3.2(b) of the
Common Agreement;
(d) except as set forth in the proviso to Section 4.2 of the
foregoing Intercreditor Agreement, any Modification of any provision of the
Intercreditor Agreement;
(e) any Modification of any definition contained in the Common
Agreement or in any other Financing Document to which the Intercreditor Agent,
the Collateral Agent or the Administrative Agent is a party but only if and to
the extent such Modification would result in the making of any of the
Modifications referred to in clauses (a) through (e) above;
(f) any Modification of a Financing Document to which the
Intercreditor Agent, the Collateral Agent or the Administrative Agent is a party
which would permit the assignment by any Obligor of its rights under any
Transaction Document other
A-1
<PAGE>
than as expressly permitted under the Financing Documents (prior to such
Modification).
A-2
<PAGE>
Exhibit 4.13
SECOND AMENDED AND RESTATED
EQUITY CONTRIBUTION AGREEMENT
This SECOND AMENDED AND RESTATED EQUITY CONTRIBUTION AGREEMENT,
dated as of May 21, 1999 (as amended, restated, modified or otherwise
supplemented from time to time in accordance with the terms hereof, this
"Agreement"), is among LSP BATESVILLE HOLDING, LLC (the "Equity Contributor"),
LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Partnership") and THE BANK OF NEW YORK, as collateral agent (together with its
successors in such capacity, the "Collateral Agent") for the Senior Secured
Parties pursuant to the Second Amended and Restated Collateral Agency Agreement,
dated as of the date hereof (as amended, restated, modified or otherwise
supplemented from time to time in accordance with the terms thereof, the
"Collateral Agency Agreement"), among the Partnership, LSP Batesville Funding
Corporation (the "Funding Corporation"), the Trustee, the VEPCO L/C Agent, the
Collateral Agent, the Intercreditor Agent, the Administrative Agent and the
other Senior Secured Parties from time to time party thereto.
RECITALS
A. The Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined cycle electric generation facility located in
Batesville, Mississippi.
B. The Equity Contributor owns, directly or indirectly, 100% of the
limited and general partnership interests in the Partnership.
C. Pursuant to the Tranche A Facility Credit Agreement, dated as of
August 28, 1998 (the "Initial Credit Agreement"), among the Partnership, the
banks and other financial institutions party thereto (the "Initial Banks") and
Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project.
D. In connection with the execution of the Initial Credit Agreement
and the related financing documents, and as a condition precedent to the Initial
Banks providing the Initial Loans to the Partnership, the Equity Contributor
executed the Equity Contribution Agreement, dated as of August 28, 1998 (the
"Initial Equity Contribution Agreement"), in favor of the Partnership and IBJ
Schroder Bank & Trust Company, as
<PAGE>
collateral agent, pursuant to which the Equity Contributor agreed to make cash
equity contributions to the Partnership from time to time in accordance with the
terms of the Initial Equity Contribution Agreement.
E. Pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supple mental Banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and start-up of the Project.
F. In connection with the execution of the Supplemental Credit
Agreement and the related financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Equity Contributor executed the Amended and Restated Equity Contribution
Agreement, dated as of the December 15, 1998 (the "Supplemental Equity
Contribution Agreement"), in favor of the Partnership and Credit Suisse First
Boston, as collateral agent, pursuant to which the Equity Contributor agreed to
make cash equity contributions to the Partnership from time to time in
accordance with the terms of the Supplemental Equity Contribution Agreement.
G. The Partnership and the Funding Corporation have determined to
issue (1) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (2)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, together with the Series A
Bonds, the "Bonds") pursuant to the Trust Indenture, dated as of the date hereof
(the "Indenture"), among the Partnership, the Funding Corporation and The Bank
of New York, as trustee (the "Trustee").
H. The Partnership and the Funding Corporation will use the net
proceeds of the Bonds to (1) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (2) pay a portion of the remaining Project
Costs.
I. In connection with the issuance and sale of the Bonds and the
execution of the related Financing Documents, the Equity Contributor, the
Partnership and
2
<PAGE>
the Collateral Agent would like to amend and restate the Supplemental Equity
Contribution Agreement in its entirety.
AGREEMENT
NOW THEREFORE, in consideration of the Senior Secured Parties
entering into the Financing Documents and to induce the Holders to purchase the
Bonds, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Supplemental Equity Contribution Agreement
is hereby amended and restated in its entirety as follows:
1. Definitions; Principles of Construction. (a) Unless otherwise
defined herein, terms defined in the Indenture shall have such defined meanings
when used herein.
(b) The following terms shall have the following respective
meanings:
"Default Equity Contribution" shall mean any Equity Contribution
made pursuant to Section 2(b)(i) or (ii).
"Equity Contribution" shall mean a cash capital contribution or any
other cash payment to the Partnership required to be made by the Equity
Contributor to the Partnership in accordance with Section 2.
"Equity Letter of Credit" shall mean an irrevocable letter of credit
issued by a Qualified Letter of Credit Issuer, naming Cogentrix/Batesville as
the account party and the Collateral Agent as beneficiary, which (a) shall be
substantially in the form of Exhibit A hereto, (b) shall have a face amount
equal to the Total Equity Amount and (c) shall expire on the date upon which the
Equity Contributor has indefeasibly paid in full Equity Contributions in an
aggregate amount equal to the Total Equity Amount pursuant to Section 2.
"Equity Requisition Certificate" shall mean a certificate in the
form of Exhibit B attached hereto.
"Ordinary Equity Contribution" shall mean any Equity Contribution
made pursuant to Section 2(a) or Section 2(b)(iii), (iv), (v), (vi) or (vii).
3
<PAGE>
"Qualified Letter of Credit Issuer" shall mean a bank or other
financial institution whose long-term unsecured debt is rated "A" or higher by
S&P and "A2" or higher by Moody's.
"Total Equity Amount" shall mean $54,000,000.
(c) Unless otherwise expressly stated herein, the principles of
construction set forth in the Indenture shall apply to this Agreement.
2. Capital Contributions. (a) The Equity Contributor shall
contribute or cause to be contributed to the Partnership from time to time, for
the benefit of the Senior Secured Parties, an Equity Contribution on the date
and in the amount specified in any Equity Requisition Certificate delivered by
the Partnership to the Equity Contributor; provided, however, that the aggregate
amount of such Equity Contribution, together with the amount of all previous
Equity Contributions made pursuant to this Section 2(a), shall not exceed the
Total Equity Amount.
(b) The Equity Contributor shall contribute or cause to be
contributed to the Partnership, for the benefit of the Senior Secured Parties,
an Equity Contribution in an amount equal to the Total Equity Amount less the
aggregate amount of all previous Equity Contributions, if any, made pursuant to
Section 2(a), on the earliest to occur of the following:
(i) the date on which an Event of Default shall have occurred;
(ii) the date on which a Bankruptcy Event shall have occurred with
respect to the Equity Contributor;
(iii) the date on which all proceeds of the Bonds shall have been
disbursed from the Construction Account to pay Project Costs in accordance with
Section 3.1 of the Common Agreement, if the Partnership has not requested an
Equity Contribution in an amount necessary to pay all or a portion of the
remaining Project Costs pursuant to Section 2(a) within forty-five (45) days
after the date of the final disbursement of the proceeds of the Bonds from the
Construction Account;
(iv) the Completion Date;
4
<PAGE>
(v) the Date Certain;
(vi) the date which is thirty (30) days after the date on which the
issuer of the Equity Letter of Credit fails to be a Qualified Letter of Credit
Issuer; provided that the Equity Contributor shall not be required to make an
Equity Contribution pursuant to this clause (vi) if, during the thirty (30) day
period after the date on which the issuer of the Equity Letter of Credit fails
to be a Qualified Letter of Credit Issuer, the Equity Contributor shall provide
the Collateral Agent with a replacement Equity Letter of Credit issued by a
Qualified Letter of Credit Issuer; and
(vii) the date which is thirty (30) days prior to the date of
expiration of the Equity Letter of Credit; provided that the Equity Contributor
shall not be required to make an Equity Contribution pursuant to this clause
(vii) if on or prior to such date the Equity Contributor shall have provided to
the Collateral Agent a replacement Equity Letter of Credit issued by a Qualified
Letter of Credit Issuer.
3. Application of Funds.
(a) Any Equity Contributions made pursuant to clause (a) or clause
(b)(iii), (iv), (v), (vi) or (vii) of Section 2 shall be paid directly to the
Construction Account for application in accordance with Section 3.1 of the
Common Agreement.
(b) Any Equity Contributions made pursuant to clause (b)(i) or (ii)
of Section 2 shall be paid directly to the Proceeds Account for application in
accordance with Section 3.10 of the Common Agreement.
4. Interest. Any amount which is not paid when due pursuant to
Section 2 shall bear interest at a rate equal to the Post Default Rate
(calculated quarterly in arrears and based upon a 360 day year) until paid in
full.
5. Equity Letter of Credit. (a) On or before the Closing Date, the
Equity Contributor shall deliver to the Collateral Agent an Equity Letter of
Credit issued by a Qualified Letter of Credit Issuer in support of its
obligations under this Agreement.
(b) In the event that the Equity Contributor shall fail to make an
Equity Contribution when due in accordance with Section 2, the Collateral Agent,
upon receipt of notice from the Administrative Agent that such failure has
occurred, shall make a demand
5
<PAGE>
for payment under the Equity Letter of Credit in the amount of such Equity
Contribution; provided that the Collateral Agent's failure to make such demand
for payment under the Equity Letter of Credit shall not relieve the Equity
Contributor of its obligations under this Agreement. Any payment made directly
to the Collateral Agent under the Equity Letter of Credit shall be deemed to be
an Equity Contribution under Section 2 and shall satisfy the obligation of the
Equity Contributor to the Partnership and the Senior Secured Parties hereunder.
(c) The Equity Contributor shall cause the Equity Letter of Credit
(and all renewals, extensions and replacements thereof) to be outstanding until
the date on which the Equity Contributor's obligations under this Agreement
shall have been indefeasibly satisfied and performed in full.
(d) Until the expiration date of the Equity Letter of Credit set
forth in clause (c) immediately above, the Equity Contributor shall cause to be
renewed, extended or replaced the Equity Letter of Credit (or any renewed,
extended or replaced Equity Letter of Credit) within thirty (30) days prior to
any expiration date thereof with a new, extended or replacement Equity Letter of
Credit of like tenor with and substantially in the form of the original Equity
Letter of Credit and other wise satisfying all requirements of the Financing
Documents relating to the Equity Letter of Credit. Any such renewed, extended or
replacement Equity Letter of Credit shall be issued by a Qualified Letter of
Credit Issuer.
6. Obligations Unconditional; Waivers. (a) The obligations of the
Equity Contributor under Section 2 shall be absolute, unconditional and
irrevocable under any and all circumstances, and shall be performed by the
Equity Contributor regardless of:
(i) the existence of any indebtedness owing by the
Partnership, any Partner or any Affiliate thereof to the Equity
Contributor or of any setoff, abatement, counterclaim, recoupment, defense
or other right or claim which the Equity Contributor may have against the
Partnership, any Partner, any Affiliate thereof or any other Person;
(ii) the occurrence of a Bankruptcy Event of the Partner ship,
any Partner, any Affiliate thereof or any other Person or the pendency
against the Partnership, any Partner, any Affiliate thereof or any other
Person of any case, suit or proceeding under the Bankruptcy Code;
6
<PAGE>
(iii) the invalidity, irregularity or unenforceability of or
any change in or amendment to, any Transaction Document, including,
without limitation, the Partnership Agreement;
(iv) the institution or absence of any action to enforce any
Transaction Document or the waiver or consent by the Equity Contributor or
any Senior Secured Party with respect to the provisions thereof, the
obtaining of any judgment against the Partnership, any Partner or any
Affiliate thereof, or any action to enforce such judgment, or the
inability to recover from the Partnership, any Partner or any Affiliate
thereof because of any statue of limitations, laches or otherwise;
(v) the failure to complete or the destruction of the Project
or any other circumstance which might otherwise constitute a legal or
equitable discharge of or a defense to the Equity Contributor's
undertakings hereunder; or
(vi) any other circumstances whatsoever which might otherwise
constitute an excuse for nonperformance of the obligations of the Equity
Contributor under Section 2, whether similar or dissimilar to any of the
circumstances herein specified.
(b) The obligation of the Equity Contributor to make or cause to be
made an Equity Contribution as provided in Section 2 shall not be affected by
any abatement, reduction, limitation, impairment, termination, setoff, defense,
counter claim or recoupment whatsoever or any right to any thereof, and shall
not be re leased, discharged or in any way affected by any reorganization,
arrangement, compromise or plan affecting the Partnership, any Partner or any
Affiliate thereof.
(c) The Equity Contributor hereby unconditionally:
(i) waives notice of acceptance hereof, of any action taken or
omitted in reliance hereon and of any defaults by the Partnership, any
Partner or any Affiliate thereof in the payment of any amounts due,
diligence, protest, presentment, filing of claims with a court in
connection with a Bankruptcy Event of the Partnership, any Partner or any
Affiliate thereof, any right to require a proceeding first against the
Partnership, any Partner or any Affiliate thereof or that the Partnership,
any Partner or any Affiliate thereof be joined in any bankruptcy or
similar
7
<PAGE>
proceeding, any marshalling of assets of the Partnership, any Partner or
any Affiliate thereof, the Partnership's, any Partner's or any such
Affiliate's providing security for the Financing Documents or any notice
of default with respect thereto, or any other act or omission or thing or
delay to do any other act or thing which might in any manner or to any
extent vary the risk of the Equity Contributor or which might otherwise
operate as a discharge to the Equity Contributor;
(ii) agrees that this Agreement shall remain in full force and
effect without regard to, and shall not be affected or impaired by, any
invalidity, irregularity or unenforceability in whole or in part of any of
the Transaction Documents, including, without limitation, the Partnership
Agreement, which may now or hereafter be caused or imposed in any manner
whatsoever;
(iii) agrees that no failure or delay on the part of the
Partnership or any Senior Secured Party or any other Person in exercising
any right, power or privilege hereunder or under any other Transaction
Document and no course of dealing between the Equity Contributor on the
one hand, and the Partnership, any Partner, any Affiliate thereof or any
Senior Secured Party, on the other hand, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder;
(iv) agrees that the rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies which the
Partnership, any Partner, any Affiliate thereof or any Senior Secured
Party would other wise have; and
(v) agrees that this Agreement shall be discharged only by
complete performance and payment in full of the obligations contained
herein and that the Equity Contributor shall have no right to withhold or
set-off against any payments due for any reason.
7. Bankruptcy. Unless and until all of the Senior Secured
Obligations shall have been paid in full, the Equity Contributor agrees not to
bring any proceeding or join with any creditor in bringing any proceeding
against the Partnership under the Bankruptcy Code. If the Equity Contributor, in
violation of the provisions set forth herein, shall commence, prosecute or
participate in any suit, action or proceeding against the Partner-
8
<PAGE>
ship, the Collateral Agent may (but shall not be obligated to) intervene and
interpose such defense or plea in its own name or in the name of the Partnership
and may, in any event, have standing to restrain the enforcement of any right or
remedy of the Equity Contributor, insofar as any such right or remedy is being
exercised by the Equity Contributor against assets of the Partnership, in its
own name or in the name of the Partnership, in the same suit, action or
proceeding or in any independent suit, action or proceeding.
8. Modification of Obligations. The Equity Contributor agrees that
the Senior Secured Parties may, at any time and from time to time, without the
consent of or notice to the Equity Contributor, without incurring responsibility
to the Equity Contributor and without impairing or releasing any of the Senior
Secured Parties' rights or any of the obligations of the Equity Contributor
under this Agreement:
(a) change the amount, manner, place or terms of payment or change
or extend the time of payment or renew or alter the Senior Secured Obligations
in any manner or enter into or amend in any manner any agreement relating to the
Senior Secured Obligations;
(b) sell, exchange, release or otherwise deal with any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever securing,
any of the Senior Secured Obligations;
(c) release anyone liable in any manner for payment or collection of
the Senior Secured Obligations; and
(d) exercise or refrain from exercising any rights against the
Partnership or any other Person.
9. Representations and Warranties: The Equity Contributor hereby
represents and warrants that:
(a) it is a limited liability company duly formed, validly existing
and in good standing under the laws of the jurisdiction of its formation, and it
is duly qualified and authorized to do business and is in good standing as a
foreign limited liability company in each jurisdiction in which it owns or
leases real property or in which the nature of its business requires it to be so
qualified;
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<PAGE>
(b) it has all necessary power and authority to execute and deliver
this Agreement and to perform all of its obligations hereunder, and its
execution, delivery and performance of this Agreement have been duly authorized
by all necessary action on its part and do not require any approval or consent
of any holder (or any trustee for or agent of any holder) of any indebtedness or
other obligation of it or any other person or entity, other than approvals or
consents which have previously been obtained and which are in full force and
effect;
(c) it has duly executed and delivered this Agreement, and this
Agreement constitutes the valid and binding obligation of it enforceable against
it in accordance with its terms, except as enforceability may be limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally;
(d) the execution and delivery by it and the performance by it of
its obligations hereunder do not (i) conflict with its certificate of formation
or operating agreement, (ii) conflict with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of its properties or assets pursuant to the terms of, any
indenture, mortgage, deed of trust, agreement or other instrument to which it is
a party or by which it or any of its properties or assets is bound, except to
the extent that such conflict, breach, default, creation or imposition would not
reasonably be expected to materially and adversely affect its ability to perform
its obligations under this Agreement, or (iii) conflict with any Applicable
Laws, or any order, writ, injunction or decree of any court or Governmental
Authority binding on it or its properties or assets, except to the extent such
conflict would not reasonably be expected to materially and adversely affect its
ability to perform its obligations under this Agreement;
(e) no Governmental Approvals or other consents or approvals are
required in connection with the execution, delivery and performance by it of
this Agreement other than those which have previously been obtained and which
are in full force and effect;
(f) it is in compliance with all Applicable Laws except to the
extent that the failure to comply therewith would not reasonably be expected to
materially and adversely affect its ability to perform its obligations under
this Agreement; and
10
<PAGE>
(g) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best of its
knowledge, threatened against it or any of its properties, rights, revenues or
assets which would reasonably be expected to materially and adversely affect its
ability to perform its obligations under this Agreement.
10. Expenses. The Equity Contributor shall pay to the Collateral
Agent, on or prior to five (5) days after the Collateral Agent makes a demand
for such payment, the amount of any and all reasonable expenses, including the
reason able fees and expenses of its counsel, which the Collateral Agent may
incur in connection with (a) the exercise or enforcement of any of the rights of
the Collateral Agent hereunder or (b) the failure by the Equity Contributor to
perform or observe any of the provisions hereof, together with interest thereon
from the date when due at a rate per annum equal to the Post Default Rate
applicable to the Series A Bonds. Any amount payable by the Equity Contributor
pursuant to this Section 10 shall be payable as specified in the preceding
sentence and shall constitute Senior Secured Obligations.
11. Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and delivered personally, or by registered or certified first-class mail
with postage prepaid, or made, given or furnished in writing by confirmed
telecopy or facsimile transmission, or by prepaid courier service to the
appropriate party as set forth below:
Equity Contributor: LSP Batesville Holding, LLC
c/o LS Power Management, LLC
Two Tower Center
20th Floor East
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-2403
Telecopy No.: (732) 249-7290
Partnership: LSP Energy Limited Partnership
Two Tower Center
20th Floor East
East Brunswick, NJ 08816
Attn: General Counsel
Telephone No.: (732) 249-6750
Telecopy No.: (732) 249-7290
11
<PAGE>
Collateral Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Telephone No.: (212) 815-5939
Telecopy No.: (212) 815-5915
Any party may change its address by giving notice of such change in the manner
set forth herein. Any notice given to a party by mail or by courier shall be
deemed delivered upon receipt thereof (unless the party refuses to accept
delivery, in which case the party shall be deemed to have accepted delivery upon
presentation). Any notice given to a party by telecopy or facsimile transmission
shall be deemed effective on the date it is actually sent to the intended
recipient by confirmed telecopy or facsimile transmission to the telecopier
number specified above.
12. Reinstatement. This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent hereunder or pursuant hereto is rescinded or must otherwise be
restored or returned by the Collateral Agent upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Equity Contributor, the
Partnership, any Partner or any Affiliate thereof or upon the appointment of any
intervenor or conservator of, or trustee or similar official for, the Equity
Contributor, the Partner ship, any Partner or any Affiliate thereof, or any
substantial part of the Equity Contributor's, the Partnership's, any Partner's
or any such Affiliate's assets, or upon the entry of an order by any court
avoiding the payment of such amount, or otherwise, all as though such payments
had not been made.
13. Amendments. No waiver, amendment, modification or termination of
any provision of this Agreement, or consent to any departure by the Equity
Contributor therefrom, shall in any event be effective without the prior written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein. Any such
12
<PAGE>
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
14. Successors and Assigns. This Agreement shall be binding upon the
Equity Contributor and its successors and assigns and shall inure to the benefit
of the Partnership and the Collateral Agent and their respective successors and
assigns. The Equity Contributor may not assign or otherwise transfer any of its
rights or obligations under this Agreement without the written consent of the
Collateral Agent, acting upon directions from (x) the Intercreditor Agent acting
pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein.
15. Survival. All agreements, statements, representations and
warranties made by the Equity Contributor herein or in any certificate or other
instrument delivered by the Equity Contributor or on its behalf under this
Agreement shall be considered to have been relied upon by the Collateral Agent
and the other Senior Secured Parties and shall survive the execution and
delivery of this Agreement until the satisfaction in full by the Equity
Contributor of its obligations hereunder.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
17. Headings Descriptive. The headings of the several Sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
18. Severability. In case any provision contained in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
19. Governing Law. This Agreement shall be governed by the laws of
the State of New York of the United States of America and shall for all purposes
be governed by and construed in accordance with the laws of such state without
regard to the
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<PAGE>
conflict of law rules thereof other than Section 5-1401 of the New York General
Obligations Law.
20. Consent to Jurisdiction. Any legal action or proceeding by or
against the Equity Contributor with respect to or arising out of this Agreement
may be brought in or removed to the courts of the State of New York, in and for
the County of New York, or of the United States of America for the Southern
District of New York. By execution and delivery of this Agreement, the Equity
Contributor accepts, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts for legal proceedings
arising out of or in connection with this Agreement and irrevocably consents to
the appointment of CT Corporation System, with offices on the date hereof at
1633 Broadway, New York, New York 10019, as its agent to receive service of
process in New York, New York. If for any reason such agent shall cease to be
available to act as such, the Equity Contributor agrees to appoint a new agent
on the terms and for the purposes of this provision. Nothing herein shall affect
the right to serve process in any other manner permitted by law or any right to
bring legal action or proceedings in any other competent jurisdiction. The
Equity Contributor further agrees that the aforesaid courts of the State of New
York and of the United States of America for the Southern District of New York
shall have exclusive jurisdiction with respect to any claim or counterclaim of
the Equity Contributor based upon the assertion that the rate of interest
charged by or under this Agreement or under the other Financing Documents is
usurious. The Equity Contributor hereby waives any right to stay or dismiss any
action or proceeding under or in connection with the Project, this Agreement or
any other Transaction Document brought before the foregoing courts on the basis
of forum non-conveniens or improper venue.
21. Waiver of Jury Trial. EACH OF THE EQUITY CONTRIBUTOR, THE
PARTNERSHIP AND THE COLLATERAL AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF THE OTHER PARTIES HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT.
14
<PAGE>
22. Entire Agreement. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their agreement as to the matters covered hereby and is intended
as a complete and exclusive statement of the terms and conditions thereof.
23. Third Party Beneficiaries. The agreements of the parties hereto
are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
24. Consent. By its execution and delivery hereof, each of the
Equity Contributor and the Partnership consents to the assignment of this
Agreement to the Collateral Agent for the benefit of the Senior Secured Parties,
and the grant to the Collateral Agent of a security interest in all of the
Partnership's right, title and interest in and to this Agreement, pursuant to
the Senior Security Documents. The Partnership and the Equity Contributor hereby
agree that (a) pursuant to the exercise of remedies, the Collateral Agent or its
designee or transferee may succeed to the rights, powers, privileges, interests
and remedies of the Partnership, whether arising under this Agreement or by
statute or in law or in equity or otherwise and (b) the Collateral Agent shall
have the right to enforce directly the provisions hereof against each of the
parties hereto. In addition to, and not in derogation of, the foregoing, the
Collateral Agent may, in addition to proceeding in its name, or otherwise,
proceed to protect and enforce the rights of the Partnership under this
Agreement by suit in equity, action at law or other appropriate proceedings,
whether for the specific performance of any covenant or agreement contained in
this Agreement or otherwise. Each and every right of the Collateral Agent shall,
to the extent permitted by law, be cumulative and shall be in addition to any
right or remedy granted in any Financing Document or now or hereafter existing
at law or in equity or by statute.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first written above.
LSP BATESVILLE HOLDING, LLC
By: LS Power Management, LLC,
its manager
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
as the Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE>
Exhibit A to
Equity Contribution Agreement
FORM OF IRREVOCABLE STANDBY LETTER OF CREDIT
Beneficiary:
The Bank of New York,
as collateral agent (the "Collateral Agent")
Gentlemen:
We hereby establish for the account of Cogentrix/Batesville, LLC (the "Account
Party") our Irrevocable Standby Letter of Credit No. __________ in favor of the
Collateral Agent pursuant to the Second Amended and Restated Equity Contribution
Agreement, dated as of May 21, 1999 (the "Equity Contribution Agreement"), among
LSP Batesville Holding, LLC (the "Equity Contributor"), LSP Energy Limited
Partnership (the "Partnership") and the Collateral Agent, in the aggregate
amount of fifty-four million dollars ($54,000,000). Unless expressly stated
other wise, capitalized terms used but not defined herein shall have the
meanings given to such terms in the Equity Contribution Agreement (including
terms incorporated therein from the Indenture (as defined below)).
The stated amount of this Letter of Credit shall be reduced by (i) drawings made
hereunder and (ii) Equity Contributions made by the Equity Contributor pursuant
to Section 2 of the Equity Contribution Agreement.
Funds under this Letter of Credit are available in whole or in part against your
draft drawn at sight on us accompanied by the following document(s):
Your signed and dated statement as follows:
"The undersigned officer of the Collateral Agent hereby certifies that:
We hereby request a drawing in the amount of $__________ (the "Requested
Drawing") and the Requested Drawing, together with all previous drawings
hereunder and all Equity
<PAGE>
Contributions made by the Equity Contributor pursuant to the Equity Contribution
Agreement, does not exceed the stated amount of this Letter of Credit.
[Insert Option A, Option B, Option C, Option D, Option E, Option F, Option G
and/or Option H].
Option A: "The Equity Contributor has failed to make an Equity Contribution to
the Partnership in the amount of the Requested Drawing as requested in the
Equity Requisition Certificate, dated ________ __, ____, submitted by the
Partnership to the Equity Contributor."
Option B: "An Event of Default has occurred under the Trust Indenture, dated as
of May 21, 1999 (the "Indenture"), among the Partnership, LSP Batesville Funding
Corporation and The Bank of New York, as Trustee, and the Equity Contributor has
failed to make an Equity Contribution as required by Section 2(b)(i) of the
Equity Contribution Agreement."
Option C: "A Bankruptcy Event with respect to the Equity Contributor has
occurred and the Equity Contributor has failed to make an Equity Contribution as
required by Section 2(b)(ii) of the Equity Contribution Agreement."
Option D: "All proceeds of the Bonds were withdrawn from the Construction
Account on ________ __, ____ and the Partnership has not submitted an Equity
Requisition Certificate to the Equity Contributor within the time period
specified in and as contemplated by Section 2(b)(iii) of the Equity Contribution
Agreement, and the Equity Contributor has failed to make an Equity Contribution
as required by Section 2(b)(iii) of the Equity Contribution Agreement."
Option E: "The Completion Date has occurred and the Equity Contributor has
failed to make an Equity Contribution as required by Section 2(b)(iv) of the
Equity Contribution Agreement."
Option F: "The Date Certain has occurred and the Equity Contributor has failed
to make an Equity Contribution as required by Section 2(b)(v) of the Equity
Contribution Agreement."
Option G: "The long-term unsecured debt of the Issuer of this Letter of Credit
is not rated "A" or better by Standard & Poor's Ratings Group and "A2" or better
by Moody's Investors Services, Inc. and a replacement Equity Letter of Credit,
satisfactory in all respects to
<PAGE>
the Collateral Agent, from a Qualified Letter of Credit Issuer was not provided
to the Collateral Agent within thirty (30) days after the loss of such rating,
and the Equity Contributor has failed to make an Equity Contribution as required
by Section 2(b)(vi) of the Equity Contribution Agreement."
Option H: "The Equity Contributor has failed to renew this Letter of Credit or
replace this Letter of Credit with a replacement Equity Letter of Credit,
satisfactory in all respects to the Collateral Agent, from a Qualified Letter of
Credit Issuer, in either case within thirty (30) days prior to the expiration
hereof, and the Equity Contributor has failed to make an Equity Contribution as
required by Section 2(b)(vii) of the Equity Contribution Agreement."
Partial drawings under this Letter of Credit are permitted.
All banking charges are for the account of the Account Party.
Reference in this Letter of Credit to the Equity Contribution Agreement (as
defined above) and the Indenture (as defined above) is for identification
purposes only. Neither the Equity Contribution Agreement nor the Indenture is
incorporated in or made a part of this Letter of Credit.
Our obligation under this Letter of Credit shall not be affected by any
circumstance, claim or defense, real or personal, as to the enforceability of
the Equity Contribution Agreement or any other document executed and delivered
in connection therewith; it being understood that our obligation shall be that
of a primary obligor and not that of a surety guarantor or accommodation maker.
Drafts and documents must be presented on or before _________ __, ____.
We hereby agree with the drawers, endorsers and bona fide holders of drafts
drawn under and in compliance with the terms of this Letter of Credit that such
drafts shall be duly honored on presentation and delivery of the documents
specified at our office at _______________________.
This Letter of Credit sets forth in full the terms of our undertaking, and such
under taking shall not in any way be modified, amended or amplified by reference
to any document, instrument or agreement referred to herein or in which this
Letter of Credit relates and any
<PAGE>
such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits, ICC Publication No. 500 ("UCP"). Except to the extent
applicable provisions of the UCP shall prevail, this Letter of Credit shall be
governed by and construed in accordance with the laws of the United States of
America and the State of New York, including the Uniform Commercial Code as in
effect in the State of New York.
Sincerely,
<PAGE>
Exhibit B to
Equity Contribution Agreement
FORM OF EQUITY REQUISITION CERTIFICATE
[DATE]
LSP Batesville Holding, LLC
c/o LS Power Management, LLC
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
Ladies and Gentlemen:
This Equity Requisition Certificate is delivered to you pursuant to
Section 2(a) of that certain Second Amended and Restated Equity Contribution
Agreement, dated as of May 21, 1999 (the "Equity Contribution Agreement"), by
and among you (the "Equity Contributor"), the undersigned (the "Partnership")
and The Bank of New York, in its capacity as Collateral Agent (the "Collateral
Agent"). Capitalized terms used herein but not otherwise defined herein shall
have the meanings assigned to them in the Equity Contribution Agreement.
The Partnership hereby certifies as follows:
1. The aggregate amount of the Equity Contribution requested
pursuant to this Equity Requisition Certificate and all Equity
Contributions previously made by you pursuant to Section 2 of the Equity
Contribution Agreement is $_______________; and
2. The Total Equity Amount less the amount specified in clause (1)
immediately above is $_______________.
B-1
<PAGE>
The Partnership hereby requests that the Equity Contributor make an Equity
Contribution to the Partnership on the date and in the amount requested below
(the "Requested Equity Contribution Amount"), which amount is to be paid to the
Construction Account:
Date: ___________________________
Amount: $___________________________
Very truly yours,
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: _________________________________
Name:
Title:
B-2
<PAGE>
Exhibit 4.14
================================================================================
SECOND AMENDED AND RESTATED
COLLATERAL AGENCY AGREEMENT
dated as of May 21, 1999
among
LSP ENERGY LIMITED PARTNERSHIP,
LSP BATESVILLE FUNDING CORPORATION,
THE SECURED PARTIES NAMED HEREIN,
and
THE BANK OF NEW YORK,
as Administrative Agent, Collateral Agent
and Intercreditor Agent
================================================================================
<PAGE>
Table of Contents
Page
----
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION ................................. 3
1.1 Definitions .................................................... 3
1.2 Principles of Construction ..................................... 3
ARTICLE II
COLLATERAL AGENT; RELATIONS AMONG SECURED PARTIES .................... 3
2.1 Appointment of Collateral Agent; Powers and Immunities ......... 3
2.2 Reliance by Collateral Agent ................................... 5
2.3 Events of Default .............................................. 6
2.4 Duties, Immunities and Liabilities of Collateral Agent ......... 6
2.5 Documents ...................................................... 7
2.6 Non-Reliance on Collateral Agent and Other Secured Parties ..... 7
2.7 Resignation or Removal of Collateral Agent ..................... 8
2.8 Authorization .................................................. 9
2.9 Additional Collateral Agents ................................... 10
ARTICLE III
ADMINISTRATION OF THE COLLATERAL ..................................... 12
ARTICLE IV
APPLICATION OF PROCEEDS .............................................. 13
ARTICLE V
MISCELLANEOUS ........................................................ 15
5.1 Amendments ..................................................... 15
5.2 Successors and Assigns ......................................... 15
5.3 Transfers ...................................................... 15
5.4 Delay and Waiver ............................................... 15
5.5 Costs and Expenses; Indemnity .................................. 16
5.6 Collateral Agency Fee .......................................... 16
5.8 Notices ........................................................ 16
5.9 Headings ....................................................... 16
5.10 Counterparts ................................................... 16
5.11 Governing Law .................................................. 17
5.12 Consent to Jurisdiction ........................................ 17
i
<PAGE>
5.13 Waiver of Jury Trial ........................................... 17
5.14 Entire Agreement ............................................... 18
5.15 Severability ................................................... 18
5.16 References to Collateral Agency Agreement ...................... 18
ii
<PAGE>
SECOND AMENDED AND RESTATED
COLLATERAL AGENCY AGREEMENT
This SECOND AMENDED AND RESTATED COLLATERAL AGENCY AGREEMENT, dated as of
May 21, 1999 (this "Agreement"), is by and among LSP ENERGY LIMITED PARTNERSHIP,
a Delaware limited partnership (the "Partner ship"), LSP BATESVILLE FUNDING
CORPORATION, a Delaware corporation (the "Funding Corporation"), each of the
other Persons listed on the signature pages hereto under the caption "Senior
Secured Parties", each other Senior Secured Party that becomes a party hereto
pursuant to Section 5.17, THE BANK OF NEW YORK, as the Administrative Agent, the
Collateral Agent and the Intercreditor Agent and CREDIT SUISSE FIRST BOSTON, in
its capacity as an Additional Collateral Agent pursuant to Section 2.9.7.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
constructing, operating, maintaining, owning and financing a nominal 837 MW
gas-fired combined-cycle electric generating facility to be located in
Batesville, Mississippi;
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the "Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial Credit
Agreement and the related financing documents, and as a condition precedent to
the Initial Banks providing the Initial Loans to the Partnership, the
Partnership, the Funding Corporation, Credit Suisse First Boston as Tranche A
Facility Agent and L/C Facility Agent, and IBJ Schroder Bank & Trust Company as
Administrative Agent, Collateral Agent, Intercreditor Agent and Securities
Intermediary, executed the Collateral Agency Agreement, dated as of August 28,
1998 (the "Initial Collateral Agency Agreement");
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed
<PAGE>
to provide loans (the "Supplemental Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the related financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Partnership and Credit Suisse First Boston as L/C Facility Agent, Bank Facility
Agent, Administrative Agent, Collateral Agent and Securities Intermediary
executed the Amended and Restated Collateral Agency Agreement, dated as of
December 15, 1998 (the "Supplemental Collateral Agency Agreement"), pursuant to
which the Initial Collateral Agency Agreement was amended and restated in its
entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Senior
Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii) $176,000,000
aggregate principal amount of their 8.160% Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, collectively with the Series A Bonds, the
"Bonds") pursuant to the Trust Indenture, dated as of the date hereof (the
"Indenture"), among the Partnership, the Funding Corporation and The Bank of
New York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (ii) pay the remaining Project Costs; and
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Partnership and the
Collateral Agent desire to amend and restate the Supplemental Collateral Agency
Agreement in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Supplemental Collateral Agency Agreement is hereby amended and
restated in its entirety as follows:
2
<PAGE>
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
1.1 Definitions. Except as otherwise expressly provided herein,
capitalized terms used in this Agreement shall have the meanings given in the
Indenture.
1.2 Principles of Construction. Except as otherwise expressly provided
herein, the principles of construction set forth in the Indenture shall apply to
this Agreement.
ARTICLE II
COLLATERAL AGENT; RELATIONS AMONG SENIOR SECURED PARTIES
2.1 Appointment of Collateral Agent; Powers and Immunities. (a) Subject to
Section 2.7 hereof, each of the Senior Secured Parties, on the terms and
conditions hereof, hereby irrevocably appoints and authorizes The Bank of New
York (together with its successors and assigns in such capacity, the "Collateral
Agent") to act as their agent hereunder, under the Senior Security Documents and
all other Transaction Documents to which the Collateral Agent is a party, with
such powers as are expressly delegated to the Collateral Agent by the terms of
this Agreement, the Senior Security Documents and the other Transaction
Documents, together with such other powers as are reasonably incidental thereto.
The execution of this Agreement by the Collateral Agent shall be deemed an
acceptance by the Collateral Agent of the appointment made under this Section
2.1 and an agreement to act as agent on behalf of each of the other Senior
Secured Parties. The Collateral Agent (which term, when used in this sentence
and, in the next sentence of this Section 2.1 and in Section 2.2 and Section 2.4
and in Section 7.16 and Section 7.17 of the Intercreditor Agreement, shall
include reference to its Affiliates and to its own and its Affiliates' officers,
directors, employees and agents) shall not have any duties or responsibilities
except those expressly set forth in this Agreement, the Senior Security
Documents and the other Transaction Documents to which the Collateral Agent is a
party, or be a trustee for or have any fiduciary obligation to any Senior
Secured Party. The Collateral Agent shall be entitled to advice of counsel
concerning all matters pertaining to its duties.
(b) Notwithstanding anything to the contrary contained herein, the
Collateral Agent shall not be required to take any action (i) which is contrary
to this Agreement, the Senior Security Documents or any other Transaction
Document to which the Collateral Agent is a party, (ii) which is contrary to
applicable law or (iii) if the Collateral Agent has not received an indemnity or
other undertaking from all or a portion of the Senior Secured Parties with
respect to any Subject Claims arising out of such action, which undertaking is
satisfactory to the Collateral Agent in its sole discretion. The Collateral
Agent shall be entitled to cease taking any action, once it has commenced taking
3
<PAGE>
action, if it no longer deems any indemnity or undertaking from the Senior
Secured Parties to be sufficient. The Collateral Agent agrees not to resign
solely as a result of the occurrence and continuance of a Default or an Event of
Default.
(c) None of the Collateral Agent or any other Senior Secured Party,
or any of their respective Affiliates, shall be responsible to any other Senior
Secured Party for (i) any recitals, statements, representations or warranties
made by the Partnership, the Funding Corporation, any Partner or any shareholder
of the Funding Corporation (each, an "Obligor," and collectively, the
"Obligors") contained in this Agreement, the Senior Security Documents or any
other Transaction Documents or in any certificate or other document referred to
or provided for in, or received by any Senior Secured Party under, this
Agreement, the Senior Security Documents or any other Transaction Documents,
(ii) the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Senior Collateral, this Agreement, the Senior Security
Documents or any other Transaction Documents or any other documents referred to
or provided for hereunder or thereunder or (iii) any failure by any Obligor to
perform its respective obligations hereunder or thereunder; provided, however,
that nothing in this Section 2.1 shall be deemed or construed as limiting the
rights of the Collateral Agent or any Senior Secured Party or the obligations of
the Obligors, in each case as is set forth in the applicable Financing
Documents.
(d) The Collateral Agent shall be entitled to advice of counsel and
other professionals concerning all matters of trust and its duty hereunder, but
the Collateral Agent shall not be answerable for the professional malpractice of
any attorney-at-law or certified public accountant or for the acts or omissions
of any other professional in connection with the rendering of professional
advice in accordance with the terms of this Agreement, if such attorney-at-law,
certified public accountant or other professional was selected by the Collateral
Agent with due care. The Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible for the acts or omissions of any
of such agents or attorneys-in-fact selected by it in good faith.
(e) The Collateral Agent shall not be responsible for any action
taken or omitted to be taken by it hereunder, under any Senior Security Document
or under any other Transaction Document to which the Collateral Agent is a party
or in connection herewith or therewith, except for its own gross negligence or
willful misconduct. Except as otherwise provided under this Agreement, the
Senior Security Documents and the other Transaction Documents to which the
Collateral Agent is a party, the Collateral Agent shall take such action with
respect to the Senior Security Documents and the other Transaction Documents to
which it is a party as it shall be directed to take by the Intercreditor Agent
(acting pursuant to the Intercreditor Agreement).
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2.2 Reliance by Collateral Agent. The Collateral Agent shall be entitled
to rely upon any certificate, notice or other document (including any cable,
telegram, telecopy or telex) reasonably believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons
and need not investigate any fact or matter stated in any such document. The
Collateral Agent shall be entitled to rely upon any judicial order or judgment,
upon any advice or statements of legal counsel, independent consultants and
other experts selected by it in good faith or upon any certification,
instruction, notice or other writing delivered to it by the Partnership or the
Funding Corporation in compliance with the provisions of this Agreement without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of service thereof. The Collateral
Agent may act in reliance upon any such instrument comporting with the
provisions of this Agreement or any signature reasonably believed by it to be
genuine and may assume that any person purporting to give notice or receipt or
advice or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so. As to any matters not
expressly provided for by this Agreement, the Senior Security Documents or the
other Transaction Documents to which the Collateral Agent is a party, the
Collateral Agent shall not be required to take any action or exercise any
discretion, but shall be required to act or to refrain from acting upon
instructions of the Intercreditor Agent (acting pursuant to the Intercreditor
Agreement) and shall in all such cases be fully protected in acting, or in
refraining from acting, hereunder or under any of the Senior Security Documents
or any other Transaction Documents to which the Collateral Agent is a party in
accordance with such instructions of the Intercreditor Agent (acting pursuant to
the Intercreditor Agreement), and any action taken or failure to act pursuant
thereto shall be binding on all of the Senior Secured Parties.
2.3 Events of Default. (a) Unless a Responsible Officer of the Collateral
Agent shall otherwise have obtained actual knowledge of the occurrence of a
Default or an Event of Default, the Collateral Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or an Event of Default unless
a Responsible Officer of the Collateral Agent has received notice from a Senior
Secured Party or an Obligor referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "Notice of Default."
(b) In the event that any Responsible Officer of the Collateral
Agent receives a notice from a Senior Secured Party or an Obligor of the
occurrence of a Default or an Event of Default, the Collateral Agent shall give
notice thereof to each of the other Senior Secured Parties.
(c) In the event that any Responsible Officer of the Collateral
Agent otherwise obtains actual knowledge of the occurrence of a Default or an
Event of Default,
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the Collateral Agent shall give notice thereof to the other Senior Secured
Parties; provided, however, that, subject to the standard of conduct of the
Collateral Agent set forth in Section 2.1(e) hereof, the Collateral Agent shall
not incur any liability to any Obligor or any other Senior Secured Party on
account of any failure to provide such notice.
(d) The Collateral Agent shall take such action with respect to such
Default or Event of Default as so directed pursuant to Article 3 hereof;
provided that, unless and until the Collateral Agent shall have received such
directions, the Collateral Agent may (but shall not be obligated to) take, or
refrain from taking, such action with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Senior Secured
Parties.
2.4 Duties, Immunities and Liabilities of Collateral Agent. At all times
the Collateral Agent shall be required to perform such duties and only such
duties as are expressly and specifically set forth in the Senior Security
Documents and no implied duties or obligations whatsoever shall be read into
this Agreement against the Collateral Agent.
No provision in this Agreement shall require the Collateral Agent to risk
or expend its own funds or otherwise incur any financial liability in the
performance of any of its duties or powers or rights hereunder unless the
Partnership, the Funding Corporation or any Senior Secured Party, jointly or
severally, has offered and provided to the Collateral Agent security or
indemnity, which the Collateral Agent, in its sole subjective discretion, deems
adequate for such fees, expenses and liabilities that the Collateral Agent may
incur. The Collateral Agent shall be entitled to interest (calculated on a per
annum basis) on all amounts advanced by it hereunder in its discretion at the
rate of the prime commercial lending rate published in the Eastern Edition of
The Wall Street Journal plus one percent (1%).
The Collateral Agent shall not be responsible for the recording or filing
of any document relating to the Senior Security Documents or of financing
statements (or continuation statements in connection therewith) or of any
supplemental instruments or documents of further assurance as may be required
by law in order to perfect the security interests or Lien on the Site. The
Collateral Agent shall not be deemed to have made representations as to the Site
or the Collateral or as to the validity or sufficiency of any such document
relating thereto.
The Collateral Agent shall not be accountable for the use or application
by the Partnership, the Funding Corporation or any other party of any funds
which the Collateral Agent has released under this Agreement or any other
Financing Document.
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2.5 Documents. The Collateral Agent will forward promptly after the
Collateral Agent's receipt thereof (and will use its best efforts to forward
within five (5) Banking Days of such receipt) (a) to each Senior Secured Party a
copy of each document furnished to the Collateral Agent for such Senior Secured
Party under the Senior Security Documents and (b) to the Administrative Agent,
the Intercreditor Agent, the Trustee and the VEPCO L/C Agent any notice
delivered to the Collateral Agent pursuant to any Consent. The Collateral Agent
will forward to each Senior Secured Party, promptly upon such Senior Secured
Party's request therefor, a copy of any other document furnished to the
Collateral Agent under the Senior Security Documents or any other Transaction
Document to which the Collateral Agent is a party.
2.6 Non-Reliance on Collateral Agent and Other Senior Secured Parties. (a)
Each Senior Secured Party represents that it has, independently and without
reliance on the Collateral Agent or any other Senior Secured Party, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of the financial condition and affairs of the Obligors and its own
decision to enter into this Agreement, the Senior Security Documents and the
other Transaction Documents to which it is a party and agrees that it will,
independently and without reliance upon the Collateral Agent or any other Senior
Secured Party, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own appraisals and decisions in
taking or not taking action under this Agreement, the Senior Security Documents
and the other Transaction Documents to which it is a party.
(b) Neither the Collateral Agent nor any Senior Secured Party shall
be required to keep informed as to the performance or observance by the Obligors
under this Agreement or any other document referred to or provided for herein or
to make inquiry of, or to inspect the properties or books of, the Obligors.
(c) Except for notices, reports and other documents and information
expressly required to be furnished to the Senior Secured Parties by the
Collateral Agent hereunder and under the Senior Security Documents and the other
Transaction Documents to which the Collateral Agent is a party, the Collateral
Agent shall not have any duty or responsibility to provide any Senior Secured
Party with any credit or other information concerning any Obligor which may come
into the possession of the Collateral Agent or any of its Affiliates.
(d) Notwithstanding the generality of the foregoing, nothing in this
Section 2.6 shall be deemed or construed as limiting the rights of the
Collateral Agent or any Senior Secured Party or the obligations of the Obligors,
in each case as set forth in the applicable Financing Documents.
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2.7 Resignation or Removal of Collateral Agent. Subject to the appointment
and acceptance of a successor Collateral Agent as provided below, (i) the
Collateral Agent may resign at any time by giving not less than sixty (60) days
notice thereof to the Administrative Agent, the Collateral Agent, the Trustee,
the VEPCO L/C Agent, the Partnership and the Funding Corporation and (ii) the
Collateral Agent may be removed at any time with or without cause by the
Intercreditor Agent (acting pursuant to the Intercreditor Agreement). Upon any
such resignation or removal referred to in clauses (i) and (ii) of the preceding
sentence, the Intercreditor Agent (acting pursuant to the Intercreditor
Agreement) shall have the right to appoint a successor Collateral Agent, which
Collateral Agent shall be reasonably acceptable to the Partnership and the
Funding Corporation unless an Event of Default shall have occurred and be
continuing. If no successor Collateral Agent shall have been so appointed by the
Intercreditor Agent (acting pursuant to the Intercreditor Agreement) and shall
have accepted such appointment within sixty (60) days after the retiring
Collateral Agent's giving of notice of resignation or the Intercreditor Agent
(acting pursuant to the Intercreditor Agreement) removal of the retiring
Collateral Agent, then the retiring Collateral Agent may, on behalf of the
Intercreditor Agent (acting pursuant to the Intercreditor Agreement) and the
other Senior Secured Parties, petition a court of competent jurisdiction for a
successor or it may appoint a successor Collateral Agent, which shall be a bank
or trust company (a) acceptable to the Intercreditor Agent (acting pursuant to
the Intercreditor Agreement), (b) having a combined capital and surplus of at
least $50,000,000, (c) having offices in New York, New York, (d) having a
long-term credit rating of not less than "BBB-" from S&P and "Baa3" Moody's,
provided that any such bank with long-term credit ratings of "BBB-" and "Baa3"
shall not cease to be a Collateral Agent upon a downward change in either such
rating of no more than one category or grade of such rating, as the case may be,
and (e) unless an Event of Default has occurred and is continuing, reasonably
acceptable to the Partnership and the Funding Corporation. Upon the acceptance
of any appointment as Collateral Agent hereunder by a successor Collateral
Agent, (i) such successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations hereunder, and (ii) the retiring Collateral Agent shall
promptly transfer all Collateral within its possession or control to the
possession or control of the successor Collateral Agent and shall execute and
deliver such notices, instructions and assignments as may be necessary or
desirable to transfer the rights of the Collateral Agent in respect of the
Collateral to the successor Collateral Agent. After any retiring Collateral
Agent's resignation, removal or replacement hereunder as Collateral Agent, the
provisions of this Article 2 shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Collateral Agent.
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2.8 Authorization. (a) The Collateral Agent is hereby authorized by each
of the other Senior Secured Parties to execute, deliver and perform each of the
Senior Security Documents to which the Collateral Agent is or is intended to be
a party, each of the Consents and each other Transaction Document to which the
Collateral Agent is or is intended to be a party and, subject to the terms of
the Senior Security Documents and the other Transaction Documents, to draw on,
or otherwise act under, any letter of credit or guarantee delivered to the
Collateral Agent for the benefit of the Senior Secured Parties, and each of the
Senior Secured Parties agrees to be bound by all of the agreements of the
Collateral Agent contained in, and all of the other terms and conditions of, the
Senior Security Documents, each of the Consents and each other Transaction
Document to which the Collateral Agent is or is intended to be a party.
(b) Without the prior written consent of, or direction from, the
Intercreditor Agent (acting pursuant to the Intercreditor Agreement), the
Collateral Agent shall not consent to any modification, supplement or waiver
under any of the Senior Security Documents or under any other Transaction
Document to which the Collateral Agent (in its capacity as such) is a party and
shall not (i) release any Senior Collateral or otherwise terminate any Lien
under any Senior Security Document, (ii) consent to any modification of this
Section 2.8 or of the definition of "Senior Secured Obligations" or "Senior
Secured Parties", (iv) release any letter of credit or other instrument securing
the obligations of any Person under any Transaction Document or (v) consent to
any Lien under any Senior Security Document securing obligations other than the
Senior Secured Obligations; provided, however, that, notwithstanding any
provision contained herein or in any other Financing Document to the contrary,
but subject in all respects to Section 5.1 and Section 5.1(k) of the Indenture,
the Collateral Agent shall release, or cause the release of, the Lien of the
Senior Secured Parties on (A) the portion of the Senior Collateral comprising
the Infrastructure to be transferred by the Partnership pursuant to the
Infrastructure Financing Documents upon receipt of an officer's certificate of
the Partnership, signed by an Authorized Officer, requesting such release and
certifying that such release complies with Section 5.1(g)(ii) and Section 5.1(k)
of the Indenture, and (B) the portion of any other Senior Collateral that the
Partnership is entitled to transfer pursuant to Section 5.1(g) of the Indenture
upon receipt of an officer's certificate of the Partnership, signed by an
Authorized Officer, requesting such release and certifying that such release
complies with Section 5.1(g) of the Indenture. In addition, the Collateral Agent
shall take such action as is reasonably necessary in order to enable the
Partnership to revise real property descriptions contained in any easement
conveyancing instrument (including enabling an amendment to the Deed of Trust),
upon receipt of the Collateral Agent of an officer's certificate of the Partner
ship, signed by an Authorized Officer, certifying that such revised property
description is necessary for the construction of the Infrastructure (as
confirmed in writing by the Independent Engineer).
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(c) For the avoidance of doubt, nothing in this Section 2.8, in
Section 2.1 of this Agreement or elsewhere in this Agreement or in any other
Senior Security Document or Transaction Document shall limit the obligations of
the Obligors under any Senior Security Document or other Transaction Document,
including, without limitation, any obligation of any of the Obligors to obtain
any consent or approval of any of the Senior Secured Parties obtained or
required to be obtained by the Obligors prior to any amendment of, modification
or supplement to or waiver under any Senior Security Document or other
Transaction Document.
2.9 Additional Collateral Agents.
2.9.1 Whenever the Collateral Agent shall deem it necessary or
prudent in order either to conform to any law of any jurisdiction in which all
or any part of the Senior Collateral shall be situated or to make any claim or
bring any suit with respect to the Senior Collateral, or the Collateral Agent
shall have been advised by counsel that it is so necessary or prudent in the
interests of the Senior Secured Parties, or in the event that the Collateral
Agent shall have been requested to do so by the Intercreditor Agent (acting
pursuant to the Intercreditor Agreement), or as otherwise expressly herein, the
Collateral Agent shall take such action (including, to the extent required, the
execution and delivery of an agreement supplemental hereto and such other
instruments and agreements) as may be necessary or proper to constitute another
bank or trust company, or one or more Persons approved by the Collateral Agent
and, unless an Event of Default has occurred and is continuing, reasonably
acceptable to the Partnership and the Funding Corporation, either to act as an
additional collateral agent of all or any part of the Senior Collateral, jointly
with the Collateral Agent, or to act as a separate collateral agent or trustee
of all or any part of the Senior Collateral (any such additional or separate
agent or trustee being herein called an "Additional Collateral Agent"), in any
such case with such powers as may be granted pursuant to such action, and to
vest in such bank, trust company or Person as an Additional Collateral Agent any
property, title, right or power of the Collateral Agent deemed necessary or
advisable by the Collateral Agent, subject to the remaining provisions of this
Section 2.9. The Collateral Agent shall provide prompt written notice to the
Administrative Agent, the Intercreditor Agent, the Trustee and the VEPCO L/C
Agent upon the appointment of an Additional Collateral Agent pursuant to this
Section. The Collateral Agent may, at the expense of the Partnership and the
Funding Corporation, execute, deliver or perform any deed, conveyance,
assignment or other instrument in writing as may be required by any Additional
Collateral Agent for more fully and certainly vesting in and confirming to it,
him or her any property, title, right or power which by the terms of such
agreement supplemental hereto are expressed to be conveyed or conferred to or
upon such Additional Collateral Agent.
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2.9.2 Every Additional Collateral Agent shall, to the extent
permitted by law, be appointed and act, and the Collateral Agent shall act,
subject to the following provisions and conditions:
(a) all powers, duties, obligations and rights conferred or
imposed upon the Collateral Agent in respect of the receipt, custody,
investment and payment of moneys shall be exercised solely by the
Collateral Agent;
(b) all other rights, powers, duties and obligations conferred
or imposed upon the Collateral Agent may be conferred or imposed upon and
exercised or performed by the Additional Collateral Agent and the
Collateral Agent, except to the extent that, under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Collateral Agent shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations
(including the holding of title to any part of the Senior Collateral in
any such jurisdiction) shall be exercised and performed by such Additional
Collateral Agent;
(c) no power hereby given to, or with respect to which it is
hereby provided may be exercised by, any such Additional Collateral Agent
shall be exercised hereunder by such Additional Collateral Agent unless
such power is exercised jointly with, or with the consent of, the
Collateral Agent;
(d) the Additional Collateral Agent shall act only upon and to
the extent of written instructions from the Collateral Agent and no other
party, and the Additional Collateral Agent shall not be required to take
and shall not be responsible for taking any action as Additional
Collateral Agent under this Agreement, any Senior Security Document or any
other Transaction Document unless it has received such written
instructions from the Collateral Agent; and
(e) the Collateral Agent shall not be personally liable by
reason of any act or omission of any Additional Collateral Agent
hereunder, nor shall any Additional Collateral Agent be personally liable
by reason of any act or omission of the Collateral Agent or any other
Additional Collateral Agent hereunder; provided, however, that nothing in
this Agreement shall excuse the liability of the Collateral Agent or any
Additional Collateral Agent for its own respective gross negligence or
willful misconduct.
2.9.3 If at any time the Collateral Agent shall deem it no longer
necessary or prudent in order to conform to any such law or take any such action
or shall be advised by counsel that it is no longer so necessary or prudent in
the interest of the Senior
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Secured Parties, or in the event that the Collateral Agent shall have been
requested to do so in writing by the Intercreditor Agent (acting pursuant to the
Intercreditor Agreement), the Collateral Agent shall execute and deliver an
agreement supplemental hereto and all other instruments and agreements necessary
or proper to remove any Additional Collateral Agent.
2.9.4 Any Additional Collateral Agent may at any time by an
instrument in writing constitute the Collateral Agent its agent or
attorney-in-fact, with full power and authority, to the extent which may be
authorized by law, to do all acts and things and exercise all discretion which
it is authorized or permitted to do or exercise, for and on its behalf and in
its name. In case any such Additional Collateral Agent shall become incapable of
acting, resign or be removed, all of the assets, property, rights, powers,
trusts, duties and obligations of such Additional Collateral Agent under this
Agreement, so far as permitted by law, shall vest in and be exercised by the
Collateral Agent, without the appointment of a new successor to such Additional
Collateral Agent unless and until a successor is appointed in the manner
hereinbefore provided.
2.9.5 Any request, approval or consent in writing by the Collateral
Agent to any Additional Collateral Agent shall be sufficient warrant to such
Additional Collateral Agent to take such action as may be so requested,
approved or consented.
2.9.6 Each Additional Collateral Agent appointed pursuant to this
Section 2.9 shall be subject to, and shall have the benefits of, the provisions
of this Agreement insofar as they apply to the Collateral Agent.
2.9.7 The Collateral Agent and each other Senior Secured Party
hereby appoints Credit Suisse First Boston to act as an Additional Collateral
Agent for the sole purpose of exercising Credit Suisse First Boston's rights as
a third party beneficiary under the Water Supply Agreement. Credit Suisse First
Boston hereby accepts such appointment. The Partnership and the Funding
Corporation hereby agree that, if the Water Supply Agreement has not been
amended to provide third party beneficiary rights to the Collateral Agent on or
prior to the date which is six (6) months after the Closing Date, the
Partnership and the Funding Corporation shall pay Credit Suisse First Boston an
annual fee of $25,000, payable annually in advance, in consideration for Credit
Suisse First Boston acting as an Additional Collateral Agent pursuant to this
Section 2.9.7. Credit Suisse First Boston's appointment as an Additional
Collateral Agent pursuant to this Section 2.9.7 shall terminate upon the
effective date of any amendment to the Water Supply Agreement which provides
third party beneficiary rights to the Collateral Agent.
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ARTICLE III
ADMINISTRATION OF THE COLLATERAL
The Collateral Agent shall hold the Senior Collateral and any Lien thereon
for the benefit of the Senior Secured Parties pursuant to the terms of this
Agreement, the Senior Security Documents and any other Transaction Document to
which the Collateral Agent is a party. The Collateral Agent shall administer the
Senior Collateral in the manner contemplated by the Senior Security Documents
and the other Transaction Documents. The Collateral Agent shall exercise such
rights and remedies with respect to the Senior Collateral as are granted to it
under the Senior Security Documents, the other Transaction Documents and
applicable law and, except as otherwise expressly provided in the Senior
Security Documents and such other Transaction Documents, as it shall be directed
by the Intercreditor Agent (acting pursuant to the Intercreditor Agreement). No
Senior Secured Party or class or classes thereof (other than the Intercreditor
Agent (acting pursuant to the Intercreditor Agreement)) shall have any right to
direct the Collateral Agent to take any action in respect of the Senior
Collateral and no Senior Secured Party shall have any right to take action with
respect to the Senior Collateral independently of the Collateral Agent. Unless
otherwise directed by the Intercreditor Agent (acting pursuant to the
Intercreditor Agreement), the Collateral Agent shall retain possession of, or
cause possession thereof to be retained by its designee, (a) all shares pledged
to the Collateral Agent (on behalf of the Senior Secured Parties) pursuant to
the Funding Corporation Stock Pledge Agreement and the GP Stock Pledge Agreement
and (b) all partnership interest certificates pledged to the Collateral Agent
(on behalf of the Senior Secured Parties) pursuant to the LP Interests Pledge
Agreement and the GP Interests Pledge Agreement.
ARTICLE IV
APPLICATION OF PROCEEDS
Following the occurrence of an Event of Default (as defined in the
Intercreditor Agreement), the proceeds of any collection, sale or other
realization of all or any part of the Senior Collateral pursuant to the Senior
Security Documents and all or any portion of the Equity Contribution made
pursuant to the Equity Contribution Agreement, and any other cash at the time of
such collection, sale or other realization held by the Collateral Agent under
the Senior Security Documents or this Article 4, shall be applied by the
Collateral Agent in the following order or priority:
(1) first, to the payment of (a) all reasonable costs and expenses
relating to the sale of the Senior Collateral and the collection of all
amounts owing hereunder, including attorneys' fees and disbursements and
the reasonable compensation of the Collateral Agent, the Administrative
Agent and the Intercreditor Agent for services rendered in connection
therewith or in connection with any pro-
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ceeding to sell if a sale is not completed, in each case, whether arising
hereunder or under the other Senior Security Documents or other Financing
Documents, (b) all charges, expenses and advances incurred or made by the
Collateral Agent, the Administrative Agent and the Intercreditor Agent in
order to protect the Liens of the Senior Security Documents or the
security afforded thereby, and (c) all liabilities (including those
specified in clauses (a) and (b) immediately above) incurred by the
Collateral Agent, the Administrative Agent and the Intercreditor Agent,
regardless of whether such liabilities arise out of the sale of Senior
Collateral or the collection of amounts owing hereunder, which are covered
by the indemnity provisions of this Agreement or the other Senior Security
Documents or other Financing Documents, together with interest thereon at
the rate per annum equal the Post Default Rate, computed on the basis of
the actual number of days elapsed and a year of 360 days;
(2) second, to the payment of accrued and unpaid interest on
interest that became overdue on the Senior Secured Obligations, ratably,
in an amount necessary to make the respective Senior Secured Parties
current on interest on overdue interest due under the respective Financing
Documents to the same proportionate extent as the other respective Senior
Secured Parties are then current on interest on overdue interest due under
the respective Financing Documents;
(3) third, to the payment of accrued and unpaid interest on
principal of the Senior Secured Obligations, ratably, in an amount
necessary to make the respective Senior Secured Parties current on
interest on overdue principal due under the respective Financing Documents
to the same proportionate extent as the other respective Senior Secured
Parties are then current on interest on overdue principal due under the
respective Financing Documents;
(4) fourth, to the payment to each of the Senior Secured Parties of
any accrued but unpaid commitment fees or other fees owed to such Person,
pro rata in accordance with the respective amounts owed to such Person;
(5) fifth, to the payment to each of the Senior Secured Parties of
the remaining principal, premium (if any), interest and other Senior
Secured Obligations owed to such Person hereunder or under any other
Transaction Document, pro rata in accordance with the respective principal
amount of Senior Secured Obligations owed to such Person, to be applied by
each such Person in accordance with the respective Financing Documents
pursuant to which such Senior Secured Obligations were incurred; and
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(6) finally, to the payment to the Partnership and the Funding
Corporation, or their respective successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining.
As used in this Article 4, "proceeds" of Senior Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Senior Collateral, including, without limitation, any cash, securities and
other property received under any reorganization, liquidation or adjustment of
Indebtedness of the Partner ship, the Funding Corporation or any other issuer of
or obligor on any of the Senior Collateral.
ARTICLE V
MISCELLANEOUS
5.1 Amendments. Neither this Agreement nor any terms or conditions hereof
may be amended, changed, waived, discharged, terminated or otherwise modified
unless such amendment, change, waiver, discharge, termination or modification
is in writing, is in accordance with the terms of the Financing Documents and is
executed by each of the Partnership, the Funding Corporation and the Collateral
Agent (acting upon instructions from the Intercreditor Agent (acting pursuant to
the Intercreditor Agreement)).
5.2 Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. The Partnership may not assign or otherwise
transfer any of its rights or obligations under this Agreement.
5.3 Transfers. Any Senior Secured Party may at any time assign, transfer,
grant or sell participations in its rights and interests under the Senior
Security Documents, subject, however, to the restrictions, if any, imposed on
the assignment, transfer, grant or sale of participations in the Senior Secured
Obligations owing to such Senior Secured Party pursuant to the Financing
Documents, and provided that any such assignee, transferee or participant
becomes bound by the terms hereof.
5.4 Delay and Waiver. No failure on the part of any Senior Secured Party
or any of their nominees or representatives to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall impair any such right, power or remedy of the Senior Secured
Parties or their nominees or representatives nor shall it operate as a waiver
thereof; nor shall any single or partial exercise by any Senior Secured Party or
any of their nominees or representatives of any right, power or remedy hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.
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5.5 Costs and Expenses; Indemnity. The Partnership and the Funding
Corporation shall pay the costs and expenses of, and shall indemnify, defend and
hold harmless, the Collateral Agent and each of the other Senior Secured Parties
as provided in Section 7.15 of the Intercreditor Agreement, which Section 7.15
is incorporated herein by this reference, mutatis mutandis, as if set forth in
full herein.
5.6 Collateral Agency Fee. On the Closing Date, and on each anniversary
thereof occurring during the period commencing on the Closing Date and
continuing to and including the date upon which all obligations of the Obligors
under the Financing Documents have been indefeasibly paid in full, the
Partnership shall pay to the Collateral Agent an annual collateral agency fee as
described in the letter agreement between the Collateral Agent and the
Partnership.
5.7 Notices. Unless otherwise specifically herein provided, all notices
required or permitted under the terms and provisions hereof shall be in writing
and any such notice shall become effective if given in accordance with the
provisions of Section 7.1 of the Intercreditor Agreement.
5.8 Headings. Paragraph headings have been inserted in this Agreement as a
matter of convenience for reference only and it is agreed that such paragraph
headings are not part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
5.9 Counterparts. This Agreement may be executed in one or more duplicate
counterparts and when signed by all of the parties listed below shall constitute
a single binding agreement.
5.10 Governing Law. This Agreement shall be governed by the laws of the
State of New York of the United States of America and shall for all purposes be
governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law.
5.11 Consent to Jurisdiction. Any legal action or proceeding by or against
the Partnership or the Funding Corporation with respect to or arising out of
this Agreement may be brought in or removed to the courts of the State of New
York, in and for the County of New York, or of the United States of America for
the Southern District of New York. By execution and delivery of this Agreement,
each of the Partnership and the Funding Corporation accepts, for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts for legal proceedings arising out of or in connection with this
Agreement and irrevocably consents to the appointment of CT Corporation System,
with offices on the date hereof at 1633 Broadway, New York, New
16
<PAGE>
York 10019 as its agent to receive service of process in New York, New York. If
for any reason such agent shall cease to be available to act as such, each of
the Partnership and the Funding Corporation agrees to appoint a new agent on the
terms and for the purposes of this provision. Nothing herein shall affect the
right to serve process in any other manner permitted by law or any right to
bring legal action or proceedings in any other competent jurisdiction, including
judicial or non-judicial foreclosure of real property interests which are part
of the Senior Collateral. Each of the Partnership and the Funding Corporation
further agrees that the aforesaid courts of the State of New York and of the
United States of America for the Southern District of New York shall have
exclusive jurisdiction with respect to any claim or counterclaim of the
Partnership or the Funding Corporation based upon the assertion that the rate of
interest charged by or under this Agreement or under the other Financing
Documents is usurious. Each of the Partnership and the Funding Corporation
hereby waives any right to stay or dismiss any action or proceeding under or in
connection with the Project, this Agreement or any other Transaction Document
brought before the foregoing courts on the basis of forum non-conveniens or
improper venue.
5.12 Waiver of Jury Trial. EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE OTHER PARTIES HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT, THE
ADMINISTRATIVE AGENT, THE INTERCREDITOR AGENT AND THE OTHER SENIOR SECURED
PARTIES TO ENTER INTO THIS AGREEMENT.
5.13 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and provisions of this
Agreement and any such agreement, document or instrument, the terms, conditions
and provisions of this Agreement shall prevail.
5.14 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and the parties hereto shall enter into
good faith negotiations to replace the invalid, illegal or unenforceable
provision with a view to obtaining the same commercial effect as this Agreement
would have had if such provision had been legal, valid and enforceable.
17
<PAGE>
5.15 References to Collateral Agency Agreement. On and after the date
hereof, each reference in any of the Transaction Documents to the "Collateral
Agency Agreement" shall mean the Collateral Agency Agreement as amended and
restated hereby.
5.16 Joint and Several Liability. The obligations of the Partnership and
the Funding Corporation hereunder are joint and several.
5.17 Additional Senior Secured Parties. Each of the parties to this
Agreement agrees that any Person which becomes a Senior Secured Party after the
Closing Date shall become a party to this Agreement upon execution and delivery
by such Person of a counterpart to this Agreement. Any Person that becomes a
party to this Agreement pursuant to this Section 5.17 shall be bound by and
subject to the terms and conditions hereof and the covenants, stipulations and
agreements contained herein.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated Collateral Agency Agreement to be executed by their respective officers
or representatives hereunto duly authorized as of the day and year first above
written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
SENIOR SECURED PARTIES:
THE BANK OF NEW YORK,
in its capacity as the Administrative Agent
By: /s/ Mary Beth Lewicki
-------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Intercreditor Agent
19
<PAGE>
By: /s/ Mary Beth Lewicki
-------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK,
in its capacity as the Trustee
By: /s/ Mary Beth Lewicki
-------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
CREDIT SUISSE FIRST BOSTON,
in its capacity as the VEPCO L/C Agent
By: /s/ Brian T. Caldwell
------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
-------------------------
Name: Pilarcita V. Naval
Title: Associate
CREDIT SUISSE FIRST BOSTON,
in its capacity as an Additional Collateral Agent
By: /s/ Brian T. Caldwell
------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
-------------------------
Name: Pilarcita V. Naval
Title: Associate
20
<PAGE>
Exhibit 4.15
================================================================================
PLEDGE AND SECURITY AGREEMENT
(Funding Corporation Stock)
dated as of May 21, 1999
between
LSP BATESVILLE HOLDING, LLC
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS.......................................................................1
AGREEMENT......................................................................2
ARTICLE 1: DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions................................................2
Section 1.2 Principles of Construction.................................2
ARTICLE 2: PLEDGE
Section 2.1 Pledged Collateral.........................................3
Section 2.2 Delivery of Stock Collateral...............................4
Section 2.3 Pledgor's Rights...........................................4
(a) Distributions..............................................4
(b) Other Rights...............................................5
(c) Turnover ...............................................5
(d) Proxies, etc...............................................5
Section 2.4 Collateral Agent Not Liable................................6
Section 2.5 Attorney-in-Fact...........................................6
Section 2.6 Collateral Agent May Perform...............................6
Section 2.7 Reasonable Care............................................7
Section 2.8 Security Interest Absolute.................................7
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
Section 3.1 Pledged Shares.............................................8
Section 3.2 Ownership of Pledged Collateral............................8
Section 3.3 Nature of Security Interest................................8
Section 3.4 Consents, etc..............................................8
Section 3.5 Chief Executive Office.....................................8
ARTICLE 4: COVENANTS
Section 4.1 Sale of Pledged Collateral.................................9
Section 4.2 No Other Liens.............................................9
Section 4.3 Issuance of Shares.........................................9
Section 4.4 Chief Executive Office.....................................9
i
<PAGE>
Page
----
Section 4.5 Supplements; Further Assurances, etc.......................9
Section 4.6 Stock Certificates........................................10
Section 4.7 Records; Statements and Schedules.........................10
Section 4.8 Improper Distributions....................................10
Section 4.9 Bankruptcy................................................10
ARTICLE 5: EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
Section 5.1 Remedies Generally........................................11
Section 5.2 Sale of Pledged Collateral................................11
Section 5.3 Purchase of Pledged Collateral............................13
Section 5.4 Application of Proceeds...................................13
ARTICLE 6: MISCELLANEOUS PROVISIONS
Section 6.1 Notices...................................................13
Section 6.2 Continuing Security Interest..............................13
Section 6.3 Release...................................................13
Section 6.4 Reinstatement.............................................13
Section 6.5 Independent Security......................................14
Section 6.6 Amendments................................................14
Section 6.7 Successors and Assigns....................................15
Section 6.8 Survival..................................................15
Section 6.9 No Waiver; Remedies Cumulative............................15
Section 6.10 Counterparts..............................................15
Section 6.11 Headings Descriptive......................................16
Section 6.12 Severability..............................................16
Section 6.13 Governing Law. ...........................................16
Section 6.14 Consent to Jurisdiction. .................................16
Section 6.15 Waiver of Jury Trial. ....................................17
Section 6.16 Entire Agreement..........................................17
Section 6.17 Third Party Beneficiaries.................................17
Section 6.18 Independent Obligations...................................17
Section 6.19 Waiver of Defenses........................................17
Section 6.20 Subrogation, Etc..........................................17
Section 6.21 Limitation of Liability...................................18
Section 6.22 Collateral Agency Agreement...............................18
ii
<PAGE>
PLEDGE AND SECURITY AGREEMENT
(Funding Corporation Stock)
This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
May 21, 1999, is made by LSP BATESVILLE HOLDING, LLC, a Delaware limited
liability company (the "Pledgor"), to THE BANK OF NEW YORK, as collateral agent
(together with its successors in such capacity, the "Collateral Agent") for the
benefit of the Senior Secured Parties pursuant to the Second Amended and
Restated Collateral Agency Agreement, dated as of May 21, 1999 (the "Collateral
Agency Agreement"), among (as of the date hereof) LSP Energy Limited Partnership
(the "Partnership"), LSP Batesville Funding Corporation (the "Funding
Corporation"), the Trustee, the VEPCO L/C Agent, the Collateral Agent, the
Intercreditor Agent and the Administrative Agent.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, the Pledgor owns 100% of the issued and outstanding
capital stock of the Funding Corporation;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, collectively with the Series
A Bonds, the "Bonds") pursuant to the Trust Indenture, dated as of the date
hereof (the "Indenture"), among the Partnership, the Funding Corporation and The
Bank of New York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Amended and Restated Bank Facility Credit Agreement and, dated as of
December 15, 1998, by and among the Partnership, the banks and other financial
institutions party thereto and Credit Suisse First Boston as agent, and (ii) pay
the remaining Project Costs;
<PAGE>
WHEREAS, the execution by the Grantor of this Agreement is a
condition precedent to the issuance and sale of the Bonds and the execution by
the Senior Secured Parties of the related Financing Documents.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantor hereby agrees with the Collateral Agent as follows:
ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Indenture shall have such defined meanings when used herein.
(b) The following terms shall have the following respective
meanings:
"Additional Shares" shall have the meaning ascribed thereto in
Section 2.1(a)(ii).
"Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Event of Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Pledged Collateral" shall have the meaning ascribed thereto in
Section 2.1(a).
"Pledged Shares" shall have the meaning ascribed thereto in Section
2.1(a)(i).
"Secured Obligations" shall mean the Senior Secured Obligations.
"Securities Act" shall have the meaning ascribed thereto in Section
5.2(b).
2
<PAGE>
"Stock Collateral" shall have the meaning ascribed thereto in
Section 2.1(a)(ii).
Section 1.2 Principles of Construction. Except as otherwise expressly
provided herein, the principles of construction set forth in the Indenture shall
apply to this Agreement.
ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral. (a) As collateral security for the prompt
and complete payment and performance when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the U.S.
Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all of the Secured Obligations,
whether now existing or hereafter arising and howsoever evidenced, the Pledgor
hereby pledges, grants, assigns, hypothecates, transfers and delivers to the
Collateral Agent on behalf of and for the ratable benefit of all of the Senior
Secured Parties, a first priority security interest in the following, whether
now existing or hereafter from time to time acquired (collectively, the "Pledged
Collateral"):
(i) all of the Pledgor's right, title and interest in and to
all shares (the "Pledged Shares") of capital stock of the Funding
Corporation, and the certificates, if any, representing the Pledged
Shares, and all dividends, distributions, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares;
(ii) all additional shares (the "Additional Shares") of
capital stock of any issuer of any Pledged Shares from time to time
acquired by the Pledgor in any manner (including, without limitation, any
shares of preferred stock issued by any such issuer), and the
certificates, if any, representing such additional shares, and all
dividends, distributions, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares (the certificates
representing the shares referred to in clause (i) above and this clause
(ii), the "Stock Collateral");
3
<PAGE>
(iii) all other rights appurtenant to the property described
in clauses (i) and (ii) above (including, without limitation, voting
rights); and
(vi) all proceeds of any and all of the foregoing, and in
addition, all dividends, distributions, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the foregoing.
(b) As used herein, the term "proceeds" shall be construed in its
broadest sense and shall include whatever is received or receivable when any of
the Pledged Collateral, or any proceeds thereof, is sold, collected, exchanged
or other wise disposed of, whether voluntarily or involuntarily, and shall
include, without limitation, all rights to payment, including interest and
premiums, with respect to any of the Pledged Collateral or any proceeds thereof.
Section 2.2 Delivery of Stock Collateral. All certificates or instruments
representing or evidencing the Stock Collateral shall be delivered to and held
by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent. The Collateral Agent shall have the
right, at any time following the occurrence and during the continuation of an
Event of Default, without notice to the Pledgor, to transfer to or to register
in its name or in the name of any of its nominees any or all of the Stock
Collateral. In addition, the Collateral Agent shall have the right at any time
to exchange certificates or instruments representing or evidencing any of the
Stock Collateral for certificates or instruments of smaller or larger
denominations.
Section 2.3 Pledgor's Rights. (a) Distributions. Unless an Event of
Default shall have occurred and be continuing, the Pledgor shall be entitled to
receive and retain any and all distributions paid in respect of the Stock
Collateral in compliance with the terms of the Transaction Documents; provided,
however, that any and all
(i) distributions paid or payable in respect of any Stock
Collateral (whether paid in cash, securities or other property) in
connection with (A) any partial or total liquidation or dissolution of the
Funding Corporation, (B) any distribution of capital of the Funding
Corporation, (C) any recapitalization or reclassification of the capital
of the Funding Corporation or (D) any reorganization of the Funding
Corporation, and
4
<PAGE>
(ii) all property (whether cash, securities or other property)
paid, payable or otherwise distributed in redemption of, or in exchange
for, the property described in clause (i) immediately above,
shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Stock Collateral and shall, if received by the Pledgor, be received in trust for
the benefit of the Collateral Agent, be segregated from the other property or
funds of the Pledgor, and be forthwith delivered to the Collateral Agent as
Stock Collateral in the same form as so received (with any necessary
endorsement). Upon the occurrence and during the continuance of an Event of
Default, all rights of the Pledgor to receive the distributions which it would
otherwise be authorized to receive and retain pursuant to the preceding sentence
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent which shall thereupon have the sole right to receive and hold as Stock
Collateral such distributions.
(b) Other Rights. Unless an Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to exercise all voting and other
rights with respect to the Stock Collateral; provided, however, that no vote
shall be cast, right exercised or other action taken which would knowingly have
a material adverse effect on the Stock Collateral or which would knowingly be
inconsistent with or knowingly result in any violation of any provision of this
Agreement or any other Financing Document. Upon the occurrence and during the
continuance of an Event of Default and upon election by the Collateral Agent, as
directed by the Intercreditor Agent, acting pursuant to the Intercreditor
Agreement, all voting and other rights of the Pledgor with respect to the Stock
Collateral which the Pledgor would otherwise be entitled to exercise pursuant to
the terms of this Agreement shall cease, and all such rights shall be vested in
the Collateral Agent which shall thereupon have the sole right to exercise such
rights.
(c) Turnover. All distributions and other amounts which are received
by the Pledgor contrary to the provisions of this Agreement shall be received in
trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Collateral Agent as
Stock Collateral in the same form as so received (with any necessary
endorsement).
(d) Proxies, etc. The Pledgor shall, if necessary to permit the
Collateral Agent to exercise the voting and other rights which it may be
entitled to exercise pursuant to clause (b) above and to receive all dividends
and distributions which it may be entitled to receive under clause (a) above,
execute and deliver to the Collateral Agent, from time to
5
<PAGE>
time and upon written notice of the Collateral Agent, appropriate proxies,
dividend payment orders and other instruments as the Collateral Agent may
reasonably request. The foregoing shall not in any way limit the Collateral
Agent's power and authority granted pursuant to Section 2.5.
Section 2.4 Collateral Agent Not Liable. Neither the Collateral Agent nor
any of its directors, officers, employees, affiliates or agents shall have any
obligations or liability under or with respect to any Pledged Collateral by
reason of or arising out of this Agreement or the receipt by the Collateral
Agent of any payment relating to any Pledged Collateral, nor shall the
Collateral Agent or any of its directors, officers, employees, affiliates or
agents be obligated in any manner to (a) perform any of the obligations of the
Pledgor under or pursuant to any agreement to which the Pledgor is a party, (b)
make any payment or to inquire as to the nature or sufficiency of any payment or
performance with respect to any Pledged Collateral, (c) present or file any
claim or collect the payment of any amounts or take any action to enforce any
performance with respect to the Pledged Collateral or (d) take any other action
whatsoever with respect to the Pledged Collateral.
Section 2.5 Attorney-in-Fact. (a) The Pledgor hereby appoints the
Collateral Agent or any Person, officer or agent whom the Collateral Agent may
designate, as its true and lawful attorney-in-fact and proxy, with full
irrevocable power and authority in the place and stead of the Pledgor and in the
name of the Pledgor or in its own name, at the Pledgor's cost and expense, from
time to time to take any action and to execute any instrument which may be
necessary or advisable to enforce its rights under this Agreement, including,
without limitation, authority to receive, endorse and collect all instruments
made payable to the Pledgor representing any distribution, interest payment or
other payment in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, and to vote or grant any consent in respect of
the Pledged Shares authorized by Section 2.2(b).
(b) The Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof, in each case pursuant to the
powers granted hereunder. The Pledgor hereby acknowledges and agrees that the
Collateral Agent shall have no fiduciary duties to the Pledgor and the Pledgor
hereby waives any claims or rights of a beneficiary of a fiduciary relationship
hereunder.
Section 2.6 Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein after receipt of a written request to do so from
the Collateral Agent, the Collateral Agent may (but shall not be obligated to)
itself perform, or cause
6
<PAGE>
performance of, such agreement, and the expenses of the Collateral Agent,
including the reasonable fees and expenses of its counsel, incurred in
connection therewith shall be payable by the Pledgor under Section 5.5 of the
Collateral Agency Agreement; provided that if a Bankruptcy Event shall have
occurred with respect to the Pledgor, the written request described in this
Section 2.6 shall not be required and shall be deemed to have been delivered
upon the failure of the Pledgor to perform such agreement.
Section 2.7 Reasonable Care. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent accords its own
property of the type of which the Pledged Collateral consists, it being
understood that the Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral,
whether or not the Collateral Agent has or is deemed to have knowledge of such
matters, or (b) taking any necessary steps to preserve rights against any
parties with respect to any Pledged Collateral.
Section 2.8 Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Financing
Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Financing
Documents or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor, except as otherwise
provided herein.
7
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows, which representations and
warranties shall survive the execution and delivery of this Agreement and the
making and repayment of the Secured Obligations:
Section 3.1 Pledged Shares. The Pledged Shares (a) have been duly
authorized and validly issued, (b) are fully paid and non-assessable and (c)
constitute all of the issued and outstanding shares of stock of the Funding
Corporation.
Section 3.2 Ownership of Pledged Collateral. The Pledgor is the sole legal
and beneficial owner of the Pledged Shares, free and clear of any Lien other
than the Lien created pursuant to this Agreement and other Permitted Liens.
Section 3.3 Nature of Security Interest. The pledge and grant of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority security interest in the Pledged Collateral in favor of the
Collateral Agent, securing the payment of all of the Secured Obligations.
Section 3.4 Consents, etc. No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental authority is
required either (i) for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the due execution, delivery or performance of
this Agreement by the Pledgor, or (ii) for the exercise by the Collateral Agent
of the voting or other rights provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement, except as may
be required in connection with the disposition of the Stock Collateral by laws
affecting the offering and sale of securities generally.
Section 3.5 Chief Executive Office. The chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Pledged Collateral is located at:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816.
8
<PAGE>
ARTICLE 4
COVENANTS
The Pledgor hereby covenants and agrees from and after the date of this
Agreement until the termination of this Agreement in accordance with the
provisions of Section 6.3:
Section 4.1 Sale of Pledged Collateral. The Pledgor shall not sell or
other wise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral, except to the extent the same would not violate the
terms and provisions of the Financing Documents, provided that the Pledged
Collateral shall at all times remain subject to the pledge of this Agreement
following any sale or disposition thereof.
Section 4.2 No Other Liens. The Pledgor shall not create, incur or permit
to exist, shall defend the Pledged Collateral against, and shall take such other
action as is reasonably necessary to remove, any Lien or claim on or to the
Pledged Collateral (other than the Lien created pursuant to this Agreement), and
shall defend the right, title and interest of the Collateral Agent in and to any
of the Pledged Collateral against the claims and demands of all Persons
whomsoever, except with respect to any sale or disposition of any of the Pledged
Collateral not in violation of the Financing Documents.
Section 4.3 Issuance of Shares. The Pledgor agrees that it will cause the
Funding Corporation (a) not to issue to the Pledgor any shares of stock or other
securities in addition to or in substitution for the Pledged Shares, (b) not to
sell or otherwise dispose of, or grant any option or warrant with respect to,
any of its assets or properties, and (c) not to create or permit to exist any
Lien, security interest, option or other charge or encumbrance upon any of its
assets or properties, in each case except to the extent the same are expressly
permitted by the terms of this Agreement and the other Financing Documents.
Section 4.4 Chief Executive Office. The Pledgor shall not establish a new
location for its chief executive office or change its name until (i) it has
given to the Collateral Agent not less than sixty (60) days prior written notice
of its intention so to do, clearly describing such new location or specifying
such new name, as the case may be, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all action necessary to
maintain the security interest of the Collateral Agent in the Pledged Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
9
<PAGE>
Section 4.5 Supplements; Further Assurances, etc. The Pledgor shall at any
time and from time to time, at the expense of the Pledgor, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
Section 4.6 Stock Certificates. The Pledgor shall deliver all
certificates, instruments or other documents representing the Pledged Collateral
to the Collateral Agent with all necessary stock transfer or other powers duly
indorsed in blank. In the event the Pledgor obtains possession of any other
stock certificates, or other securities or instruments forming a part of the
Pledged Collateral, the Pledgor shall promptly deliver same to the Collateral
Agent together with all necessary stock transfer or other powers duly indorsed
in blank. Prior to any such delivery, any Pledged Collateral in the Pledgor's
possession shall be held by the Pledgor in trust for the Collateral Agent.
Section 4.7 Records; Statements and Schedules. The Pledgor shall keep and
maintain, at its own cost and expense, records of the Pledged Collateral,
including, but not limited to, records of all payments received with respect
thereto, and the Pledgor shall make the same available to the Collateral Agent
for inspection at the Pledgor's chief executive office, at the Pledgor's own
cost and expense, at any and all times upon demand. The Pledgor shall furnish to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Pledged Collateral and such other reports in
connection with the Pledged Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
Section 4.8 Improper Distributions. Notwithstanding any other provision
contained in this Agreement, the Pledgor shall not accept any distributions,
dividends or other payments (or any collateral in lieu thereof) in respect of
the Pledged Collateral, except to the extent the same are expressly permitted
by the terms of this Agreement and the other Financing Documents.
Section 4.9 Bankruptcy. The Pledgor shall not authorize or permit the
Funding Corporation to (a) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Funding
Corporation or the Funding Corporation's debts under any Bankruptcy Law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the
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<PAGE>
Funding Corporation or any substantial part of the Funding Corporation's
property, (b) consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against the Funding Corporation or (c) make a general assignment for
the benefit of the Funding Corporation's creditors. The Pledgor shall not
commence or join with any other Person (other than the Collateral Agent and the
other Senior Secured Parties) in commencing any proceeding against the Funding
Corporation under any Bankruptcy Law now or hereafter in effect in any
jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
The provisions of this Article 5 shall apply only upon the occurrence and
during the continuance of an Event of Default.
Section 5.1 Remedies Generally. Subject to the terms of the Intercreditor
Agreement, if an Event of Default shall have occurred and be continuing, the
Collateral Agent, upon directions from (x) the Intercreditor Agent acting
pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, may exercise, in addition to all other rights and
remedies granted in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Uniform Commercial Code in effect from
time to time in any relevant jurisdiction and all other rights and remedies
available at law or in equity.
Section 5.2 Sale of Pledged Collateral. (a) Without limiting the
generality of Section 5.1, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, may, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale or at the Collateral Agent's corporate
trust office or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as is commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral at any such sale. Each purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. The
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Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to the Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale of Pledged Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Collateral Agent shall incur no liability as a result of the sale of the Pledged
Collateral, or any part thereof, at any public or private sale. The Pledgor
hereby waives any claims against the Collateral Agent arising by reason of the
fact that the price at which any Pledged Collateral may have been sold at such a
private sale, if commercially reasonable, was less than the price which might
have been obtained at a public sale, even if the Collateral Agent accepts the
first offer received and does not offer such Pledged Collateral to more than one
offeree.
(b) The Pledgor recognizes that the Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, may
elect to sell all or a part of the Stock Collateral to one or more purchasers in
privately negotiated transactions in which the purchasers will be obligated to
agree, among other things, to acquire the Stock Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sales may be at prices
and on terms less favorable than those obtainable through a public sale
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Collateral Agent agree that such
private sales shall be made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public sales and no obligation
to delay sale of any Stock Collateral to permit the issuer thereof to register
the Stock Collateral for a form of public sale requiring registration under the
Securities Act. If the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, determines to exercise its
right to sell any or all of the Stock Collateral, upon written request, the
Pledgor shall, from time to time, furnish to the Collateral Agent all such
information necessary in order to determine the number of shares and other
instruments included in the Stock Collateral which may be sold by the Collateral
Agent as exempt transactions under the Securities Act and rules of
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the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
Section 5.3 Purchase of Pledged Collateral. The Collateral Agent may be a
purchaser of the Pledged Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Collateral Agent may apply the purchase price to the
payment of the Secured Obligations. Any purchaser of all or any part of the
Pledged Collateral shall, upon any such purchase, acquire good title to the
Pledged Collateral so purchased, free of the security interests created by this
Agreement.
Section 5.4 Application of Proceeds. The Collateral Agent shall apply any
proceeds from time to time held by it and the net proceeds of any collection,
recovery, receipt, appropriation, realization or sale with respect to the
Pledged Collateral in accordance Article IV of the Collateral Agency Agreement.
For avoidance of doubt, it is understood that the Partnership and the Funding
Corporation shall remain liable to the extent of any deficiency between the
amount of proceeds of the Pledged Collateral and the aggregated amount of the
Secured Obligations in accordance with the Financing Documents.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective if given in accordance with
the provisions of Section 1.4 of the Indenture (and, in the case of notices to
the Pledgor, addressed to the Pledgor's chief executive office as determined
herein).
Section 6.2 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral until the release thereof
pursuant to Section 6.3.
Section 6.3 Release. Upon the indefeasible payment in full of the Secured
Obligations in cash or cash equivalents and the termination of all commitments
of the Senior Secured Parties under the Financing Documents, the Collateral
Agent, upon the request, and at the expense, of the Pledgor, and acting pursuant
to instructions from the Pledgor shall execute and deliver all such
documentation as the Pledgor may request to release the Lien created pursuant to
this Agreement.
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Section 6.4 Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent hereunder or pursuant hereto is rescinded or must otherwise be
restored or returned by the Collateral Agent upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Pledgor, the Partnership or
the Funding Corporation or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, the Pledgor, the Partnership
or the Funding Corporation or any substantial part of the Pledgor's, the
Partnership's or the Funding Corporation's assets, or upon the entry of an order
by any court avoiding the payment of such amount, or otherwise, all as though
such payments had not been made.
Section 6.5 Independent Security. The security provided for in this
Agreement shall be in addition to and shall be independent of every other
security which the Collateral Agent may at any time hold for any of the Secured
Obligations hereby secured, whether or not under the Senior Security Documents.
The execution of any other Senior Security Document shall not modify or
supersede the security interest or any rights or obligations contained in this
Agreement and shall not in any way affect, impair or invalidate the
effectiveness and validity of this Agreement or any term or condition hereof.
The Pledgor hereby waives its rights to plead or claim in any court that the
execution of any other Senior Security Document is a cause for extinguishing,
invalidating, impairing or modifying the effectiveness and validity of this
Agreement or any term or condition contained herein. The Collateral Agent shall
be at liberty to accept further security from the Pledgor or from any third
party and/or release such security without notifying the Pledgor and without
affecting in any way the obligations of the Pledgor under the Senior Security
Documents or the other Financing Documents. The Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, shall
determine if any security conferred upon the Collateral Agent under the Senior
Security Documents shall be enforced by the Collateral Agent, as well as the
sequence of securities to be so enforced.
Section 6.6 Amendments. No waiver, amendment, modification or termination
of any provision of this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the prior written consent of
the Collateral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, and none of the Pledged Collateral shall be released
without the written consent of the Collateral Agent, acting upon directions from
(x) the Intercreditor Agent acting pursuant to the Intercreditor
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Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
Section 6.7 Successors and Assigns. This Agreement shall be binding upon
the Pledgor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and its successors and assigns. The Pledgor may not assign or
otherwise transfer any of their respective rights or obligations under this
Agreement without the written consent of the Collateral Agent, acting upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein; provided
that the obligations of the Pledgor hereunder shall be equally binding on any
transferee of the Pledgor (or its successors) with respect to the Pledged
Collateral.
Section 6.8 Survival. All agreements, statements, representations and
warranties made by the Pledgor herein or in any certificate or other instrument
delivered by the Pledgor or on their behalf under this Agreement shall be
considered to have been relied upon by the Collateral Agent and the other Senior
Secured Parties and shall survive the execution and delivery of this Agreement
and the other Financing Documents until termination thereof or the indefeasible
payment in full in cash or cash equivalents of all of the Secured Obligations
and the termination of all commitments of the Senior Secured Parties under the
Financing Documents regardless of any investigation made by the Collateral Agent
or the other Senior Secured Parties or made on their behalf.
Section 6.9 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between the Pledgor and the Collateral Agent
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Collateral Agent would
otherwise have.
Section 6.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
15
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Section 6.11 Headings Descriptive. The headings of the several Sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
Section 6.12 Severability. In case any provision contained in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.13 Governing Law. This Agreement shall be governed by the laws
of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 6.14 Consent to Jurisdiction. Any legal action or proceeding by or
against the Pledgor with respect to or arising out of this Agreement may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, the Pledgor accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Agreement and irrevocably consents to the appointment of CT
Corporation System, with offices on the date hereof at 1633 Broadway, New York,
New York 10019, as its agent to receive service of process in New York, New
York. If for any reason such agent shall cease to be available to act as such,
the Pledgor agrees to appoint a new agent on the terms and for the purposes of
this provision. Nothing herein shall affect the right to serve process in any
other manner permitted by law or any right to bring legal action or proceedings
in any other competent jurisdiction, including judicial or non-judicial
foreclosure of real property interests which are part of the Pledged Collateral.
The Pledgor further agrees that the aforesaid courts of the State of New York
and of the United States of America for the Southern District of New York shall
have exclusive jurisdiction with respect to any claim or counterclaim of the
Pledgor based upon the assertion that the rate of interest charged by or under
this Agreement or under the other Financing Documents is usurious. The Pledgor
hereby waives any right to stay or dismiss any action or proceeding under or in
connection with the Project, this Agreement or any other Transaction Document
brought before the foregoing courts on the basis of forum non-conveniens or
improper venue.
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Section 6.15 Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE COLLATERAL
AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE
OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT TO ENTER INTO THIS AGREEMENT.
Section 6.16 Entire Agreement. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their agreement as to the matters covered hereby and is intended
as a complete and exclusive statement of the terms and conditions thereof.
Section 6.17 Third Party Beneficiaries. The agreements of the parties
hereto are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
Section 6.18 Independent Obligations. The Pledgor's obligations under this
Agreement are independent of those of the Partnership and the Funding
Corporation. The Collateral Agent may bring a separate action against the
Pledgor without first proceeding against the Partnership, the Funding
Corporation or any other Person or any other security held by the Collateral
Agent and without pursuing any other remedy.
Section 6.19 Waiver of Defenses. The Pledgor hereby waives: (a) any
defense of a statute of limitations; (b) any defense based on the legal
disability of the Partnership or the Funding Corporation or any discharge or
limitation of the liability of the Partnership or the Funding Corporation to the
Collateral Agent or the other Senior Secured Parties, whether consensual or
arising by operation of law; (c) presentment, demand, protest and notice of any
kind (other than as expressly provided by the Financing Documents); and (d) any
defense based upon or arising out of any defense which the Partnership or the
Funding Corporation may have to the payment or performance of any part of the
Secured Obligations.
Section 6.20 Subrogation, Etc. Notwithstanding any payment or payments
made by the Pledgor or the exercise by the Collateral Agent of any of the
remedies provided under this Agreement or any other Financing Document, until
the Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior
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Secured Parties under the Financing Documents shall have terminated, the Pledgor
shall have no claim (as defined in 11 U.S.C. ss. 101(5)) of subrogation to any
of the rights of the Collateral Agent against the Partnership, the Funding
Corporation, the Pledged Collateral or any guaranty held by the Collateral Agent
for the satisfaction of any of the Secured Obligations, nor shall the Pledgor
have any claims (as defined in 11 U.S.C. ss. 101(5)) for reimbursement,
indemnity, exoneration or contribution from the Partnership or the Funding
Corporation in respect of payments made by the Pledgor hereunder.
Notwithstanding the foregoing, if any amount shall be paid to the Pledgor on
account of such subrogation, reimbursement, indemnity, exoneration or
contribution rights at any time, such amount shall be held by the Pledgor in
trust for the Collateral Agent segregated from other funds of the Pledgor, and
shall be turned over to the Collateral Agent in the exact form received by the
Pledgor (duly endorsed by the Pledgor to the Collateral Agent if required) to be
applied against the Secured Obligations in such amounts and in such order as the
Collateral Agent, upon directions from (x) the Intercreditor Agent acting
pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, may elect.
Section 6.21 Limitation of Liability. The provisions of Section 14.1 of
the Indenture shall apply to this Agreement.
Section 6.22 Collateral Agency Agreement. The rights, benefits, privileges
and immunities given to the Collateral Agent and set forth in the Collateral
Agency Agreement are expressly incorporated herein by reference thereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed and delivered by their officers thereunto
duly authorized as of the date first above written.
LSP BATESVILLE HOLDING, LLC
By: LS Power Management, LLC,
its manager
By: /s/ Frank Hardenburgh
---------------------
Name: Frank Hardenburgh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
not in its individual capacity but
solely as Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Funding Corporation Stock Pledge Agreement
<PAGE>
Exhibit 4.16
================================================================================
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(GP Stock)
dated as of May 21, 1999
between
LSP BATESVILLE HOLDING, LLC
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS.......................................................................1
AGREEMENT......................................................................2
ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION.............................2
Section 1.1 Definitions...................................................2
Section 1.2 Principles of Construction....................................3
ARTICLE 2 PLEDGE..............................................................3
Section 2.1 Pledged Collateral............................................3
Section 2.2 Delivery of Stock Collateral..................................4
Section 2.3 Pledgor's Rights..............................................4
(a) Distributions.................................................4
(b) Other Rights .................................................5
(c) Turnover .................................................5
(d) Proxies, etc..................................................6
Section 2.4 Collateral Agent Not Liable...................................6
Section 2.5 Attorney-in-Fact..............................................6
Section 2.6 Collateral Agent May Perform..................................7
Section 2.7 Reasonable Care...............................................7
Section 2.8 Security Interest Absolute....................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES......................................8
Section 3.1 Pledged Shares................................................8
Section 3.2 Ownership of Pledged Collateral...............................8
Section 3.3 Nature of Security Interest...................................8
Section 3.4 Consents, etc.................................................8
Section 3.5 Chief Executive Office........................................9
ARTICLE 4 COVENANTS...........................................................9
Section 4.1 Sale of Pledged Collateral....................................9
Section 4.2 No Other Liens................................................9
Section 4.3 Issuance of Shares............................................9
i
<PAGE>
Page
----
Section 4.4 Chief Executive Office........................................9
Section 4.5 Supplements; Further Assurances, etc.........................10
Section 4.6 Stock Certificates...........................................10
Section 4.7 Records; Statements and Schedules............................10
Section 4.8 Improper Distributions.......................................10
Section 4.9 Bankruptcy...................................................11
ARTICLE 5 EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT......................11
Section 5.1 Remedies Generally...........................................11
Section 5.2 Sale of Pledged Collateral...................................11
Section 5.3 Purchase of Pledged Collateral...............................13
Section 5.4 Application of Proceeds......................................13
ARTICLE 6 MISCELLANEOUS PROVISIONS...........................................13
Section 6.1 Notices......................................................13
Section 6.2 Continuing Security Interest.................................13
Section 6.3 Release......................................................14
Section 6.4 Reinstatement................................................14
Section 6.5 Independent Security.........................................14
Section 6.6 Amendments...................................................15
Section 6.7 Successors and Assigns.......................................15
Section 6.8 Survival.....................................................15
Section 6.9 No Waiver; Remedies Cumulative...............................15
Section 6.10 Counterparts................................................16
Section 6.11 Headings Descriptive........................................16
Section 6.12 Severability................................................16
Section 6.13 Governing Law. .............................................16
Section 6.14 Consent to Jurisdiction. ...................................16
Section 6.15 Waiver of Jury Trial. ......................................17
Section 6.16 Entire Agreement............................................17
Section 6.17 Third Party Beneficiaries...................................17
Section 6.18 Independent Obligations.....................................17
Section 6.19 Waiver of Defenses..........................................17
Section 6.20 Subrogation, Etc............................................18
Section 6.22 Limitation of Liability.....................................19
Section 6.23 Amendment and Restatement...................................20
ii
<PAGE>
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(GP Stock)
This SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated as of May 21, 1999, is made by LSP BATESVILLE HOLDING, LLC,
a Delaware limited liability company (the "Pledgor"), to THE BANK OF NEW YORK,
as collateral agent (together with its successors in such capacity, the
"Collateral Agent") for the benefit of the Senior Secured Parties pursuant to
the Second Amended and Restated Collateral Agency Agreement, dated as of May 21,
1999 (the "Collateral Agency Agreement"), among (as of the date hereof) LSP
Energy Limited Partnership (the "Partnership"), LSP Batesville Funding
Corporation (the "Funding Corporation"), the Trustee, the VEPCO L/C Agent, the
Collateral Agent, the Intercreditor Agent and the Administrative Agent.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the " Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, the Pledgor owns 100% of the issued and outstanding capital
stock of the LSP Energy, Inc., a Delaware corporation ("LSP Energy");
WHEREAS, in connection with the execution of the Initial Credit
Agreement and the related financing documents, the Pledgor executed the Pledge
and Security Agreement, dated as of August 28, 1998 (the "Initial GP Stock
Pledge Agreement"), in favor of IBJ Schroder Bank & Trust Company as collateral
agent;
<PAGE>
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the relating financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Pledgor and the Collateral Agent executed the Amended and Restated Pledge
Agreement, dated as of December 15, 1998 (the "Supplemental GP Stock Pledge
Agreement"), pursuant to which the Initial GP Stock Pledge Agreement was amended
and restated in its entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Senior
Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii) $176,000,000
aggregate principal amount of their 8.160% Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, collectively with the Series A Bonds, the
"Bonds") pursuant to the Trust Indenture, dated as of the date hereof (the
"Indenture"), among the Partnership, the Funding Corporation and The Bank of New
York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (ii) pay the remaining Project Costs;
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Pledgor and the Collateral
Agent desire to amend and restate the Supplemental GP Stock Pledge Agreement in
its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the
2
<PAGE>
Supplemental GP Stock Pledge Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Indenture shall have such defined meanings when used herein.
(b) The following terms shall have the following respective
meanings:
"Additional Shares" shall have the meaning ascribed thereto in
Section 2.1(a)(ii).
"Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Event of Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Pledged Collateral" shall have the meaning ascribed thereto in
Section 2.1(a).
"Pledged Shares" shall have the meaning ascribed thereto in Section
2.1(a)(i).
"Secured Obligations" shall mean the Senior Secured Obligations.
"Securities Act" shall have the meaning ascribed thereto in Section
5.2(b).
"Stock Collateral" shall have the meaning ascribed thereto in
Section 2.1(a)(ii).
Section 1.2 Principles of Construction. Except as otherwise expressly
provided herein, the principles of construction set forth in the Indenture shall
apply to this Agreement.
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ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral. (a) As collateral security for the prompt
and complete payment and performance when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the U.S.
Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all of the Secured Obligations,
whether now existing or hereafter arising and howsoever evidenced, the Pledgor
hereby pledges, grants, assigns, hypothecates, transfers and delivers to the
Collateral Agent on behalf of and for the ratable benefit of all of the Senior
Secured Parties, a first priority security interest in the following, whether
now existing or hereafter from time to time acquired (collectively, the "Pledged
Collateral"):
(i) all of the Pledgor's right, title and interest in and to
all shares (the "Pledged Shares") of capital stock of LSP Energy, and the
certificates, if any, representing the Pledged Shares, and all dividends,
distributions, cash, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(ii) all additional shares (the "Additional Shares") of
capital stock of any issuer of any Pledged Shares from time to time
acquired by the Pledgor in any manner (including, without limitation, any
shares of preferred stock issued by any such issuer), and the
certificates, if any, representing such additional shares, and all
dividends, distributions, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares (the certificates
representing the shares referred to in clause (i) above and this clause
(ii), the "Stock Collateral");
(iii) all other rights appurtenant to the property described
in clauses (i) and (ii) above (including, without limitation, voting
rights); and
(vi) all proceeds of any and all of the foregoing, and in
addition, all dividends, distributions, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the foregoing.
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(b) As used herein, the term "proceeds" shall be construed in its
broadest sense and shall include whatever is received or receivable when any of
the Pledged Collateral, or any proceeds thereof, is sold, collected, exchanged
or otherwise disposed of, whether voluntarily or involuntarily, and shall
include, without limitation, all rights to payment, including interest and
premiums, with respect to any of the Pledged Collateral or any proceeds thereof.
Section 2.2 Delivery of Stock Collateral. All certificates or instruments
representing or evidencing the Stock Collateral shall be delivered to and held
by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent. The Collateral Agent shall have the right,
at any time following the occurrence and during the continuation of an Event of
Default, without notice to the Pledgor, to transfer to or to register in its
name or in the name of any of its nominees any or all of the Stock Collateral.
In addition, the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing any of the Stock
Collateral for certificates or instruments of smaller or larger denominations.
Section 2.3 Pledgor's Rights. (a) Distributions. Unless an Event of
Default shall have occurred and be continuing, the Pledgor shall be entitled to
receive and retain any and all distributions paid in respect of the Stock
Collateral in compliance with the terms of the Transaction Documents; provided,
however, that any and all
(i) distributions paid or payable in respect of any Stock
Collateral (whether paid in cash, securities or other property) in
connection with (A) any partial or total liquidation or dissolution of LSP
Energy, (B) any distribution of capital of LSP Energy, (C) any
recapitalization or reclassification of the capital of LSP Energy and (D)
any reorganization of LSP Energy, and
(ii) all property (whether cash, securities or other property)
paid, payable or otherwise distributed in redemption of, or in exchange
for, the property described in clause (i) immediately above,
shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Stock Collateral and shall, if received by the Pledgor, be received in trust for
the benefit of the Collateral Agent, be segregated from the other property or
funds of the Pledgor, and be
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forthwith delivered to the Collateral Agent as Stock Collateral in the same form
as so received (with any necessary endorsement). Upon the occurrence and during
the continuance of an Event of Default, all rights of the Pledgor to receive the
distributions which it would otherwise be authorized to receive and retain
pursuant to the preceding sentence shall cease, and all such rights shall
thereupon become vested in the Collateral Agent which shall thereupon have the
sole right to receive and hold as Stock Collateral such distributions.
(b) Other Rights. Unless an Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to exercise all voting and other
rights with respect to the Stock Collateral; provided, however, that no vote
shall be cast, right exercised or other action taken which would knowingly have
a material adverse effect on the Stock Collateral or which would knowingly be
inconsistent with or knowingly result in any violation of any provision of this
Agreement or any other Financing Document. Upon the occurrence and during the
continuance of an Event of Default and upon election by the Collateral Agent, as
directed by the Intercreditor Agent, acting pursuant to the Intercreditor
Agreement, all voting and other rights of the Pledgor with respect to the Stock
Collateral which the Pledgor would otherwise be entitled to exercise pursuant to
the terms of this Agreement shall cease, and all such rights shall be vested in
the Collateral Agent which shall thereupon have the sole right to exercise such
rights.
(c) Turnover. All distributions and other amounts which are received
by the Pledgor contrary to the provisions of this Agreement shall be received in
trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Collateral Agent as
Stock Collateral in the same form as so received (with any necessary
endorsement).
(d) Proxies, etc. The Pledgor shall, if necessary to permit the
Collateral Agent to exercise the voting and other rights which it may be
entitled to exercise pursuant to clause (b) above and to receive all dividends
and distributions which it may be entitled to receive under clause (a) above,
execute and deliver to the Collateral Agent, from time to time and upon written
notice of the Collateral Agent, appropriate proxies, dividend payment orders and
other instruments as the Collateral Agent may reasonably request. The foregoing
shall not in any way limit the Collateral Agent's power and authority granted
pursuant to Section 2.5.
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Section 2.4 Collateral Agent Not Liable. Neither the Collateral Agent nor
any of its directors, officers, employees, affiliates or agents shall have any
obligations or liability under or with respect to any Pledged Collateral by
reason of or arising out of this Agreement or the receipt by the Collateral
Agent of any payment relating to any Pledged Collateral, nor shall the
Collateral Agent or any of its directors, officers, employees, affiliates or
agents be obligated in any manner to (a) perform any of the obligations of the
Pledgor under or pursuant to any agreement to which the Pledgor is a party, (b)
make any payment or to inquire as to the nature or sufficiency of any payment or
performance with respect to any Pledged Collateral, (c) present or file any
claim or collect the payment of any amounts or take any action to enforce any
performance with respect to the Pledged Collateral or (d) take any other action
whatsoever with respect to the Pledged Collateral.
Section 2.5 Attorney-in-Fact. (a) The Pledgor hereby appoints the
Collateral Agent or any Person, officer or agent whom the Collateral Agent may
designate, as its true and lawful attorney-in-fact and proxy, with full
irrevocable power and authority in the place and stead of the Pledgor and in the
name of the Pledgor or in its own name, at the Pledgor's cost and expense, from
time to time to take any action and to execute any instrument which may be
necessary or advisable to enforce its rights under this Agreement, including,
without limitation, authority to receive, endorse and collect all instruments
made payable to the Pledgor representing any distribution, interest payment or
other payment in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, and to vote or grant any consent in respect of
the Pledged Shares authorized by Section 2.2(b).
(b) The Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof, in each case pursuant to the
powers granted hereunder. The Pledgor hereby acknowledges and agrees that the
Collateral Agent shall have no fiduciary duties to the Pledgor and the Pledgor
hereby waives any claims or rights of a beneficiary of a fiduciary relationship
hereunder.
Section 2.6 Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein after receipt of a written request to do so from
the Collateral Agent, the Collateral Agent may (but shall not be obligated to)
itself perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor under Section
5.5 of the Collateral Agency Agreement; provided that if a Bankruptcy Event
shall have occurred with respect to the Pledgor, the written request
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described in this Section 2.6 shall not be required and shall be deemed to have
been delivered upon the failure of the Pledgor to perform such agreement.
Section 2.7 Reasonable Care. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent accords its own
property of the type of which the Pledged Collateral consists, it being
understood that the Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Collateral Agent has or is deemed to have knowledge of such matters,
or (b) taking any necessary steps to preserve rights against any parties with
respect to any Pledged Collateral.
Section 2.8 Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Financing
Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Financing
Documents or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor, except as otherwise
provided herein.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows, which representations and
warranties shall survive the execution and delivery of this Agreement and the
making and repayment of the Secured Obligations:
Section 3.1 Pledged Shares. The Pledged Shares (a) have been duly
authorized and validly issued, (b) are fully paid and non-assessable and (c)
constitute all of the issued and outstanding shares of stock of LSP Energy.
Section 3.2 Ownership of Pledged Collateral. The Pledgor is the sole legal
and beneficial owner of the Pledged Shares, free and clear of any Lien other
than the Lien created pursuant to this Agreement and other Permitted Liens.
Section 3.3 Nature of Security Interest. The pledge and grant of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority security interest in the Pledged Collateral in favor of the
Collateral Agent, securing the payment of all of the Secured Obligations.
Section 3.4 Consents, etc. No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental authority is
required either (i) for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the due execution, delivery or performance of
this Agreement by the Pledgor, or (ii) for the exercise by the Collateral Agent
of the voting or other rights provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement, except as may
be required in connection with the disposition of the Stock Collateral by laws
affecting the offering and sale of securities generally.
Section 3.5 Chief Executive Office. The chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Pledged Collateral is located at:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816.
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ARTICLE 4
COVENANTS
The Pledgor hereby covenants and agrees from and after the date of this
Agreement until the termination of this Agreement in accordance with the
provisions of Section 6.3:
Section 4.1 Sale of Pledged Collateral. The Pledgor shall not sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Pledged Collateral, except to the extent the same would not violate the terms
and provisions of the Financing Documents, provided that the Pledged Collateral
shall at all times remain subject to the pledge of this Agreement following any
sale or disposition thereof.
Section 4.2 No Other Liens. The Pledgor shall not create, incur or permit
to exist, shall defend the Pledged Collateral against, and shall take such other
action as is reasonably necessary to remove, any Lien or claim on or to the
Pledged Collateral (other than the Lien created pursuant to this Agreement), and
shall defend the right, title and interest of the Collateral Agent in and to any
of the Pledged Collateral against the claims and demands of all Persons
whomsoever, except with respect to any sale or disposition of any of the Pledged
Collateral not in violation of the Financing Documents.
Section 4.3 Issuance of Shares. The Pledgor agrees that it will cause LSP
Energy (a) not to issue to the Pledgor any shares of stock or other securities
in addition to or in substitution for the Pledged Shares, except with the
written consent of the Collateral Agent, (b) not to sell or otherwise dispose
of, or grant any option or warrant with respect to, any of its assets or
properties, and (c) not to create or permit to exist any Lien, security
interest, option or other charge or encumbrance upon any of its assets or
properties, in each case except to the extent the same are expressly permitted
by the terms of this Agreement and the other Financing Documents.
Section 4.4 Chief Executive Office. The Pledgor shall not establish a new
location for its chief executive office or change its name until (i) it has
given to the Collateral Agent not less than sixty (60) days prior written notice
of its intention so to do, clearly describing such new location or specifying
such new name, as the case may be, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all action necessary to
maintain the security interest of the Collateral Agent in the Pledged Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
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Section 4.5 Supplements; Further Assurances, etc. The Pledgor shall at any
time and from time to time, at the expense of the Pledgor, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
Section 4.6 Stock Certificates. The Pledgor shall deliver all
certificates, instruments or other documents representing the Pledged Collateral
to the Collateral Agent with all necessary stock transfer or other powers duly
indorsed in blank. In the event the Pledgor obtains possession of any other
stock certificates, or other securities or instruments forming a part of the
Pledged Collateral, the Pledgor shall promptly deliver same to the Collateral
Agent together with all necessary stock transfer or other powers duly indorsed
in blank. Prior to any such delivery, any Pledged Collateral in the Pledgor's
possession shall be held by the Pledgor in trust for the Collateral Agent.
Section 4.7 Records; Statements and Schedules. The Pledgor shall keep and
maintain, at its own cost and expense, records of the Pledged Collateral,
including, but not limited to, records of all payments received with respect
thereto, and the Pledgor shall make the same available to the Collateral Agent
for inspection at the Pledgor's chief executive office, at the Pledgor's own
cost and expense, at any and all times upon demand. The Pledgor shall furnish to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Pledged Collateral and such other reports in
connection with the Pledged Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
Section 4.8 Improper Distributions. Notwithstanding any other provision
contained in this Agreement, the Pledgor shall not accept any distributions,
dividends or other payments (or any collateral in lieu thereof) in respect of
the Pledged Collateral, except to the extent the same are expressly permitted by
the terms of this Agreement and the other Financing Documents.
Section 4.9 Bankruptcy. The Pledgor shall not authorize or permit LSP
Energy to (a) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to LSP Energy or LSP Energy's debts
under any Bankruptcy Law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator,
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custodian or other similar official of LSP Energy or any substantial part of LSP
Energy's property, (b) consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against LSP Energy or (c) make a general assignment for the
benefit of LSP Energy's creditors. The Pledgor shall not commence or join with
any other Person (other than the Collateral Agent and the other Senior Secured
Parties) in commencing any proceeding against LSP Energy under any Bankruptcy
Law now or hereafter in effect in any jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
The provisions of this Article 5 shall apply only upon the occurrence and
during the continuance of an Event of Default.
Section 5.1 Remedies Generally. Subject to the terms of the Intercreditor
Agreement, if an Event of Default shall have occurred and be continuing, the
Collateral Agent, upon directions from (x) the Intercreditor Agent acting
pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, may exercise, in addition to all other rights and
remedies granted in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Uniform Commercial Code in effect from
time to time in any relevant jurisdiction and all other rights and remedies
available at law or in equity.
Section 5.2 Sale of Pledged Collateral. (a) Without limiting the
generality of Section 5.1, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, may, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale or at the Collateral Agent's corporate
trust office or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as is commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral at any such sale. Each purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
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in the future have under any rule of law or statute now existing or hereafter
enacted. The Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days' notice to the Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Collateral Agent shall incur no liability as a result of the sale
of the Pledged Collateral, or any part thereof, at any public or private sale.
The Pledgor hereby waives any claims against the Collateral Agent arising by
reason of the fact that the price at which any Pledged Collateral may have been
sold at such a private sale, if commercially reasonable, was less than the price
which might have been obtained at a public sale, even if the Collateral Agent
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree.
(b) The Pledgor recognizes that the Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, may
elect to sell all or a part of the Stock Collateral to one or more purchasers in
privately negotiated transactions in which the purchasers will be obligated to
agree, among other things, to acquire the Stock Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sales may be at prices
and on terms less favorable than those obtainable through a public sale
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Collateral Agent agree that such
private sales shall be made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public sales and no obligation
to delay sale of any Stock Collateral to permit the issuer thereof to register
the Stock Collateral for a form of public sale requiring registration under the
Securities Act. If the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, determines to exercise its
right to sell any or all of the Stock Collateral, upon written request, the
Pledgor shall, from time to time, furnish to the Collateral Agent all such
information necessary in order to determine the number of shares and other
instruments included in the Stock Collateral which may be
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sold by the Collateral Agent as exempt transactions under the Securities Act and
rules of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect.
Section 5.3 Purchase of Pledged Collateral. The Collateral Agent may be a
purchaser of the Pledged Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Collateral Agent may apply the purchase price to the
payment of the Secured Obligations. Any purchaser of all or any part of the
Pledged Collateral shall, upon any such purchase, acquire good title to the
Pledged Collateral so purchased, free of the security interests created by this
Agreement.
Section 5.4 Application of Proceeds. The Collateral Agent shall apply any
proceeds from time to time held by it and the net proceeds of any collection,
recovery, receipt, appropriation, realization or sale with respect to the
Pledged Collateral in accordance Article IV of the Collateral Agency Agreement.
For avoidance of doubt, it is understood that the Partnership and the Funding
Corporation shall remain liable to the extent of any deficiency between the
amount of proceeds of the Pledged Collateral and the aggregated amount of the
Secured Obligations in accordance with the Financing Documents.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective if given in accordance with
the provisions of Section 1.4 of the Indenture (and, in the case of notices to
the Pledgor, addressed to Pledgor's chief executive office as determined
herein).
Section 6.2 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral until the release thereof
pursuant to Section 6.3.
Section 6.3 Release. Upon the indefeasible payment in full of the Secured
Obligations in cash or cash equivalents and the termination of all commitments
of the Senior Secured Parties under the Financing Documents, the Collateral
Agent, upon the
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request, and at the expense, of the Pledgor, and acting pursuant to instructions
from the Pledgor, shall execute and deliver all such documentation as the
Pledgor may request to release the Lien created pursuant to this Agreement.
Section 6.4 Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent hereunder or pursuant hereto is rescinded or must otherwise be
restored or returned by the Collateral Agent upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Pledgor, the Partnership or
the Funding Corporation or upon the appointment of any intervenor or conservator
of, or trustee or similar official for, the Pledgor, the Partnership or the
Funding Corporation or any substantial part of the Pledgor's, the Partnership's
or the Funding Corporation's assets, or upon the entry of an order by any court
avoiding the payment of such amount, or otherwise, all as though such payments
had not been made.
Section 6.5 Independent Security. The security provided for in this
Agreement shall be in addition to and shall be independent of every other
security which the Collateral Agent may at any time hold for any of the Secured
Obligations hereby secured, whether or not under the Senior Security Documents.
The execution of any other Senior Security Document shall not modify or
supersede the security interest or any rights or obligations contained in this
Agreement and shall not in any way affect, impair or invalidate the
effectiveness and validity of this Agreement or any term or condition hereof.
The Pledgor hereby waives its rights to plead or claim in any court that the
execution of any other Senior Security Document is a cause for extinguishing,
invalidating, impairing or modifying the effectiveness and validity of this
Agreement or any term or condition contained herein. The Collateral Agent shall
be at liberty to accept further security from the Pledgor or from any third
party and/or release such security without notifying the Pledgor and without
affecting in any way the obligations of the Pledgor under the Senior Security
Documents or the other Financing Documents. The Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, shall
determine if any security conferred upon the Collateral Agent under the Senior
Security Documents shall be enforced by the Collateral Agent, as well as the
sequence of securities to be so enforced.
Section 6.6 Amendments. No waiver, amendment, modification or termination
of any provision of this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the prior written consent of
the Collateral Agent,
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acting upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, and none of the Pledged Collateral shall be released without the written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
Section 6.7 Successors and Assigns. This Agreement shall be binding upon
the Pledgor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and its successors and assigns. The Pledgor may not assign or
otherwise transfer any of their respective rights or obligations under this
Agreement without the written consent of the Collateral Agent, acting upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, provided
that the obligations of the Pledgor hereunder shall be equally binding on any
transferee of the Pledgor (or its successors) with respect to the Pledged
Collateral..
Section 6.8 Survival. All agreements, statements, representations and
warranties made by the Pledgor herein or in any certificate or other instrument
delivered by the Pledgor or on their behalf under this Agreement shall be
considered to have been relied upon by the Collateral Agent and the other Senior
Secured Parties and shall survive the execution and delivery of this Agreement
and the other Financing Documents until termination thereof or the indefeasible
payment in full in cash or cash equivalents of all of the Secured Obligations
and the termination of all commitments of the Senior Secured Parties under the
Financing Documents regardless of any investigation made by the Collateral Agent
or the other Senior Secured Parties or made on their behalf.
Section 6.9 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between the Pledgor and the Collateral Agent
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumula-
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tive and not exclusive of any rights or remedies which the Collateral Agent
would otherwise have.
Section 6.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 6.11 Headings Descriptive. The headings of the several Sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
Section 6.12 Severability. In case any provision contained in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.13 Governing Law. This Agreement shall be governed by the laws
of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 6.14 Consent to Jurisdiction. Any legal action or proceeding by or
against the Pledgor with respect to or arising out of this Agreement may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, the Pledgor accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Agreement and irrevocably consents to the appointment of CT
Corporation System, with offices on the date hereof at 1633 Broadway, New York,
New York 10019, as its agent to receive service of process in New York, New
York. If for any reason such agent shall cease to be available to act as such,
the Pledgor agrees to appoint a new agent on the terms and for the purposes of
this provision. Nothing herein shall affect the right to serve process in any
other manner permitted by law or any right to bring legal action or proceedings
in any other competent jurisdiction, including judicial or non-judicial
foreclosure of real property interests which
17
<PAGE>
are part of the Pledged Collateral. The Pledgor further agrees that the
aforesaid courts of the State of New York and of the United States of America
for the Southern District of New York shall have exclusive jurisdiction with
respect to any claim or counterclaim of the Pledgor based upon the assertion
that the rate of interest charged by or under this Agreement or under the other
Financing Documents is usurious. The Pledgor hereby waives any right to stay or
dismiss any action or proceeding under or in connection with the Project, this
Agreement or any other Transaction Document brought before the foregoing courts
on the basis of forum non-conveniens or improper venue.
Section 6.15 Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE COLLATERAL
AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE
OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT TO ENTER INTO THIS AGREEMENT.
Section 6.16 Entire Agreement. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their agreement as to the matters covered hereby and is intended
as a complete and exclusive statement of the terms and conditions thereof.
Section 6.17 Third Party Beneficiaries. The agreements of the parties
hereto are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
Section 6.18 Independent Obligations. The Pledgor's obligations under this
Agreement are independent of those of the Partnership and the Funding
Corporation. The Collateral Agent may bring a separate action against the
Pledgor without first proceeding against the Partnership, the Funding
Corporation or any other Person or any other security held by the Collateral
Agent and without pursuing any other remedy.
Section 6.19 Waiver of Defenses. The Pledgor hereby waives: (a) any
defense of a statute of limitations; (b) any defense based on the legal
disability of the Partnership or the Funding Corporation or any discharge or
limitation of the liability of the Partnership or the Funding Corporation to the
Collateral Agent or the other Senior Secured Parties,
18
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whether consensual or arising by operation of law; (c) presentment, demand,
protest and notice of any kind (other than as expressly provided by the
Financing Documents); and (d) any defense based upon or arising out of any
defense which the Partnership or the Funding Corporation may have to the payment
or performance of any part of the Secured Obligations.
Section 6.20 Subrogation, Etc. Notwithstanding any payment or payments
made by the Pledgor or the exercise by the Collateral Agent of any of the
remedies provided under this Agreement or any other Financing Document, until
the Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under the
Financing Documents shall have terminated, the Pledgor shall have no claim (as
defined in 11 U.S.C. ss. 101(5)) of subrogation to any of the rights of the
Collateral Agent against the Partnership, the Funding Corporation, the Pledged
Collateral or any guaranty held by the Collateral Agent for the satisfaction of
any of the Secured Obligations, nor shall the Pledgor have any claims (as
defined in 11 U.S.C. ss. 101(5)) for reimbursement, indemnity, exoneration or
contribution from the Partnership or the Funding Corporation in respect of
payments made by the Pledgor hereunder. Notwithstanding the foregoing, if any
amount shall be paid to the Pledgor on account of such subrogation,
reimbursement, indemnity, exoneration or contribution rights at any time, such
amount shall be held by the Pledgor in trust for the Collateral Agent segregated
from other funds of the Pledgor, and shall be turned over to the Collateral
Agent in the exact form received by the Pledgor (duly endorsed by the Pledgor to
the Collateral Agent if required) to be applied against the Secured Obligations
in such amounts and in such order as the Collateral Agent, upon directions from
(x) the Intercreditor Agent acting pursuant to the Intercreditor Agreement or
(y) the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein, may elect.
Section 6.21 Limitation of Liability. The provisions of Section 14.1 of
the Indenture shall apply to this Agreement.
Section 6.22 Collateral Agency Agreement. The rights, benefits, privileges
and immunities given to the Collateral Agent set forth in the Collateral Agency
Agreement are expressly incorporated herein by reference thereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Pledge and Security Agreement to be duly executed and
delivered by their officers thereunto duly authorized as of the date first above
written.
LSP BATESVILLE HOLDING, LLC
By: LS Power Management, LLC,
its manager
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
in its capacity as the Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Second Amended and Restated GP Stock Pledge Agreement
<PAGE>
Exhibit 4.17
================================================================================
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(LP Interests)
dated as May 21, 1999
between
LSP BATESVILLE HOLDING, LLC
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS.......................................................................1
AGREEMENT......................................................................2
ARTICLE 1: DEFINITIONS; PRINCIPLES OF CONSTRUCTION............................3
Section 1.1 Definitions...................................................3
Section 1.2 Principles of Construction....................................3
ARTICLE 2: PLEDGE.............................................................3
Section 2.1 Pledged Collateral............................................4
Section 2.2 Delivery of Certificates and Instruments......................5
Section 2.3 Pledgor's Rights..............................................5
(a) Distributions.................................................5
(b) Other Rights..................................................6
(c) Turnover ...................................................6
Section 2.4 Secured Parties Not Liable....................................6
Section 2.5 Attorney-in-Fact..............................................7
Section 2.6 Collateral Agent May Perform..................................7
Section 2.7 Reasonable Care...............................................7
Section 2.8 Security Interest Absolute....................................8
Section 2.9 Effective as a Financing Statement............................8
ARTICLE 3: REPRESENTATIONS AND WARRANTIES.....................................8
Section 3.1 Necessary Filings.............................................9
Section 3.2 No Liens......................................................9
Section 3.3 Other Financing Statements....................................9
Section 3.4 Chief Executive Office........................................9
Section 3.5 Consents, etc.................................................9
ARTICLE 4: COVENANTS.........................................................10
Section 4.1 Sale of Pledged Collateral...................................10
Section 4.2 No Other Liens...............................................10
Section 4.3 Chief Executive Office.......................................10
i
<PAGE>
Page
----
Section 4.4 Supplements; Further Assurances, etc.........................10
Section 4.5 Amendment of Partnership Agreement...........................11
Section 4.6 Certificates and Instruments.................................11
Section 4.7 Financing Statements.........................................11
Section 4.8 Records; Statements and Schedules............................11
Section 4.9 Improper Distributions.......................................12
Section 4.10 Bankruptcy..................................................12
ARTICLE 5: EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT.....................12
Section 5.1 Remedies Generally...........................................12
Section 5.2 Sale of Pledged Collateral...................................13
Section 5.3 Purchase of Pledged Collateral...............................14
Section 5.4 Application of Proceeds......................................14
ARTICLE 6; MISCELLANEOUS PROVISIONS..........................................14
Section 6.1 Notices......................................................14
Section 6.2 Continuing Security Interest.................................15
Section 6.3 Release......................................................15
Section 6.4 Reinstatement................................................15
Section 6.5 Independent Security.........................................15
Section 6.6 Amendments...................................................16
Section 6.7 Successors and Assigns.......................................16
Section 6.8 Third Party Beneficiaries....................................16
Section 6.9 Survival.....................................................16
Section 6.10 No Waiver; Remedies Cumulative..............................17
Section 6.11 Counterparts................................................17
Section 6.12 Headings Descriptive........................................17
Section 6.13 Severability................................................17
Section 6.14 Governing Law. .............................................17
Section 6.15 Consent to Jurisdiction. ...................................17
Section 6.16 Waiver of Jury Trial. ......................................18
Section 6.17 Entire Agreement............................................18
Section 6.18 Independent Obligations.....................................18
Section 6.19 Waiver of Defenses..........................................19
Section 6.20 Subrogation, Etc............................................19
Section 6.21 Limitation of Liability.....................................19
ii
<PAGE>
Section 6.22 Collateral Agency Agreement.................................20
Schedule I - Certificates
iii
<PAGE>
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(LP Interests)
This SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated as of May 21, 1999, is made by LSP BATESVILLE HOLDING, LLC,
a Delaware limited liability company (the "Pledgor"), to THE BANK OF NEW YORK,
as collateral agent (together with its successors in such capacity, the
"Collateral Agent") for the benefit of the Senior Secured Parties pursuant to
the Second Amended and Restated Collateral Agency Agreement, dated as of May 21,
1999 (the "Collateral Agency Agreement"), among (as of the date hereof) LSP
Energy Limited Partnership (the "Partnership"), LSP Batesville Funding
Corporation (the "Funding Corporation"), the Trustee, the VEPCO L/C Agent, the
Collateral Agent, the Intercreditor Agent and the Administrative Agent.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, the Pledgor owns 99% of the aggregate partnership
interests, and all of the limited partnership interests, in the Partnership;
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the "Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial Credit
Agreement, and the related financing documents, the Pledgor executed the Pledge
and Security Agreement dated as of August 28, 1998 (the "Initial LP Interests
Pledge Agreement"), in favor of IBJ Schroder Bank & Trust Company as collateral
agent;
<PAGE>
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the relating financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Pledgor and Credit Suisse First Boston, as collateral agent, executed the
Amended and Restated Pledge and Security Agreement, dated as of December 15,
1998 (the "Supplemental LP Interests Pledge Agreement") pursuant to which the
Initial LP Interests Pledge Agreement was amended and restated in its entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (1) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (2)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, together with the Series A
Bonds, the "Bonds") pursuant to the Trust Indenture, dated as of the date hereof
(the "Indenture"), among the Partnership, the Funding Corporation and The Bank
of New York, as trustee (the "Trustee").
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the supplemental Credit Agreement and (ii) pay the remaining Project Cost;
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Pledgor and the Collateral
Agent desire to amend and restate the Supplemental LP Interests Pledge Agreement
in its entirety.
AGREEMENT
2
<PAGE>
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Supplemental LP Interests Pledge Agreement is hereby amended
and restated in its entirety as follows:
ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Indenture shall have such defined meanings when used herein.
(b) The following terms shall have the following respective
meanings:
"Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Event of Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Financing Statement" shall mean all financing statements,
recordings, filings or other instruments of registration necessary and
appropriate to perfect a security interest or Lien by filing in any appropriate
filing or recording office in accordance with the UCC as enacted in any and all
relevant jurisdictions or any other relevant applicable law.
"Partnership Agreement" shall mean the Second Amended and Restated
Agreement of Limited Partnership of LSP Energy Limited Partnership, dated as of
May 19, 1999, between the Pledgor and LSP Energy, Inc.
"Partnership Interests" shall have the meaning ascribed thereto in
Section 2.1(a)(i).
"Pledged Collateral" shall have the meaning ascribed thereto in
Section 2.1(a).
"Secured Obligations" shall mean the Senior Secured Obligations.
"Securities Act" shall have the meaning ascribed thereto in Section
5.2(b).
3
<PAGE>
Section 1.2 Principles of Construction. Except as otherwise expressly
provided herein, principles of construction set forth in the Indenture shall
apply to this Agreement.
ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral. (a) As collateral security for the prompt
and complete payment and performance when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the U.S.
Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all of the Secured Obligations,
whether now existing or hereafter arising and howsoever evidenced, the Pledgor
hereby pledges, grants, assigns, hypothecates, transfers and delivers to the
Collateral Agent, for its benefit and the ratable benefit of the other Senior
Secured Parties, a first priority security interest in the following, whether
now existing or hereafter from time to time acquired (collectively, the "Pledged
Collateral"):
(i) all of the Pledgor's partnership interests in the
Partnership (the "Partnership Interests") and all of the Pledgor's rights
to acquire partner ship interests in the Partnership in addition to or in
exchange or substitution for the Partnership Interests;
(ii) all of the Pledgor's rights, privileges, authority and
powers as a partner in the Partnership under the Partnership Agreement;
(iii) all certificates or other documents (if any)
representing any and all of the foregoing in clauses (i) and (ii),
including, without limitation, the certificates listed on Schedule I
hereto;
(iv) all dividends, distributions, cash, securities,
instruments and other property or proceeds of any kind to which the
Pledgor may be entitled in its capacity as a partner in the Partnership by
way of distribution, return of capital or otherwise;
(v) any other claim which the Pledgor now has or may in the
future acquire in its capacity as a partner in the Partnership against the
Partnership and its property; and
4
<PAGE>
(vi) all proceeds, products and accessions of and to any of
the property described in the preceding clauses (i) through (v).
(b) As used herein, the term "proceeds" shall be construed in its
broadest sense and shall include whatever is received or receivable when any of
the Partnership Interests, or any proceeds thereof, is sold, collected,
exchanged or otherwise disposed of, whether voluntarily or involuntarily, and
shall include, without limitation, all rights to payment, including interest and
premiums, with respect to any of the Partnership Interests or any proceeds
thereof.
Section 2.2 Delivery of Certificates and Instruments. All certificates or
instruments representing or evidencing the Partnership Interests shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent shall have
the right, at any time following the occurrence and during the continuation of
an Event of Default, without notice to the Pledgor, to transfer to or to
register in its name or in the name of any of its nominees any or all of the
Partnership Interests. In addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing any
of the Partnership Interests for certificates or instruments of smaller or
larger denominations.
Section 2.3 Pledgor's Rights.
(a) Distributions. Unless an Event of Default shall have occurred
and be continuing, the Pledgor shall be entitled to receive and retain any and
all distributions paid in respect of the Partnership Interests in compliance
with the terms of the other Transaction Documents; provided, however, that any
and all
(i) distributions paid or payable in respect of the
Partnership Interests (whether paid in cash, securities or other property)
in connection with (A) any partial or total liquidation or dissolution of
the Partnership, (B) any distribution of capital of the Partnership (but
not including distributions made (x) pursuant to Section 6.1 of the
Partnership Agreement and (y) in accordance with the Financing Documents),
(C) any recapitalization or reclassification of the capital of the
Partnership and (D) any reorganization of the Partnership, and
5
<PAGE>
(ii) property (whether cash, securities or other property)
paid, payable or otherwise distributed in redemption of, or in exchange
for, the property described in clause (i) immediately above,
shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Pledged Collateral and shall, if received by the Pledgor, be received in trust
for the benefit of the Collateral Agent, be segregated from the other property
or funds of the Pledgor, be forthwith delivered to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement). Upon the occurrence and during the continuance of an Event of
Default, all rights of the Pledgor to receive the distributions which it would
otherwise be authorized to receive and retain pursuant to the preceding sentence
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent which shall thereupon have the sole right to receive and hold as Pledged
Collateral such distributions.
(b) Other Rights. Unless an Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to exercise all voting and other
rights with respect to the Partnership Interests; provided, however, that no
vote shall be cast, right exercised or other action taken which would knowingly
have a material adverse effect on the Pledged Collateral or which would
knowingly be inconsistent with or knowingly result in any violation of any
provision of this Agreement or any other Financing Document. Upon the occurrence
and during the continuance of an Event of Default and upon election by the
Collateral Agent, as directed by the Intercreditor Agent, acting pursuant to the
Intercreditor Agreement, all voting and other rights of the Pledgor with respect
to the Partnership Interests which the Pledgor would otherwise be entitled to
exercise pursuant to the terms of this Agreement shall cease, and all such
rights shall be vested in the Collateral Agent which shall thereupon have the
sole right to exercise such rights.
(c) Turnover. All distributions and other amounts which are received
by the Pledgor contrary to the provisions of this Agreement shall be received in
trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
Section 2.4 Secured Parties Not Liable. Notwithstanding any other
provision contained in this Agreement, the Pledgor shall remain liable under the
Partnership Agreement to observe and perform all of the conditions and
obligations to be observed
6
<PAGE>
and performed by the Pledgor thereunder. None of the Collateral Agent, any other
Senior Secured Party or any of their respective directors, officers, employees,
affiliates or agents shall have any obligations or liability under or with
respect to any Pledged Collateral by reason of or arising out of this Agreement,
except as set forth in Section 9-207 of the UCC as in effect from time to time
in the State of New York, or the receipt by the Collateral Agent of any payment
relating to any Pledged Collateral, nor shall any of the Collateral Agent, any
other Senior Secured Party or any of their respective directors, officers,
employees, affiliates or agents be obligated in any manner to (a) perform any of
the obligations of the Pledgor under or pursuant to the Partnership Agreements
or any other agreement to which the Pledgor is a party, (b) make any payment or
inquire as to the nature or sufficiency of any payment or performance with
respect to any Pledged Collateral, (c) present or file any claim or collect the
payment of any amounts or take any action to enforce any performance with
respect to the Pledged Collateral or (d) take any other action whatsoever with
respect to the Pledged Collateral.
Section 2.5 Attorney-in-Fact. (a) The Pledgor hereby appoints the
Collateral Agent, on behalf of the Senior Secured Parties, or any Person,
officer or agent whom the Collateral Agent may designate, as its true and lawful
attorney-in-fact and proxy, with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, at the Pledgor's cost and expense, from time to time to take any action
and to execute any instrument which may be necessary or advisable to enforce
its rights under this Agreement, including, without limitation, authority to
receive, endorse and collect all instruments made payable to the Pledgor
representing any distribution, interest payment or other payment in respect of
the Pledged Collateral or any part thereof to be paid over to the Collateral
Agent pursuant to Section 2.3(c) and to give full discharge for the same.
(b) The Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof, in each case pursuant to the
powers granted hereunder. The Pledgor hereby acknowledges and agrees that the
Collateral Agent shall have no fiduciary duties to the Pledgor and the Pledgor
hereby waives any claims or rights of a beneficiary of a fiduciary relationship
hereunder.
Section 2.6 Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein after receipt of a written request to do so from
the Collateral Agent, the Collateral Agent may (but shall not be obligated to)
itself perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent, including the rea-
7
<PAGE>
sonable fees and expenses of its counsel, incurred in connection therewith shall
be payable by the Pledgor under Section 5.5 of the Collateral Agency Agreement,
provided that if a Bankruptcy Event shall have occurred with respect to the
Pledgor, the written request described in this Section 2.6 shall not be required
and shall be deemed to have been delivered upon the failure of the Pledgor to
perform such agreement.
Section 2.7 Reasonable Care. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent accords its own
property of the type of which the Pledged Collateral consists, it being
understood that the Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Collateral Agent has or is deemed to have knowledge of such matters,
or (b) taking any necessary steps to preserve rights against any parties with
respect to any Pledged Collateral.
Section 2.8 Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Financing
Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Financing
Documents or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor, except as otherwise
provided herein.
8
<PAGE>
Section 2.9 Effective as a Financing Statement. This Agreement shall also
be effective as a Financing Statement covering any Pledged Collateral and may be
filed in any appropriate filing or recording office. A carbon, photographic,
facsimile or other reproduction of this Agreement or of any Financing Statement
relating to this Agreement shall be sufficient as a Financing Statement for any
of the purposes referred to in the preceding sentence.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants, as of the date of this Agreement and
the Closing Date, as follows, which representations and warranties shall survive
the execution and delivery of this Agreement and the making and repayment of the
Secured Obligations:
Section 3.1 Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted to the Collateral Agent hereby in respect of the Pledged
Collateral have been accomplished and the security interest granted to the
Collateral Agent pursuant to this Agreement in and to the Pledged Collateral
constitutes a valid and enforceable perfected security interest therein superior
and prior to the rights of all other Persons therein and, in each case, subject
to no other Liens, sales, assignments, conveyances, settings over or transfers
other than the Lien created pursuant to this Agreement.
Section 3.2 No Liens. The Pledgor is the owner of all of its right, title
and interest in the Pledged Collateral pledged by it hereunder free from any
Lien or other right, title or interest of any Person other than the Lien created
pursuant to this Agreement and other Permitted Liens.
Section 3.3 Other Financing Statements. There is no Financing Statement
(or similar statement or instrument of registration under the law of any
jurisdiction) executed by the Pledgor, or, to the knowledge of the Pledgor after
due inquiry, by any other Person covering or purporting to cover any interest of
any kind in the Pledged Collateral, except Financing Statements filed or to be
filed in respect of and covering the security interests granted hereby by the
Pledgor and Financing Statements filed in respect of the Supplemental LP
Interest Pledge Agreement (releases of which have been delivered to the
Collateral Agent).
9
<PAGE>
Section 3.4 Chief Executive Office. The chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Pledged Collateral is located at:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816.
Section 3.5 Consents, etc. No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental authority is
required either (i) for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the due execution, delivery or performance of
this Agreement by the Pledgor, or (ii) for the exercise by the Collateral Agent
of the voting or other rights provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement, except as may
be required in connection with the disposition of the Pledged Collateral by laws
affecting the offering and sale of securities generally.
ARTICLE 4
COVENANTS
The Pledgor hereby covenants and agrees from and after the date of this
Agreement until the termination of this Agreement in accordance with the
provisions of Section 6.3:
Section 4.1 Sale of Pledged Collateral. The Pledgor shall not sell or
other wise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral, except to the extent any such sale or disposition would
not violate the terms and provisions of the Financing Documents; provided that
any portion of the Pledged Collateral so sold or disposed of shall remain
subject to the pledge of this Agreement to the same extent as though it had not
been so sold or disposed of.
Section 4.2 No Other Liens. The Pledgor shall not create, incur or permit
to exist, shall defend the Pledged Collateral owned by it against and shall take
such other action as is reasonably necessary to remove, any Lien or claim on or
to the Pledged Collateral, other than the Lien created pursuant to this
Agreement, and shall defend the right, title and interest of the Collateral
Agent in and to the Pledged Collateral against the
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<PAGE>
claims and demands of all Persons whomsoever, except with respect to any sale or
disposition of any of the Pledged Collateral not in violation of the Financing
Documents.
Section 4.3 Chief Executive Office. The Pledgor shall not establish a new
location for its chief executive office or change its name until (i) it has
given to the Collateral Agent not less than sixty (60) days prior written notice
of its intention so to do, clearly describing such new location or specifying
such new name, as the case may be, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all action, necessary to
maintain the security interest of the Collateral Agent in the Pledged Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
Section 4.4 Supplements; Further Assurances, etc. The Pledgor shall at any
time and from time to time, at the expense of the Pledgor, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
Section 4.5 Amendment of Partnership Agreement. Except as permitted by the
express provisions of the Indenture, the Pledgor shall not, without the prior
written consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, agree to or permit (a) the
cancellation or termination of the Partnership Agreement, except upon the
expiration of the stated term thereof, or (b) any amendment, supplement, or
modification of, or waiver with respect to any of the provisions of, the
Partnership Agreement. Nothing contained in this Section 4.5 shall restrict the
Pledgor's right to agree to or permit the amendment, supplement or modification
of the Partnership Agreement the sole purpose of which is to admit a new partner
into the Partnership to the extent not prohibited in the Indenture; provided
that the Pledged Collateral shall at all times remain subject to the Lien of
this Agreement.
Section 4.6 Certificates and Instruments. The Pledgor shall deliver all
certificates or other documents representing the Pledged Collateral to the
Collateral Agent with all necessary instruments of transfer or assignment duly
indorsed in blank. In the event the Pledgor obtains possession of any other
certificates, or other securities or instruments
11
<PAGE>
forming a part of the Pledged Collateral, the Pledgor shall promptly deliver
same to the Collateral Agent together with all necessary instruments of transfer
or assignment duly indorsed in blank. Prior to any such delivery, any Pledged
Collateral in the Pledgor's possession shall be held by the Pledgor in trust for
the Collateral Agent.
Section 4.7 Financing Statements. The Pledgor shall sign and deliver to
the Collateral Agent and the other Senior Secured Parties such Financing
Statements (or similar statements or instruments of registration under the law
of any jurisdiction), as are necessary or desirable to establish and maintain
the security interests contemplated hereunder as valid, enforceable, first
priority security interests as provided herein and the other rights and security
contemplated herein, all in accordance with the UCC as enacted in any and all
relevant jurisdictions or any other applicable law. The Pledgor shall pay any
applicable filing fees and related expenses. The Pledgor authorizes the
Collateral Agent to file any such Financing Statements (or similar statements or
instruments of registration under the law of any jurisdiction) without the
signature of the Pledgor.
Section 4.8 Records; Statements and Schedules. The Pledgor shall keep and
maintain, at its own cost and expense, records of the Pledged Collateral owned
by it, including, but not limited to, records of all payments received with
respect thereto, and the Pledgor shall make the same available to the Collateral
Agent for inspection at the Pledgor's chief executive office, at the Pledgor's
own cost and expense, at any and all times upon demand. The Pledgor shall
furnish to the Collateral Agent from time to time statements and schedules
further identifying and describing the Pledged Collateral and such other reports
in connection with the Pledged Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
Section 4.9 Improper Distributions. Notwithstanding any other provision
contained in this Agreement, the Pledgor shall not accept any distributions,
dividends or other payments (or any collateral in lieu thereof) in respect of
the Pledged Collateral, except to the extent the same are expressly permitted by
the terms of this Agreement and the other Financing Documents.
Section 4.10 Bankruptcy. The Pledgor shall not authorize or permit the
Partnership to (a) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Partnership or
the Partnership's debts under any Bankruptcy Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Partnership or any
12
<PAGE>
substantial part of the Partnership's property, (b) to consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against the Partnership or (c)
make a general assignment for the benefit of the Partnership's creditors. The
Pledgor shall not commence or join with any other Person (other than the
Collateral Agent and the other Senior Secured Parties) in commencing any
proceeding against the Partnership under any Bankruptcy Law now or hereafter in
effect in any jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
The provisions of this Article 5 shall apply only upon the occurrence and
during the continuance of an Event of Default.
Section 5.1 Remedies Generally. If an Event of Default shall have occurred
and be continuing, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, may exercise, in addition
to all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC in effect
from time to time in any relevant jurisdiction and all other rights and remedies
available at law or in equity.
Section 5.2 Sale of Pledged Collateral. (a) Without limiting the
generality of Section 5.1, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, may, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale or at any of the Collateral Agent's
corporate trust office or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as is commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral at any such sale. Each purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. The
13
<PAGE>
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to the Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale of Pledged Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Collateral Agent shall incur no liability as a result of the sale of the Pledged
Collateral, or any part thereof, at any public or private sale. The Pledgor
hereby waives any claims against the Collateral Agent arising by reason of the
fact that the price at which any Pledged Collateral may have been sold at such a
private sale, if commercially reasonable, was less than the price which might
have been obtained at a public sale, even if the Collateral Agent accepts the
first offer received and does not offer the Pledged Collateral to more than one
offeree.
(b) The Pledgor recognizes that the Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, may
elect to sell all or any part of the Pledged Collateral to one or more
purchasers in privately negotiated transactions in which the purchasers will be
obligated to agree, among other things, to acquire the Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Collateral Agent agree that such
private sales shall be made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public sales and no obligation
to delay sale of any Pledged Collateral to permit the issuer thereof to register
the Pledged Collateral for a form of public sale requiring registration under
the Securities Act. If the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15of the Intercreditor
Agreement, or as otherwise expressly provided herein, determines to exercise its
right to sell any or all of the Pledged Collateral, upon written request, the
Pledgor shall, from time to time, furnish to the Collateral Agent all such
information as is necessary in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by the
Collateral Agent as exempt transactions under the Securities Act
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<PAGE>
and rules of the Securities and Exchange Commission thereunder, as the same are
from time to time in effect.
Section 5.3 Purchase of Pledged Collateral. The Collateral Agent may be a
purchaser of the Pledged Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Collateral Agent may apply the purchase price to the
payment of the Secured Obligations. Any purchaser of all or any part of the
Pledged Collateral shall, upon any such purchase, acquire good title to the
Pledged Collateral so purchased, free of the security interests created by this
Agreement.
Section 5.4 Application of Proceeds. The Collateral Agent shall apply any
proceeds from time to time held by it and the net proceeds of any collection,
recovery, receipt, appropriation, realization or sale with respect to the
Pledged Collateral in accordance Article IV of the Collateral Agency Agreement.
For avoidance of doubt, it is understood that the Partnership and the Funding
Corporation shall remain liable to the extent of any deficiency between the
amount of proceeds of the Pledged Collateral and the aggregated amount of the
Secured Obligations in accordance with the Financing Documents.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective if given in accordance with
the provisions of Section 1.4 of the Indenture (and, in the case of notice to
the Pledgor, addressed to the Pledgor's chief executive office as determined
herein).
Section 6.2 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral until the release thereof
pursuant to Section 6.3.
Section 6.3 Release. Upon the indefeasible payment in full of the Secured
Obligations in cash or cash equivalents and the termination of all commitments
of the Senior Secured Parties under the Financing Documents, the Collateral
Agent, upon the request, and at the expense, of the Pledgor, and acting pursuant
to direction from the
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Pledgor, shall execute and deliver all such documentation as the Pledgor may
request to release the security interest created pursuant to this Agreement.
Section 6.4 Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent or any other Senior Secured Party hereunder or pursuant hereto
is rescinded or must otherwise be restored or returned by the Collateral Agent
or such Senior Secured Party upon a Bankruptcy Event of the Pledgor, the
Partnership or the Funding Corporation or upon the appointment of any intervenor
or conservator of, or trustee or similar official for, the Pledgor, the
Partnership or the Funding Corporation or any substantial part of the Pledgor's,
the Partnership's or the Funding Corporation's assets, or upon the entry of an
order by any court avoiding the payment of such amount, or otherwise, all as
though such payments had not been made.
Section 6.5 Independent Security. The security provided for in this
Agreement shall be in addition to and shall be independent of every other
security which the Senior Secured Parties may at any time hold for any of the
Secured Obligations hereby secured, whether or not under the Senior Security
Documents. The execution of any other Senior Security Document shall not modify
or supersede the security interest or any rights or obligations contained in
this Agreement and shall not in any way affect, impair or invalidate the
effectiveness and validity of this Agreement or any term or condition hereof.
The Pledgor hereby waives its right to plead or claim in any court that the
execution of any other Senior Security Document is a cause for extinguishing,
invalidating, impairing or modifying the effectiveness and validity of this
Agreement or any term or condition contained herein. The Collateral Agent shall
be at liberty to accept further security from the Pledgor or from any third
party and/or release such security without notifying the Pledgor and without
affecting in any way the obligations of the Pledgor under the Senior Security
Documents or the other Financing Documents. The Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, shall
determine if any security conferred upon the Collateral Agent under the Senior
Security Documents shall be enforced by the Collateral Agent, as well as the
sequence of securities to be so enforced.
Section 6.6 Amendments. No waiver, amendment, modification or termination
of any provision of this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the prior written consent of
the Collateral Agent,
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acting upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, and none of the Pledged Collateral shall be released without the written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
Section 6.7 Successors and Assigns. This Agreement shall be binding upon
the Pledgor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and the other Senior Secured Parties and their respective
successors and assigns. The Pledgor may not assign or otherwise transfer any of
its rights or obligations under this Agreement without the written consent of
the Collateral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein; provided that the obligations of the Pledgor
hereunder shall be equally binding on any transferee of the Pledgor (or its
successors) with respect to the Pledged Collateral.
Section 6.8 Third Party Beneficiaries. The agreements of the parties
hereto are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
Section 6.9 Survival. All agreements, statements, representations and
warranties made by the Pledgor herein or in any certificate or other instrument
delivered by the Pledgor or on its behalf under this Agreement shall be
considered to have been relied upon by the Collateral Agent and the other Senior
Secured Parties and shall survive the execution and delivery of this Agreement
and the other Financing Documents until termination thereof or the indefeasible
payment in full in cash or cash equivalents of all of the Secured Obligations
and the termination of all commitments of the Senior Secured Parties under the
Financing Documents regardless of any investigation made by the Collateral Agent
or the other Senior Secured Parties or made on their behalf.
Section 6.10 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between the Pledgor and the Collateral Agent
shall operate as a waiver thereof;
17
<PAGE>
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Collateral Agent would otherwise have.
Section 6.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 6.12 Headings Descriptive. The headings of the several Sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
Section 6.13 Severability. In case any provision contained in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.14 Governing Law. This Agreement shall be governed by the laws
of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 6.15 Consent to Jurisdiction. Any legal action or proceeding by or
against the Pledgor with respect to or arising out of this Agreement may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, the Pledgor accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Agreement and irrevocably consents to the appointment of CT
Corporation System, with offices on the date hereof at 1633 Broadway, New York,
New York 10019, as its agent to receive service of process in New York, New
York. If for any reason such agent shall cease to be available to act as such,
the Pledgor agrees to appoint a new agent on the terms and for the purposes of
this
18
<PAGE>
provision. Nothing herein shall affect the right to serve process in any other
manner permitted by law or any right to bring legal action or proceedings in any
other competent jurisdiction, including judicial or non-judicial foreclosure of
real property interests which are part of the Pledged Collateral. The Pledgor
further agrees that the aforesaid courts of the State of New York and of the
United States of America for the Southern District of New York shall have
exclusive jurisdiction with respect to any claim or counterclaim of the Pledgor
based upon the assertion that the rate of interest charged by or under this
Agreement or under the other Financing Documents is usurious. The Pledgor hereby
waives any right to stay or dismiss any action or proceeding under or in
connection with the Project, this Agreement or any other Transaction Document
brought before the foregoing courts on the basis of forum non-conveniens or
improper venue.
Section 6.16 Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE COLLATERAL
AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE
OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT TO ENTER INTO THIS AGREEMENT.
Section 6.17 Entire Agreement. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their agreement as to the matters covered hereby and is intended
as a complete and exclusive statement of the terms and conditions thereof.
Section 6.18 Independent Obligations. The Pledgor's obligations under this
Agreement are independent of those of the Partnership and the Funding
Corporation. The Collateral Agent may bring a separate action against the
Pledgor without first proceeding against the Partnership, the Funding
Corporation or any other Person or any other security held by the Collateral
Agent and without pursuing any other remedy.
Section 6.19 Waiver of Defenses. The Pledgor hereby waives: (a) any
defense of a statute of limitations; (b) any defense based on the legal
disability of the Partnership or the Funding Corporation or any discharge or
limitation of the liability of the Partnership or the Funding Corporation to the
Collateral Agent or the Senior Secured Parties, whether
19
<PAGE>
consensual or arising by operation of law; (c) presentment, demand, protest and
notice of any kind (other than as expressly provided by the Financing
Documents); and (d) any defense based upon or arising out of any defense which
the Partnership or the Funding Corporation may have to the payment or
performance of any part of the Secured Obligations.
Section 6.20 Subrogation, Etc. Notwithstanding any payment or payments
made by the Pledgor or the exercise by the Collateral Agent of any of the
remedies provided under this Agreement or any other Financing Document, until
the Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under the
Financing Documents shall have terminated, the Pledgor shall have no claim (as
defined in 11 U.S.C. ss. 101(5)) of subrogation to any of the rights of the
Collateral Agent against the Partnership, the Funding Corporation, the Pledged
Collateral or any guaranty held by the Collateral Agent for the satisfaction of
any of the Secured Obligations, nor shall the Pledgor have any claims (as
defined in 11 U.S.C. ss. 101(5)) for reimbursement, indemnity, exoneration or
contribution from the Partnership or the Funding Corporation in respect of
payments made by the Pledgor hereunder. Notwithstanding the foregoing, if any
amount shall be paid to the Pledgor on account of such subrogation,
reimbursement, indemnity, exoneration or contribution rights at any time, such
amount shall be held by the Pledgor in trust for the Collateral Agent segregated
from other funds of the Pledgor, and shall be turned over to the Collateral
Agent in the exact form received by the Pledgor (duly endorsed by the Pledgor to
the Collateral Agent if required) to be applied against the Secured Obligations
in such amounts and in such order as the Collateral Agent, upon directions from
(x) the Intercreditor Agent acting pursuant to the Intercreditor Agreement or
(y) the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein, may elect.
Section 6.21 Limitation of Liability. The provisions of Section 14.1 of
the Indenture shall apply to this Agreement.
Section 6.22 Collateral Agency Agreement. The rights, benefits, privileges
and immunities given to the Collateral Agent and set forth in the Collateral
Agency Agreement are expressly incorporated herein by reference thereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Pledge and Security Agreement to be duly executed and delivered by
their officers thereunto duly authorized as of the date first above written.
LSP BATESVILLE HOLDING, LLC
By: LS Power Management, LLC,
its manager
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK
not in its individual capacity but
solely as Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Second Amended and Restated LP Pledge Agreement
<PAGE>
Schedule I
CERTIFICATES
Certificate No. 3 representing a 99% interest in LSP Energy Limited Partnership.
<PAGE>
Exhibit 4.18
================================================================================
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(GP Interests)
dated as of May 21, 1999
between
LSP ENERGY, INC.
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS.......................................................................1
AGREEMENT......................................................................2
ARTICLE 1: DEFINITIONS; PRINCIPLES OF CONSTRUCTION............................2
Section 1.1 Definitions..................................................3
Section 1.2 Principles of Construction...................................3
ARTICLE 2: PLEDGE.............................................................3
Section 2.1 Pledged Collateral...........................................3
Section 2.2 Delivery of Certificates and Instruments.....................4
Section 2.3 Pledgor's Rights.............................................5
(a) Distributions................................................5
(b) Other Rights.................................................6
(c) Turnover ..................................................6
Section 2.4 Secured Parties Not Liable...................................6
Section 2.5 Attorney-in-Fact.............................................7
Section 2.6 Collateral Agent May Perform.................................7
Section 2.7 Reasonable Care..............................................7
Section 2.8 Security Interest Absolute...................................8
Section 2.9 Effective as a Financing Statement...........................8
ARTICLE 3: REPRESENTATIONS AND WARRANTIES.....................................8
Section 3.1 Necessary Filings............................................8
Section 3.2 No Liens.....................................................9
Section 3.3 Other Financing Statements...................................9
Section 3.4 Chief Executive Office.......................................9
Section 3.5 Consents, etc................................................9
ARTICLE 4: COVENANTS..........................................................9
Section 4.1 Sale of Pledged Collateral..................................10
Section 4.2 No Other Liens..............................................10
Section 4.3 Chief Executive Office......................................10
Section 4.4 Supplements; Further Assurances, etc........................10
Section 4.5 Amendment of Partnership Agreement..........................10
Section 4.6 Certificates and Instruments................................10
Section 4.7 Financing Statements........................................11
i
<PAGE>
Page
----
Section 4.8 Records; Statements and Schedules...........................11
Section 4.9 Improper Distributions......................................11
Section 4.10 Bankruptcy.................................................11
ARTICLE 5: EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT.....................12
Section 5.1 Remedies Generally..........................................12
Section 5.2 Sale of Pledged Collateral..................................12
Section 5.3 Purchase of Pledged Collateral..............................14
Section 5.4 Application of Proceeds.....................................14
ARTICLE 6: MISCELLANEOUS PROVISIONS..........................................14
Section 6.1 Notices.....................................................14
Section 6.2 Continuing Security Interest................................14
Section 6.3 Release.....................................................14
Section 6.4 Reinstatement...............................................14
Section 6.5 Independent Security........................................15
Section 6.6 Amendments..................................................15
Section 6.7 Successors and Assigns......................................16
Section 6.8 Third Party Beneficiaries...................................16
Section 6.9 Survival....................................................16
Section 6.10 No Waiver; Remedies Cumulative.............................16
Section 6.11 Counterparts...............................................16
Section 6.12 Headings Descriptive.......................................17
Section 6.13 Severability...............................................17
Section 6.14 Governing Law..............................................17
Section 6.15 Consent to Jurisdiction....................................17
Section 6.16 Waiver of Jury Trial.......................................18
Section 6.17 Entire Agreement...........................................18
Section 6.18 Independent Obligations....................................18
Section 6.19 Waiver of Defenses.........................................18
Section 6.20 Subrogation, Etc...........................................18
Section 6.21 Limitation of Liability....................................19
Section 6.22 Collateral Agency Agreement................................19
Schedule I - Certificates
ii
<PAGE>
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
(GP Interests)
This SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated as of May 21, 1999, is made by LSP ENERGY, INC., a Delaware
corporation (the "Pledgor"), to THE BANK OF NEW YORK, as collateral agent
(together with its successors in such capacity, the "Collateral Agent") for the
benefit of the Senior Secured Parties pursuant to the Second Amended and
Restated Collateral Agency Agreement, dated as of May 21, 1999 (the "Collateral
Agency Agreement"), among (as of the date hereof) LSP Energy Limited Partnership
(the "Partnership"), LSP Batesville Funding Corporation (the "Funding
Corporation"), the Trustee, the VEPCO L/C Agent, the Collateral Agent the
Intercreditor Agent, and the Administrative Agent.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, the Pledgor owns 1% of the aggregate partnership
interests, and all of the general partnership interests, in the Partnership;
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the "Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial Credit
Agreement and the related financing documents, the Pledgor executed the Pledge
and Security Agreement dated as of August 28, 1998 (the "Initial GP Interests
Pledge Agreement"), in favor of IBJ Schroder Bank & Trust Company as collateral
agent;
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
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among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the relating financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Pledgor and the Collateral Agent executed the Amended and Restated LSP Energy GP
Pledge and Security Agreement, dated as of December 15, 1998 (the "Supple mental
GP Interests Pledge Agreement"), pursuant to which the Initial GP Interests
Pledge Agreement was amended and restated in its entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (1) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (2)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, together with the Series A
Bonds, the "Bonds") pursuant to the Trust Indenture, dated as of the date hereof
(the "Indenture"), among the Partnership, the Funding Corporation and The Bank
of New York, as trustee (the "Trustee").
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (ii) pay the remaining Project Costs;
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Pledgor and the Collateral
Agent desire to amend and restate the Supplemental GP Interests Pledge Agreement
in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Supplemental GP Interests Pledge Agreement is hereby amended
and restated in its entirety as follows:
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ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Indenture shall have such defined meanings when used herein.
(b) The following terms shall have the following respective
meanings:
"Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Event of Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Financing Statement" shall mean all financing statements,
recordings, filings or other instruments of registration necessary and
appropriate to perfect a security interest or Lien by filing in any appropriate
filing or recording office in accordance with the UCC as enacted in any and all
relevant jurisdictions or any other relevant applicable law.
"Partnership Agreement" shall mean the Second Amended and Restated
Agreement of Limited Partnership of LSP Energy Limited Partnership, dated as of
May 19, 1999, between the Pledgor and LSP Batesville Holding, LLC.
"Partnership Interests" shall have the meaning ascribed thereto in
Section 2.1(a)(i).
"Pledged Collateral" shall have the meaning ascribed thereto in
Section 2.1(a).
"Secured Obligations" shall mean the Senior Secured Obligations.
"Securities Act" shall have the meaning ascribed thereto in Section
5.2(b).
Section 1.2 Principles of Construction. Except as otherwise expressly
provided herein, the principles of construction set forth in the Indenture shall
apply to this Agreement.
ARTICLE 2
PLEDGE
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Section 2.1 Pledged Collateral. (a) As collateral security for the prompt
and complete payment and performance when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the U.S.
Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all of the Secured Obligations,
whether now existing or hereafter arising and howsoever evidenced, the Pledgor
hereby pledges, grants, assigns, hypothecates, transfers and delivers to the
Collateral Agent, for its benefit and the ratable benefit of the other Senior
Secured Parties, a first priority security interest in the following, whether
now existing or hereafter from time to time acquired (collectively, the "Pledged
Collateral"):
(i) all of the Pledgor's partnership interests in the
Partnership (the "Partnership Interests") and all of the Pledgor's rights
to acquire partner ship interests in the Partnership in addition to or in
exchange or substitution for the Partnership Interests;
(ii) all of the Pledgor's rights, privileges, authority and
powers as a partner in the Partnership under the Partnership Agreement;
(iii) all certificates or other documents (if any)
representing any and all of the foregoing in clauses (i) and (ii),
including, without limitation, the certificates listed on Schedule I
hereto;
(iv) all dividends, distributions, cash, securities,
instruments and other property or proceeds of any kind to which the
Pledgor may be entitled in its capacity as a partner in the Partnership by
way of distribution, return of capital or otherwise;
(v) any other claim which the Pledgor now has or may in the
future acquire in its capacity as a partner in the Partnership against the
Partnership and its property; and
(vi) all proceeds, products and accessions of and to any of
the property described in the preceding clauses (i) through (v).
(b) As used herein, the term "proceeds" shall be construed in its
broadest sense and shall include whatever is received or receivable when any of
the Partnership Interests, or any proceeds thereof, is sold, collected,
exchanged or otherwise disposed of, whether voluntarily or involuntarily, and
shall include, without limitation, all rights to
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payment, including interest and premiums, with respect to any of the Partnership
Interests or any proceeds thereof.
Section 2.2 Delivery of Certificates and Instruments. All certificates or
instruments representing or evidencing the Partnership Interests shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent shall have
the right, at any time following the occurrence and during the continuation of
an Event of Default, without notice to the Pledgor, to transfer to or to
register in its name or in the name of any of its nominees any or all of the
Partnership Interests. In addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing any
of the Partnership Interests for certificates or instruments of smaller or
larger denominations.
Section 2.3 Pledgor's Rights.
(a) Distributions. Unless an Event of Default shall have occurred
and be continuing, the Pledgor shall be entitled to receive and retain any and
all distributions paid in respect of the Partnership Interests in compliance
with the terms of the other Transaction Documents; provided, however, that any
and all
(i) distributions paid or payable in respect of the
Partnership Interests (whether paid in cash, securities or other property)
in connection with (A) any partial or total liquidation or dissolution of
the Partnership, (B) any distribution of capital of the Partnership (but
not including distributions made (x) pursuant to Section 6.1 of the
Partnership Agreement and (y) in accordance with the Financing Documents),
(C) any recapitalization or reclassification of the capital of the
Partnership and (D) any reorganization of the Partnership, and
(ii) property (whether cash, securities or other property)
paid, payable or otherwise distributed in redemption of, or in exchange
for, the property described in clause (i) immediately above,
shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Pledged Collateral and shall, if received by the Pledgor, be received in trust
for the benefit of the Collateral Agent, be segregated from the other property
or funds of the Pledgor, be forthwith delivered to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement). Upon the occurrence and during the contin-
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uance of an Event of Default, all rights of the Pledgor to receive the
distributions which it would otherwise be authorized to receive and retain
pursuant to the preceding sentence shall cease, and all such rights shall
thereupon become vested in the Collateral Agent which shall thereupon have the
sole right to receive and hold as Pledged Collateral such distributions.
(b) Other Rights. Unless an Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to exercise all voting and other
rights with respect to the Partnership Interests; provided, however, that no
vote shall be cast, right exercised or other action taken which would knowingly
have a material adverse effect on the Pledged Collateral or which would
knowingly be inconsistent with or knowingly result in any violation of any
provision of this Agreement or any other Financing Document. Upon the occurrence
and during the continuance of an Event of Default and upon election by the
Collateral Agent, as directed by the Intercreditor Agent, acting pursuant to the
Intercreditor Agreement, all voting and other rights of the Pledgor with respect
to the Partnership Interests which the Pledgor would otherwise be entitled to
exercise pursuant to the terms of this Agreement shall cease, and all such
rights shall be vested in the Collateral Agent which shall thereupon have the
sole right to exercise such rights.
(c) Turnover. All distributions and other amounts which are received
by the Pledgor contrary to the provisions of this Agreement shall be received in
trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
Section 2.4 Secured Parties Not Liable. Notwithstanding any other
provision contained in this Agreement, the Pledgor shall remain liable under the
Partnership Agreement to observe and perform all of the conditions and
obligations to be observed and performed by the Pledgor thereunder. None of the
Collateral Agent, any other Senior Secured Party or any of their respective
directors, officers, employees, affiliates or agents shall have any obligations
or liability under or with respect to any Pledged Collateral by reason of or
arising out of this Agreement, except as set forth in Section 9-207 of the UCC
as in effect from time to time in the State of New York, or the receipt by the
Collateral Agent of any payment relating to any Pledged Collateral, nor shall
any of the Collateral Agent, any other Senior Secured Party or any of their
respective directors, officers, employees, affiliates or agents be obligated in
any manner to (a) perform any of the obligations of the Pledgor under or
pursuant to the Partnership Agreements or any other agreement to which the
Pledgor is a party, (b) make any payment or inquire as to the nature or
sufficiency of any payment or performance with respect to any Pledged
Col-
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lateral, (c) present or file any claim or collect the payment of any amounts or
take any action to enforce any performance with respect to the Pledged
Collateral or (d) take any other action whatsoever with respect to the Pledged
Collateral.
Section 2.5 Attorney-in-Fact. (a) The Pledgor hereby appoints the
Collateral Agent, on behalf of the Senior Secured Parties, or any Person,
officer or agent whom the Collateral Agent may designate, as its true and lawful
attorney-in-fact and proxy, with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, at the Pledgor's cost and expense, from time to time to take any action
and to execute any instrument which may be necessary or advisable to enforce
its rights under this Agreement, including, without limitation, authority to
receive, endorse and collect all instruments made payable to the Pledgor
representing any distribution, interest payment or other payment in respect of
the Pledged Collateral or any part thereof to be paid over to the Collateral
Agent pursuant to Section 2.3(c) and to give full discharge for the same.
(b) The Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof, in each case pursuant to the
powers granted hereunder. The Pledgor hereby acknowledges and agrees that the
Collateral Agent shall have no fiduciary duties to the Pledgor and the Pledgor
hereby waives any claims or rights of a beneficiary of a fiduciary relationship
hereunder.
Section 2.6 Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein after receipt of a written request to do so from
the Collateral Agent, the Collateral Agent may (but shall not be obligated to)
itself perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor under Section
5.5 of the Collateral Agency Agreement; provided that if a Bankruptcy Event
shall have occurred with respect to the Pledgor, the notice described in this
Section 2.6 shall not be required and shall be deemed to have been delivered
upon the failure of the Pledgor to perform such agreement.
Section 2.7 Reasonable Care. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent accords its own
property of the type of which the Pledged Collateral consists, it being
understood that the Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the
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Collateral Agent has or is deemed to have knowledge of such matters, or (b)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
Section 2.8 Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Financing
Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Financing
Documents or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor, except as otherwise
provided herein.
Section 2.9 Effective as a Financing Statement. This Agreement shall also
be effective as a Financing Statement covering any Pledged Collateral and may be
filed in any appropriate filing or recording office. A carbon, photographic,
facsimile or other reproduction of this Agreement or of any Financing Statement
relating to this Agreement shall be sufficient as a Financing Statement for any
of the purposes referred to in the preceding sentence.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants, as of the date of this Agreement and
the Closing Date, as follows, which representations and warranties shall survive
the execution and delivery of this Agreement and the making and repayment of the
Secured Obligations:
Section 3.1 Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted to the
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Collateral Agent hereby in respect of the Pledged Collateral have been
accomplished and the security interest granted to the Collateral Agent pursuant
to this Agreement in and to the Pledged Collateral constitutes a valid and
enforceable perfected security interest therein superior and prior to the rights
of all other Persons therein and, in each case, subject to no other Liens,
sales, assignments, conveyances, settings over or transfers other than the Lien
created pursuant to this Agreement.
Section 3.2 No Liens. The Pledgor is the owner of all of its right, title
and interest in the Pledged Collateral pledged by it hereunder free from any
Lien or other right, title or interest of any Person other than the Lien created
pursuant to this Agreement and other Permitted Liens.
Section 3.3 Other Financing Statements. There is no Financing Statement
(or similar statement or instrument of registration under the law of any
jurisdiction) executed by the Pledgor, or, to the knowledge of the Pledgor after
due inquiry, by any other Person covering or purporting to cover any interest of
any kind in the Pledged Collateral, except Financing Statements filed or to be
filed in respect of and covering the security interests granted hereby by the
Pledgor.
Section 3.4 Chief Executive Office. The chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Pledged Collateral is located at:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816.
Section 3.5 Consents, etc. No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental authority is
required either (i) for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the due execution, delivery or performance of
this Agreement by the Pledgor, or (ii) for the exercise by the Collateral Agent
of the voting or other rights provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement, except as may
be required in connection with the disposition of the Pledged Collateral by laws
affecting the offering and sale of securities generally.
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ARTICLE 4
COVENANTS
The Pledgor hereby covenants and agrees from and after the date of this
Agreement until the termination of this Agreement in accordance with the
provisions of Section 6.3:
Section 4.1 Sale of Pledged Collateral. The Pledgor shall not sell or
other wise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral, except to the extent any such sale or disposition would
not violate the terms and provisions of the Financing Documents; provided that
any portion of the Pledged Collateral so sold or disposed of shall remain
subject to the pledge of this Agreement to the same extent as though it had not
been so sold or disposed of.
Section 4.2 No Other Liens. The Pledgor shall not create, incur or permit
to exist, shall defend the Pledged Collateral owned by it against and shall take
such other action as is reasonably necessary to remove, any Lien or claim on or
to the Pledged Collateral, other than the Lien created pursuant to this
Agreement, and shall defend the right, title and interest of the Collateral
Agent in and to the Pledged Collateral against the claims and demands of all
Persons whomsoever, except with respect to any sale or disposition of any of the
Pledged Collateral not in violation of the Financing Documents.
Section 4.3 Chief Executive Office. The Pledgor shall not establish a new
location for its chief executive office or change its name until (i) it has
given to the Collateral Agent not less than sixty (60) days prior written notice
of its intention so to do, clearly describing such new location or specifying
such new name, as the case may be, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all action, necessary to
maintain the security interest of the Collateral Agent in the Pledged Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
Section 4.4 Supplements; Further Assurances, etc. The Pledgor shall at any
time and from time to time, at the expense of the Pledgor, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
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Section 4.5 Amendment of Partnership Agreement. Except as permitted by the
express terms of the Indenture, the Pledgor shall not, without the prior written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as other wise expressly provided herein, agree to or permit (a)
the cancellation or termination of the Partnership Agreement, except upon the
expiration of the stated term thereof, or (b) any amendment, supplement, or
modification of, or waiver with respect to any of the provisions of, the
Partnership Agreement. Nothing contained in this Section 4.5 shall restrict the
Pledgor's right to agree to or permit the amendment, supplement or modification
of the Partnership Agreement the sole purpose of which is to admit a new partner
into the Partnership to the extent not prohibited under the Indenture; provided
that the Pledged Collateral shall at all times remain subject to the Lien of
this Agreement.
Section 4.6 Certificates and Instruments. The Pledgor shall deliver all
certificates or other documents representing the Pledged Collateral to the
Collateral Agent with all necessary instruments of transfer or assignment duly
indorsed in blank. In the event the Pledgor obtains possession of any other
certificates, or other securities or instruments forming a part of the Pledged
Collateral, the Pledgor shall promptly deliver same to the Collateral Agent
together with all necessary instruments of transfer or assignment duly indorsed
in blank. Prior to any such delivery, any Pledged Collateral in the Pledgor's
possession shall be held by the Pledgor in trust for the Collateral Agent.
Section 4.7 Financing Statements. The Pledgor shall sign and deliver to
the Collateral Agent and the other Senior Secured Parties such Financing
Statements (or similar statements or instruments of registration under the law
of any jurisdiction), as are necessary or desirable to establish and maintain
the security interests contemplated hereunder as valid, enforceable, first
priority security interests a provided herein and the other rights and security
contemplated herein, all in accordance with the UCC as enacted in any and all
relevant jurisdictions or any other applicable law. The Pledgor shall pay any
applicable filing fees and related expenses. The Pledgor authorizes the
Collateral Agent to file any such Financing Statements (or similar statements or
instruments of registration under the law of any jurisdiction) without the
signature of the Pledgor.
Section 4.8 Records; Statements and Schedules. The Pledgor shall keep and
maintain, at its own cost and expense, records of the Pledged Collateral owned
by it, including, but not limited to, records of all payments received with
respect thereto, and the Pledgor shall make the same available to the Collateral
Agent for inspection at the Pledgor's chief executive office, at the Pledgor's
own cost and expense, at any and all
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times upon demand. The Pledgor shall furnish to the Collateral Agent from time
to time statements and schedules further identifying and describing the Pledged
Collateral and such other reports in connection with the Pledged Collateral as
the Collateral Agent may reasonably request, all in reasonable detail.
Section 4.9 Improper Distributions. Notwithstanding any other provision
contained in this Agreement, the Pledgor shall not accept any distributions,
dividends or other payments (or any collateral in lieu thereof) in respect of
the Pledged Collateral, except to the extent the same are expressly permitted by
the terms of this Agreement and the other Financing Documents.
Section 4.10 Bankruptcy. The Pledgor shall not authorize or permit the
Partnership to (a) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Partnership or
the Partnership's debts under any Bankruptcy Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Partnership or any substantial part of the Partnership's
property, (b) to consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against the Partnership or (c) make a general assignment for the
benefit of the Partnership's creditors. The Pledgor shall not commence or join
with any other Person (other than the Collateral Agent and the other Secured
Parties) in commencing any proceeding against the Partnership under any
Bankruptcy Law or statute now or hereafter in effect in any jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
The provisions of this Article 5 shall apply only upon the occurrence and
during the continuance of an Event of Default.
Section 5.1 Remedies Generally. If an Event of Default shall have occurred
and be continuing, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as other wise expressly provided herein, may exercise, in addition
to all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC in effect
from time to time in any relevant jurisdiction and all other rights and remedies
available at law or in equity.
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Section 5.2 Sale of Pledged Collateral. (a) Without limiting the
generality of Section 5.1, the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, may, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale or at any of the Collateral Agent's
corporate trust office or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as is commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral at any such sale. Each purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. The Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days' notice to the Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Collateral Agent shall incur no liability as a result of the sale
of the Pledged Collateral, or any part thereof, at any public or private sale.
The Pledgor hereby waives any claims against the Collateral Agent arising by
reason of the fact that the price at which any Pledged Collateral may have been
sold at such a private sale, if commercially reasonable, was less than the price
which might have been obtained at a public sale, even if the Collateral Agent
accepts the first offer received and does not offer the Pledged Collateral to
more than one offeree.
(b) The Pledgor recognizes that the Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, may
elect to sell all or any part of the Pledged Collateral to one or more
purchasers in privately negotiated transactions in which the purchasers will be
obligated to agree, among other things, to acquire the Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Collateral Agent agree that such
private sales shall be made in a commercially reasonable manner and that the
Collateral
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Agent has no obligation to engage in public sales and no obligation to delay
sale of any Pledged Collateral to permit the issuer thereof to register the
Pledged Collateral for a form of public sale requiring registration under the
Securities Act. If the Collateral Agent, upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, determines to exercise its
right to sell any or all of the Pledged Collateral, upon written request, the
Pledgor shall, from time to time, furnish to the Collateral Agent all such
information as is necessary in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by the
Collateral Agent as exempt transactions under the Securities Act and rules of
the Securities and Ex change Commission thereunder, as the same are from time to
time in effect.
Section 5.3 Purchase of Pledged Collateral. The Collateral Agent may be a
purchaser of the Pledged Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Collateral Agent may apply the purchase price to the
payment of the Secured Obligations. Any purchaser of all or any part of the
Pledged Collateral shall, upon any such purchase, acquire good title to the
Pledged Collateral so purchased, free of the security interests created by this
Agreement.
Section 5.4 Application of Proceeds. The Collateral Agent shall apply any
proceeds from time to time held by it and the net proceeds of any collection,
recovery, receipt, appropriation, realization or sale with respect to the
Pledged Collateral in accordance Article IV of the Collateral Agency Agreement.
For avoidance of doubt, it is understood that the Partnership and the Funding
Corporation shall remain liable to the extent of any deficiency between the
amount of proceeds of the Pledged Collateral and the aggregated amount of the
Secured Obligations in accordance with the Financing Documents.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective if given in accordance with
the provisions of Section 1.4 of the Indenture (and, in the case of notices to
the Pledgor, addressed to the Pledgor's chief executive office as determined
herein).
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<PAGE>
Section 6.2 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral until the release thereof
pursuant to Section 6.3.
Section 6.3 Release. Upon the indefeasible payment in full of the Secured
Obligations in cash or cash equivalents and the termination of all commitments
of the Senior Secured Parties under the Financing Documents, the Collateral
Agent, upon the request, and at the expense, of the Pledgor, and acting pursuant
to direction from the Pledgor, shall execute and deliver all such documentation
as the Pledgor may request to release the security interest created pursuant to
this Agreement.
Section 6.4 Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent or any other Senior Secured Party hereunder or pursuant hereto
is rescinded or must otherwise be restored or returned by the Collateral Agent
or such Senior Secured Party upon a Bankruptcy Event of the Pledgor, the
Partnership or the Funding Corporation or upon the appointment of any intervenor
or conservator of, or trustee or similar official for, the Pledgor, the
Partnership or the Funding Corporation or any substantial part of the Pledgor's,
the Partnership's or the Funding Corporation's assets, or upon the entry of an
order by any court avoiding the payment of such amount, or otherwise, all as
though such payments had not been made.
Section 6.5 Independent Security. The security provided for in this
Agreement shall be in addition to and shall be independent of every other
security which the Senior Secured Parties may at any time hold for any of the
Secured Obligations hereby secured, whether or not under the Senior Security
Documents. The execution of any other Senior Security Document shall not modify
or supersede the security interest or any rights or obligations contained in
this Agreement and shall not in any way affect, impair or invalidate the
effectiveness and validity of this Agreement or any term or condition hereof.
The Pledgor hereby waives its right to plead or claim in any court that the
execution of any other Senior Security Document is a cause for extinguishing,
invalidating, impairing or modifying the effectiveness and validity of this
Agreement or any term or condition contained herein. The Collateral Agent shall
be at liberty to accept further security from the Pledgor or from any third
party and/or release such security without notifying the Pledgor and without
affecting in any way the obligations of the Pledgor under the Senior Security
Documents or the other Financing Documents. The Collateral Agent, upon
directions from (x) the Intercreditor Agent acting pursuant to the Intercreditor
Agreement or (y) the Senior Secured Parties acting pursuant to Section 7.15 of
the Intercreditor Agreement, or as otherwise expressly provided herein, shall
determine if any security con-
15
<PAGE>
ferred upon the Senior Secured Parties under the Senior Security Documents shall
be enforced by the Collateral Agent, as well as the sequence of securities to be
so enforced.
Section 6.6 Amendments. No waiver, amendment, modification or termination
of any provision of this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the prior written consent of
the Collateral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, and none of the Pledged Collateral shall be released
without the written consent of the Collateral Agent, acting upon directions from
(x) the Intercreditor Agent acting pursuant to the Intercreditor Agreement or
(y) the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
Section 6.7 Successors and Assigns. This Agreement shall be binding upon
the Pledgor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and the other Senior Secured Parties and their respective
successors and assigns. The Pledgor may not assign or otherwise transfer any of
its rights or obligations under this Agreement without the written consent of
the Collateral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein; provided that the obligations of the Pledgor
hereunder shall be equally binding on any transferee of the Pledgor (or its
successors) with respect to the Pledged Collateral.
Section 6.8 Third Party Beneficiaries. The agreements of the parties
hereto are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
Section 6.9 Survival. All agreements, statements, representations and
warranties made by the Pledgor herein or in any certificate or other instrument
delivered by the Pledgor or on its behalf under this Agreement shall be
considered to have been relied upon by the Collateral Agent and the other Senior
Secured Parties and shall survive the execution and delivery of this Agreement
and the other Financing Documents until termination thereof or the indefeasible
payment in full in cash or cash equivalents of all of the Secured Obligations
and the termination of all commitments of the Senior Secured Parties under the
Financing Documents regardless of any investigation made by the Collateral Agent
or the other Senior Secured Parties or made on their behalf.
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<PAGE>
Section 6.10 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between the Pledgor and the Collateral Agent
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Collateral Agent would
otherwise have.
Section 6.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 6.12 Headings Descriptive. The headings of the several Sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
Section 6.13 Severability. In case any provision contained in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.14 Governing Law. This Agreement shall be governed by the laws
of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 6.15 Consent to Jurisdiction. Any legal action or proceeding by or
against the Pledgor with respect to or arising out of this Agreement may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, the Pledgor accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Agreement and irrevocably consents to the appointment of CT
Corporation System, with offices on the date hereof at 1633 Broadway, New York,
New York 10019, as its agent to receive service of process in New York, New
York. If for any reason such agent shall cease to be available to act as
17
<PAGE>
such, the Pledgor agrees to appoint a new agent on the terms and for the
purposes of this provision. Nothing herein shall affect the right to serve
process in any other manner permitted by law or any right to bring legal action
or proceedings in any other competent jurisdiction, including judicial or
non-judicial foreclosure of real property interests which are part of the
Pledged Collateral. The Pledgor further agrees that the aforesaid courts of the
State of New York and of the United States of America for the Southern District
of New York shall have exclusive jurisdiction with respect to any claim or
counterclaim of the Pledgor based upon the assertion that the rate of interest
charged by or under this Agreement or under the other Financing Documents is
usurious. The Pledgor hereby waives any right to stay or dismiss any action or
proceeding under or in connection with the Project, this Agreement or any other
Transaction Document brought before the foregoing courts on the basis of forum
non-conveniens or improper venue.
Section 6.16 Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE COLLATERAL
AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE
OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT TO ENTER INTO THIS AGREEMENT.
Section 6.17 Entire Agreement. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their agreement as to the matters covered hereby and is intended
as a complete and exclusive statement of the terms and conditions thereof.
Section 6.18 Independent Obligations. The Pledgor's obligations under this
Agreement are independent of those of the Partnership and the Funding
Corporation. The Collateral Agent may bring a separate action against the
Pledgor without first proceeding against the Partnership, the Funding
Corporation or any other Person or any other security held by the Collateral
Agent and without pursuing any other remedy.
Section 6.19 Waiver of Defenses. The Pledgor hereby waives: (a) any
defense of a statute of limitations; (b) any defense based on the legal
disability of the Partnership or the Funding Corporation or any discharge or
limitation of the liability of the Partnership or the Funding Corporation to the
Collateral Agent or the Senior Secured Parties, whether consensual or arising by
operation of law; (c) presentment, demand, protest and notice of
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<PAGE>
any kind (other than as expressly provided by the Financing Documents); and (d)
any defense based upon or arising out of any defense which the Partnership or
the Funding Corporation may have to the payment or performance of any part of
the Secured Obligations.
Section 6.20 Subrogation, Etc. Notwithstanding any payment or payments
made by the Pledgor or the exercise by the Collateral Agent of any of the
remedies provided under this Agreement or any other Financing Document, until
the Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under the
Financing Documents shall have terminated, the Pledgor shall have no claim (as
defined in 11 U.S.C. ss. 101(5)) of subrogation to any of the rights of the
Collateral Agent against the Partnership, the Funding Corporation, the Pledged
Collateral or any guaranty held by the Collateral Agent for the satisfaction of
any of the Secured Obligations, nor shall the Pledgor have any claims (as
defined in 11 U.S.C. ss. 101(5)) for reimbursement, indemnity, exoneration or
contribution from the Partnership or the Funding Corporation in respect of
payments made by the Pledgor hereunder. Notwithstanding the foregoing, if any
amount shall be paid to the Pledgor on account of such subrogation,
reimbursement, indemnity, exoneration or contribution rights at any time, such
amount shall be held by the Pledgor in trust for the Collateral Agent segregated
from other funds of the Pledgor, and shall be turned over to the Collateral
Agent in the exact form received by the Pledgor (duly endorsed by the Pledgor to
the Collateral Agent if required) to be applied against the Secured Obligations
in such amounts and in such order as the Collateral Agent, upon directions from
(x) the Intercreditor Agent acting pursuant to the Intercreditor Agreement or
(y) the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein, may elect.
Section 6.21 Limitation of Liability. The provisions of Section 14.1 of
the Indenture shall apply to this Agreement.
Section 6.22 Collateral Agency Agreement. The rights, benefits, privileges
and immunities given to the Collateral Agent and set forth in the Collateral
Agency Agreement are expressly incorporated herein by reference thereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Pledge and Security Agreement to be duly executed and
delivered by their officers thereunto duly authorized as of the date first above
written.
LSP ENERGY, INC.
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
not in its individual capacity but solely
as Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Second Amended and Restated GP Pledge Agreement
<PAGE>
Schedule I
CERTIFICATES
Certificate No. 1 representing a 1% interest in LSP Energy Limited Partnership.
<PAGE>
Exhibit 4.19
================================================================================
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
dated as of May 21, 1999
between
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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RECITALS
AGREEMENT
ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION
1.1. Definitions .....................................................2
1.2. Principles of Construction.........................................6
ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTEREST
2.1. Assignment and Grant of Security Interest..........................7
2.2. Security Interest Absolute.........................................8
2.3. Power of Attorney..................................................9
2.4. Inspection and Verification.......................................12
ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1. Title and Authority...............................................12
3.2. Validity, Perfection and Priority of Lien.........................12
3.3. No Liens; Other Financing Statements..............................13
3.4. Chief Executive Office; Name; Records.............................14
3.5. Additional Statements and Schedules...............................14
3.6. Further Actions...................................................15
ARTICLE IV SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
4.1. Maintenance of Insurance; Protection of Security Interest.........15
4.2. Location of Inventory and Equipment...............................15
ARTICLE V SPECIAL PROVISIONS CONCERNING RECEIVABLES, CONTRACTS AND
INSTRUMENTS
5.1. Additional Representations and Warranties.........................15
5.2. Maintenance of Records; Legending of Records......................16
5.3. Modification of Terms; No Payment to Grantor......................16
5.4. Collection ....................................................17
5.5. Direction to Account Debtors; Grantor Bound.......................17
5.6. Instruments ....................................................17
ARTICLE VI SPECIAL PROVISIONS CONCERNING CONTRACTS
6.1. Security Interest in Contract Rights..............................18
<PAGE>
Page
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6.2. Further Protection................................................18
6.3. Liabilities Under Receivables and Contracts.......................19
6.4. Remedies ....................................................19
ARTICLE VII DUTY OF CARE OF COLLATERAL AGENT
7.1. Collateral Agent's Duties; Reasonable Care........................20
ARTICLE VIII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT
8.1. Remedies; Obtaining the Collateral upon Default...................20
8.2. Remedies; Disposition of the Collateral...........................22
8.3. Waiver ....................................................22
8.4. Application of Proceeds; Grantor Liable for Deficiency............24
8.5. No Waiver; Remedies Cumulative....................................24
8.6. Discontinuance of Proceedings.....................................25
ARTICLE IX MISCELLANEOUS
9.1. Notices ....................................................25
9.2. Amendment ....................................................25
9.3. Successors and Assigns............................................26
9.4. Survival ....................................................26
9.5. Headings Descriptive..............................................26
9.6. Severability ....................................................26
9.7. Grantor's Duties..................................................26
9.8. Termination; Release..............................................26
9.9. Reinstatement ....................................................27
9.10. Counterparts ....................................................27
9.11 Governing Law ....................................................27
9.12 Consent to Jurisdiction...........................................27
9.13 Waiver of Jury Trial..............................................28
9.14. Authority of Collateral Agent....................................28
9.15. Indemnities and Expenses. .......................................28
9.16. Entire Agreement.................................................29
9.17. Independent Security.............................................29
9.18. Third Party Beneficiaries........................................29
9.19 Limitation of Liability...........................................29
Schedule I - Filing Offices
Schedule II - Instruments
Schedule III - Copyrights
Schedule IV - Patents
Schedule V - Trademarks
<PAGE>
Page
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Schedule VI - Chief Executive Office and Principal Place of Business
Schedule 4.2 - Locations of Collateral
<PAGE>
SECOND AMENDED AND RESTATED
PARTNERSHIP SECURITY AGREEMENT
SECOND AMENDED AND RESTATED PARTNERSHIP SECU RITY AGREEMENT,
dated as of May 21, 1999 (this "AGREEMENT"), made by LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "GRANTOR"), in favor of THE
BANK OF NEW YORK, as collateral agent (together with its successors in such
capacity, the "COLLATERAL AGENT") for the benefit of the Senior Secured Parties
pursuant to the Second Amended and Restated Collateral Agency Agreement, dated
as of May 21, 1999 (the "COLLATERAL AGENCY AGREEMENT"), among (as of the date
hereof) the Grantor, LSP Batesville Funding Corporation (the "FUNDING
CORPORATION"), the Trustee, the VEPCO L/C Agent, the Collateral Agent, the
Intercreditor Agent and the Administrative Agent.
RECITALS
WHEREAS, the Grantor was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
NATURAL GAS-FIRED COMBINED-CYCLE ELECTRIC GENERATION FACILITY LOCATED IN
BATESVILLE, Mississippi (the "PROJECT");
WHEREAS, pursuant to the Tranche A Facility Credit Agreement,
dated as of August 28, 1998 (the "INITIAL CREDIT AGREEMENT"), among the Grantor,
the banks and other financial institutions party thereto (the "INITIAL BANKS")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "INITIAL LOANS") to the Grantor to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial
Credit Agreement and the related financing documents, and as a condition
precedent to the Banks providing the Loans to the Grantor, the Grantor executed
the Security Agree ment, dated as of August 28, 1998 (the "INITIAL PARTNERSHIP
SECURITY AGREEMENT"), in favor of IBJ Schroder Bank & Trust Company as
collateral agent;
WHEREAS, pursuant to the Amended and Restated Bank Facility
Credit Agreement, dated as of December 15, 1998 (the "SUPPLEMENTAL CREDIT
AGREEMENT"), among the Grantor, the banks and other financial institutions party
thereto (the "SUPPLEMENTAL BANKS") and Credit Suisse First Boston as agent for
the Supplemental Banks, (1) the Grantor, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed to provide loans (the
"SUPPLEMENTAL LOANS") to the
<PAGE>
Grantor to finance a portion of the development, construction and start-up of
the Project;
WHEREAS, in connection with the execution of the Supplemental
Credit Agreement and the relating financing documents, and as a condition
precedent to the Supplemental Banks providing the Supplemental Loans to the
Grantor, the Pledgor and Credit Suisse First Boston, as collateral agent,
executed the Amended and Restated Security Agreement, dated as of December 15,
1998 (the " SUPPLEMEN TAL PARTNERSHIP SECURITY AGREEMENT"), pursuant to which
the Initial Partnership Security Agreement was amended and restated in its
entirety;
WHEREAS, the Grantor and the Funding Corporation have deter
mined to issue (1) $150,000,000 aggregate principal amount of their 7.164%
Series A Senior Secured Bonds due January 15, 2014 (the "SERIES A BONDS") and
(2) $176,000,000 aggregate principal amount of their 8.160% Series B Senior
Secured Bonds due July 15, 2025 (the "SERIES B BONDS" and, together with the
Series A Bonds, the "BONDS") pursuant to the Trust Indenture, dated as of the
date hereof (the "INDENTURE"), among the Grantor, the Funding Corporation and
The Bank of New York, as trustee (the "TRUSTEE");
WHEREAS, the Grantor and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Supplemental Credit Agreement and (ii) pay the remaining Project Costs; and
WHEREAS, in connection with the issuance and sale of the Bonds
and the execution of the related Financing Documents, the Pledgor and the
Collateral Agent desire to amend and restate the Supplemental Partnership
Security Agreement in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Supplemental Partnership Security Agreement is hereby amended
and restated in its entirety as follows:
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS.
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(a) For all purposes of this Agreement, capitalized terms used
but not otherwise defined herein shall have the meanings set forth in the
Indenture.
(b) The following terms shall have the following respective
meanings unless the context otherwise requires. Commercial terms used but not
defined herein or in the Indenture shall have the meanings specified for such
terms in the UCC as in effect in the State of New York.
"CHATTEL PAPER" shall mean "chattel paper" as such term is
defined in the UCC as in effect in any relevant jurisdiction.
"COLLATERAL" shall have the meaning specified in SECTION
2.1(A).
"CONTRACT RIGHTS" shall have the meaning specified in SECTION
6.1.
"CONTRACTS" shall mean all contracts to which the Grantor now
is, or hereafter will be, bound, or a party, beneficiary or assignee, including,
without limitation, all of the Transaction Documents (to the extent the Grantor
is a party thereto or has rights thereunder), including all exhibits, schedules
and appendices thereto, and all other instruments, agreements and documents
executed and delivered with respect to such contracts, and all revenues,
rentals, Proceeds and other sums of money due and to become due from any of the
foregoing, as the same may be modified, supplemented or amended from time to
time in accordance with their respective terms.
"COPYRIGHTS" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all copyright rights in any work subject
to the copyright laws of the United States, whether as author, assignee,
transferee or otherwise; and (b) all registrations and applications for
registration of any such copyright rights in the United States, including
registrations, recordings, supplemental registrations and pending applications
for registration in the United States Copyright Office, including, without
limitation, those listed on SCHEDULE III.
"DOCUMENTS" shall mean "documents" as such term is defined in
the UCC as in effect in any relevant jurisdiction.
"DEFAULT" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"EQUIPMENT" shall mean all "equipment" (as such term is
defined in
3
<PAGE>
the UCC as in effect in any relevant jurisdiction), now or hereafter owned or
leased by the Grantor and, in any event, shall include, but shall not be limited
to, all equipment used in connection with the Project or the Site, all
machinery, manufactur ing equipment, data processing equipment, computers,
tools, office equipment, appliances, furniture, furnishings, fixtures, spare
parts, vehicles, motor vehicles, and any manuals, instructions, blueprints,
computer software and similar items which relate to the above, and any and all
additions to, substitutions for and replacements of any of the foregoing,
wherever located, together with all improvements thereon and all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.
"EVENT OF DEFAULT" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"FINANCING STATEMENTS" shall mean all financing statements, record
ings, filings or other instruments of registration necessary and appropriate to
perfect a security interest or lien by filing in any appropriate filing or
recording office in accor dance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant applicable law.
"FINANCIAL ASSETS" shall mean "financial assets" as such term is
defined in the UCC as in effect in any relevant jurisdiction.
"FIXTURES" shall mean "fixtures" as such term is defined in the UCC as
in effect in any relevant jurisdiction and in any event shall include all goods
now or hereafter attached to, placed on or incorporated in the Site.
"GENERAL INTANGIBLES" shall mean all "general intangibles" (as such
term is defined in the UCC as in effect in any relevant jurisdiction) now or
hereafter owned by the Grantor and shall include, but not be limited to, all
Trademarks, trademark applications, trademark registrations, tradenames,
fictitious business names, business names, company names, business identifiers,
prints, labels, trade styles and service marks (whether or not registered),
including logos and/or designs, Copyrights, Patents, patent applications,
goodwill of the Grantor's business symbol ized by any of the foregoing, trade
secrets, license rights, license agreements, permits, franchises and any rights
to tax refunds to which the Grantor is now or hereafter may be entitled.
"GOODS" shall mean "goods" as such term is defined in the UCC as in
effect in any relevant jurisdiction.
"INSTRUMENTS" shall mean "instruments" as such term is defined in the
UCC as in effect in any relevant jurisdiction.
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"INSURANCE POLICIES" shall mean all insurance policies to which the
Grantor now is, or hereafter will be, a party, including, without limitation,
all insurance policies required pursuant to this Agreement and the other
Financing Documents.
"INSURANCE PROCEEDS" shall mean all amounts and proceeds of any kind
(including interest, if any, thereon) paid or payable pursuant to any Insurance
Policy.
"INTELLECTUAL PROPERTY" shall mean, collectively, Copyrights, Patents
and Trademarks.
"INVENTORY" shall mean all of the inventory of the Grantor of every
type or description, including all "inventory" as such term is defined in the
UCC as in effect in any relevant jurisdiction, now owned or hereafter acquired
and wherever located, whether raw, in process or finished, all materials usable
in processing the same and all documents of title covering any inventory,
including, without limitation, work in process, materials used or consumed in
the Grantor's businesses, now owned or hereafter acquired or manufactured by the
Grantor and held for sale in the ordinary course of its business, all present
and future substitutions therefor, parts and accesso ries thereof and all
additions thereto, and all proceeds thereof and products of such inventory in
any form whatsoever.
"INVENTORY RECORDS" shall mean all books, records and other property
and General Intangibles at any time relating to the Inventory.
"INVESTMENT PROPERTY" shall mean "investment property" as such term is
defined in the UCC as in effect in any relevant jurisdiction.
"PATENTS" shall mean all of the following now owned or hereafter
acquired by the Grantor: (a) all letters patent of the United States, all
registrations and recordings thereof, and all applications for letters patent of
the United States, including registrations, recordings and pending applications
in the United States Patent and Trademark Office, including, without limitation,
those listed on SCHEDULE IV; and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"PROCEEDS" shall mean "proceeds" as such term is defined in the UCC as
in effect in any relevant jurisdiction or under other relevant law and, in any
event, shall include, but shall not be limited to, (i) any and all proceeds of
any insurance,
5
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indemnity, warranty or guaranty payable to the Collateral Agent or the Grantor
from time to time, and claims for insurance, indemnity, warranty or guaranty
effected or held for the benefit of the Grantor with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any person acting under color of
Governmental Authority) and (iii) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"RECEIVABLES" shall mean any "account" as such term is defined in the
UCC as in effect in any relevant jurisdiction and in any event shall include,
but not be limited to, all of the Grantor's rights to payment for goods
(including, without limitation, electricity) sold or leased, or services
performed, by the Grantor, whether now in existence or arising from time to time
hereafter, including, without limitation, rights evidenced by an account, note,
contract, contract rights (including any and all rights to liquidated damage
payments), security agreement, chattel paper or other evidence of indebtedness
or security, together with (i) all security pledged, assigned, hypothecated or
granted to or held by the Grantor to secure the foregoing, (ii) all guarantees,
warranties, endorsements, indemnifications or collateral on, or of, any of the
foregoing, (iii) all powers of attorney for the execution of any evidence of
indebtedness or security or other writing in connection therewith, (iv) all
books, correspondence, credit files, records, ledger cards, invoices and other
papers relating thereto, including, without limitation, all similar information
stored on a magnetic medium or other similar storage device and other papers and
documents in the possession or under the control of the Grantor or any computer
bureau from time to time acting for the Grantor, (v) all evidences of the filing
of Financing Statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (vi) all credit information, reports and memoranda relating thereto,
and (vii) all other writings related in any way to the foregoing.
"SECURITY ENTITLEMENT" shall have the meaning assigned to that term
under the UCC as in effect in any relevant jurisdiction.
"SECURITY INTEREST" shall have the meaning specified in SECTION 2.1.
"TRADEMARKS" shall mean all of the following now owned or hereafter
acquired by the Grantor: (i) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all
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registrations and recordings thereof, and all registration and recording
applications filed in connection therewith, including registrations and
registration applications in the United States Patent and Trademark Office, any
State of the United States or any political subdivi sion thereof, and all
extensions or renewals thereof, including, without limitation, those listed on
SCHEDULE V; (ii) all goodwill associated therewith or symbolized thereby; and
(iii) all other assets, rights and interests that uniquely reflect or embody
such goodwill.
SECTION 1.2. PRINCIPLES OF CONSTRUCTION. Except as otherwise expressly
provided herein, the principles of construction set forth in the Indenture shall
apply to this Agreement.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTEREST
SECTION 2.1. ASSIGNMENT AND GRANT OF SECURITY INTEREST. (a) As security
for the prompt and complete payment and performance when due of all of the
Senior Secured Obligations, the Grantor hereby grants to the Collateral Agent,
for itself and for the ratable benefit of the other Senior Secured Parties, a
continuing security interest of first priority (the "SECURITY INTEREST") in the
Grantor's right, title and interest in, to and under the following, in each
case, whether now owned or existing or hereafter acquired, arising or created,
and wherever located: (i) all Receivables; (ii) all Documents; (iii) all
Equipment; (iv) all General Intangibles; (v) all Inventory; (vi) all cash
collateral accounts established with respect to the Grantor, and all checking,
savings, deposit or other accounts of the Grantor, including, without
limitation, the Accounts (other than the Aquila PPA Reserve Account, the Panola
County Account and the Distribution Account) and any successor accounts thereto,
and all property on deposit therein or credited thereto, including, without
limitation, all Investment Property, Security Entitlements, Financial Assets,
securi ties, instruments or cash on deposit therein or credited thereto and all
Security Entitlements with respect thereto; (vii) all Contracts and Contract
Rights, including, without limitation, all Contract Rights under the Project
Documents; (viii) all cash, accounts, deposits, securities and insurance
policies now or at any time hereafter in the possession or under control of the
Grantor or its bailees and any interest therein; (ix) all Insurance Policies and
all Insurance Proceeds and Loss Proceeds; (x) all Governmental Approvals,
PROVIDED that any Governmental Approval which by its
terms or by operation of law would become void, voidable, terminable or
revocable (or would constitute a breach or default thereunder or under
applicable law) if mortgaged, pledged or assigned hereunder or if a security
interest therein were granted hereunder are expressly excepted and excluded from
the Lien and the terms of this Agreement to the extent, and only to the extent,
necessary so as to avoid such
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voidness, voidability, terminability or revocability or breach or default; (xi)
all Fixtures, including, without limitation, those now or hereafter attached to,
placed on or incorporated in the Site; (xii) all natural gas, fuel oil,
electricity and related products; (xiii) without limiting the generality of the
foregoing, all other personal property, Goods, Instruments, Chattel Paper,
credits, claims, demands, assets, books and records, customer lists, ledger
cards, credit files, print-outs and other materials and records pertaining to
any of the foregoing, of the Grantor, whether now existing or hereafter acquired
from time to time and whether or not of a type which may be subject to a
security interest under the UCC as in effect in the State of New York; and (xiv)
any and all additions and accessions to any of the foregoing, all improve ments
thereto, all substitutions and replacements therefor and all products and
Proceeds thereof (all of the above collectively, the "COLLATERAL").
(b) The security interest granted to the Collateral Agent
pursuant to this Agreement extends to all Collateral of the kind which is the
subject of this Agreement which the Grantor may acquire at any time during the
continuation of this Agreement, whether such Collateral is in transit or in the
Grantor's, the Collateral Agent's, any other Senior Secured Party's or any other
Person's constructive, actual or exclusive occupancy or possession until the
release thereof pursuant to SECTION 9.8.
(c) The assignments and security interests under this
Agreement granted to the Collateral Agent shall not relieve the Grantor from the
performance of any term, covenant, condition or agreement on the Grantor's part
to be performed or observed under or in respect of any of the Collateral pledged
by it hereunder or from any liability to any Person under or in respect of any
of such Collateral or impose any obligation on the Collateral Agent to perform
or observe any such term, covenant, condition or agreement on the Grantor's part
to be so performed or observed or impose any liability on the Collateral Agent
for any act or omission on the part of the Grantor or for any breach of any
representation or warranty on the part of the Grantor contained in this
Agreement or any other Transaction Document, or in respect of the Collateral
pledged by it hereunder or made in connection herewith or therewith. The
obligations of the Grantor contained in this paragraph shall survive the
termination of this Agreement and the discharge of the Grantor's other
obligations hereunder.
(d) This Agreement shall create a continuing security interest
in the Collateral until the release thereof pursuant to SECTION 9.8.
SECTION 2.2. SECURITY INTEREST ABSOLUTE. The parties hereto
shall not challenge or question in any proceeding the validity or enforceability
of this Agreement as a whole or any term or provision contained herein or the
validity of any Lien or Financing Statement in favor of the Collateral Agent.
All rights of the Collateral Agent and the other Senior Secured Parties and all
security interests hereunder shall, to the fullest extent permitted by law, be
absolute and unconditional
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irrespective of:
(a) any invalidity, irregularity or unenforceability of any
Financ ing Document or any other agreement or instrument relating thereto, or
any amend ment, change or modification of any of the Financing Documents;
(b) any impairment, modification, change, exchange, release or
subordination of or limitation on, any liability to, or stay of actions or lien
enforce ment proceedings against, the Grantor, its property or its estate in
bankruptcy resulting from any bankruptcy, arrangement, readjustment,
composition, liquidation, rehabilitation or similar proceeding against or
otherwise involving or affecting the Grantor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Secured Obligations, or any other
amend ment or waiver of or any consent to any departure from, any Financing
Document;
(d) any change in the time, order or method of attachment or
perfection of Liens or the filing or recording of Financing Statements or other
security documents and irrespective of anything contained in any filing or
agreement to which the Collateral Agent or any other Senior Secured Party may
now or hereaf ter be a party;
(e) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of, or consent to departure
from, any guaranty for all or any of the Senior Secured Obligations; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor or a third party pledgor,
except as otherwise provided herein.
SECTION 2.3. POWER OF ATTORNEY. (a) The Grantor hereby
irrevocably constitutes and appoints the Collateral Agent, on behalf of itself
and the other Senior Secured Parties, or any Person, officer or agent thereof
whom the Collateral Agent may designate, as the Grantor's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Grantor and in the name of the Grantor or in its own name, at the
Grantor's cost and expense, to exercise all or any of the following powers,
which, being coupled with an interest, shall be irrevocable until the Senior
Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under
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the Financing Documents have been terminated:
(i) to receive, take, endorse, sign, assign and
deliver, all in the Collateral Agent's name or the Grantor's name, any
and all checks, notes, drafts and other documents or instruments
relating to the Collateral;
(ii) to receive, open and dispose of all mail
addressed to the Grantor and to notify postal authorities to change the
address for delivery thereof to such address as the Collateral Agent
designates;
(iii) to request from account debtors of the Grantor,
in the Grantor's name or in the name of the Collateral Agent or the
Collateral Agent's designee, information concerning the Receivables and
the amounts owing thereon;
(iv) to transmit to account debtors indebted on
Receivables notice of the Collateral Agent's interest therein;
(v) to notify account debtors indebted on Receivables
to make payment directly to the Collateral Agent;
(vi) to take or bring, in the Grantor's name or in
the Collateral Agent's name on behalf of the Senior Secured Parties,
all steps, actions, suits or proceedings deemed by the Collateral Agent
to be necessary or desirable to enforce or effect collection of the
Receivables;
(vii) to the fullest extent permitted by law, to
prepare, sign and file any Financing Statements or file this Agreement
in the name of the Grantor as debtor;
(viii) if the Grantor shall have failed to do so in a
timely manner, to take or cause to be taken all actions necessary to
perform or comply, or cause performance or compliance with, the
covenants of the Grantor contained in any Financing Document;
(ix) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assign ments, verifications, notices and other
documents in connection with any of the Collateral;
(x) to defend any suit, action or proceeding brought
against the Grantor with respect to any Collateral;
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(xi) to settle, compromise or adjust any suit, action
or pro ceeding described in the preceding clause (x) and, in connection
therewith, to give such discharges or releases as the Collateral Agent,
acting upon direc tions from (x) the Intercreditor Agent acting
pursuant to the Intercreditor Agreement or (y) the Senior Secured
Parties acting pursuant to SECTION 7.15 of the Intercreditor Agreement,
or as otherwise expressly provided herein, may deem appropriate;
(xii) generally, to sell or transfer and make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent was the absolute
owner thereof for all purposes, and to do, at the Collateral Agent's
option and the Grantor's expense, at any time, or from time to time,
all reasonable acts and things which the Collateral Agent, acting upon
directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to SECTION 7.15 of the Intercreditor Agree ment, or as
otherwise expressly provided herein, deems necessary to protect,
preserve or realize upon the Collateral and the Liens of the Collateral
Agent thereon;
(xiii) to execute, in connection with any
foreclosure, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(xiv) to exercise the Grantor's rights under any
Contract in accordance with SECTION 6.1; and
(xv) to exercise any and all other rights, remedies,
powers and privileges of the Grantor with respect to the Collateral;
PROVIDED, HOWEVER, that the Collateral Agent shall not exercise its powers under
clauses (i), (ii), (iii), (iv), (vi), (viii), (ix), (x), (xi), (xii), (xiii),
(xiv) or (xv) unless an Event of Default has occurred and is continuing.
(b) The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. The Grantor hereby
acknowledges and agrees that in acting pursuant to this power-of-attorney the
Collateral Agent shall be acting in its own interest and in the interest of the
other Senior Secured Parties and the Grantor acknowledges and agrees that the
Collateral Agent and the other Senior Secured Parties shall have no fiduciary
duties to the Grantor and the Grantor hereby waives any claims to the rights of
a beneficiary of a fiduciary relationship hereunder.
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SECTION 2.4. INSPECTION AND VERIFICATION. The Collateral Agent
and such Persons as the Collateral Agent may reasonably designate shall have the
right, no more often than once each year, unless an Event of Default has
occurred and is continuing, and, if an Event of Default has occurred and is
continuing, at any reasonable time or times, in each case upon ten (10) days'
notice and at the Grantor's own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantor's affairs with the appropriate officers of the Grantor and its
independent accountants and to verify under reasonable proce dures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of Receivables or Collateral
in the possession of any third party, by contacting account debtors or the third
party possessing such Collateral for the purpose of making such a verification.
The Collateral Agent shall have the absolute right to share any information it
gains from such inspection or verification with any other Senior Secured Party.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Grantor hereby represents, warrants and covenants to the
Collat eral Agent and the other Senior Secured Parties, which representations,
warranties and covenants shall survive execution and delivery of this Agreement
and the making and repayment of the Senior Secured Obligations, as follows:
SECTION 3.1. TITLE AND AUTHORITY. The Grantor has good and
valid rights in and title to the Collateral with respect to which it has
purported to grant a Security Interest hereunder and has full power and
authority to grant to the Collateral Agent the Security Interest in such
Collateral pursuant hereto and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any Person other than any consent or approval that has been obtained and is
in full force and effect.
SECTION 3.2. VALIDITY, PERFECTION AND PRIORITY OF LIEN.
(a) This Agreement creates in favor of the Collateral Agent,
for itself and for the ratable benefit of the other Senior Secured Parties, a
legal, valid and enforceable security interest in the Collateral and the
proceeds thereof owned by the Grantor, and when Financing Statements in
appropriate form are filed by the Grantor in the offices specified on SCHEDULE I
hereto, the Lien created under this Agreement will constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the Grantor
in such Collateral and the proceeds thereof, in each case prior
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and superior in right to any other Person.
(b) (i) Fully executed Financing Statements or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in SCHEDULE I, which are all
the filings, recordings and registra tions that are necessary to publish notice
of and protect the validity of and to estab lish a valid and perfected security
interest in favor of the Collateral Agent (for the benefit of itself and for the
ratable benefit of the Senior Secured Parties) in respect of all Collateral
(other than Fixtures appurtenant to the Site) in which the Security Interest may
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements and except
that recordation of the Security Interest in the United States Patent and
Trademark Office may be necessary with respect to Collateral consisting of
Patents and Trademarks and recordation of the Security Interest, in addition to
registration of any unregistered copyrights, in the United States Copyright
Office may be necessary with respect to Collateral consist ing of Copyrights.
The Grantor will pay any applicable filing fees and related expenses. The
Grantor hereby irrevocably authorizes the Collateral Agent to file any such
Financing Statements without its signature as the debtor.
(ii) The Instruments listed on SCHEDULE II hereto, which, as
of the date hereof, constitute all instruments of the Grantor, and all other
Chattel Paper have been stamped to indicate the Security Interest of the
Collateral Agent for itself and the ratable benefit of the Senior Secured
Parties hereunder.
SECTION 3.3. NO LIENS; OTHER FINANCING STATEMENTS. (a) Except
for the Lien granted to the Collateral Agent for itself and the ratable benefit
of the Senior Secured Parties hereunder and other Permitted Liens, and, further,
except for the interest in and control over the Accounts (other than the Aquila
PPA Reserve Account, the Panola County Account and the Distribution Account) of
and by the Collateral Agent and the Administrative Agent as provided in the
Common Agree ment and the Securities Account Control Agreement, and the interest
in and control over the Indenture Funds of and by the Trustee and the Securities
Intermediary as provided in the Indenture, the Grantor owns and will continue to
own valid and marketable title in and to each item of the Collateral (other than
Collateral that it is entitled to dispose of pursuant to SECTION 5.1(G) of the
Indenture) free and clear of any and all Liens and the Grantor shall defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Collateral Agent or any other
Senior Secured Party.
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(b) Other than Financing Statements filed in connection
herewith and Financing Statements filed in respect of the Supplemental
Partnership Security Agreement (releases of which have been delivered to the
Collateral Agent), there is no Financing Statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering or
purporting to cover any interest of any kind in the Collateral. The Grantor will
not execute or authorize any Financing Statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral to be filed in any public office, except Financing
Statements filed or to be filed in respect of and covering the security
interests granted hereby to the Collateral Agent by the Grantor.
SECTION 3.4. CHIEF EXECUTIVE OFFICE; NAME; RECORDS. (a) The
chief executive office and principal place of business of the Grantor is located
at the address set forth on SCHEDULE VI. The originals of all documents
evidencing all Contracts and Receivables of the Grantor, and the only original
books of account and records concerning the Collateral are, and will continue to
be, kept at, and controlled and directed (including, without limitation, for
general accounting purposes) from, the chief executive office of the Grantor as
set forth on SCHEDULE VI, or at such new location for such chief executive
office as the Grantor may establish in accordance with SECTION 3.4(B).
(b) The Grantor shall not establish a new location for its
chief executive office or change its name or the name under which it presently
conducts its business unless (i) it has given to the Collateral Agent not less
than sixty (60) days' prior written notice of its intention so to do, clearly
describing such new location or specifying such new name, as the case may be,
and providing such other information in connection therewith as the Collateral
Agent may reasonably request, and (ii) with respect to such new location or such
new name, as the case may be, the Grantor shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
SECTION 3.5. ADDITIONAL STATEMENTS AND SCHEDULES. The Grantor
shall execute and deliver to the Collateral Agent, from time to time, for its
conve nience in maintaining a record of the Collateral, such written statements
and sched ules as is necessary or as the Collateral Agent may reasonably
require, designating, identifying or describing the Collateral.
SECTION 3.6. FURTHER ACTIONS. The Grantor will, at its own ex
pense, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such lists, descriptions and designations of
its Collateral,
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warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, convey ances, Financing Statements, transfer endorsements, powers
of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the Security Interest hereby granted by the Grantor, which is
necessary or as the Collateral Agent deems reasonably appropriate or advisable
to perfect, preserve or protect its security interest in the Collateral within
thirty (30) days after any request by the Collateral Agent or such earlier date
as may be required by applicable law or necessary to preserve or protect the
security interests in the Collateral granted by the Grantor pursuant to this
Agree ment, including the payment of any fees and taxes required in connection
with the execution and delivery of this Agreement, the granting of the Lien
created hereby and the filing of any Financing Statements or other documents in
connection herewith.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
SECTION 4.1. MAINTENANCE OF INSURANCE; PROTECTION OF SECURITY
INTEREST. The Grantor shall carry with respect to the Collateral and its use
such insurance as shall be required under the Transaction Documents.
SECTION 4.2. LOCATION OF INVENTORY AND EQUIPMENT. All
Inventory and Equipment owned on the date hereof by the Grantor is located at
one of the locations shown on SCHEDULE 4.2 (other than Equipment undergoing
repairs). The Grantor agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in transport to) one
of the locations on SCHEDULE 4.2.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
RECEIVABLES, CONTRACTS AND INSTRUMENTS
SECTION 5.1. DIRECTION TO ACCOUNT DEBTORS; GRANTOR BOUND. (a)
The Grantor agrees that the Collateral Agent may (i) directly notify the account
debtors or obligors with respect to any Receivables and/or under any Project
Docu ments to make payments with respect thereto directly to the Revenue
Account, and (ii) from and after the occurrence of an Event of Default, directly
notify the account debtors or obligors with respect to any Receivables and/or
under any Project Docu ments to make payments with respect thereto directly to
the Collateral Agent.
(b) Upon the occurrence and during the continuance of an Event
of Default, the Grantor agrees to be bound by any collection, compromise,
forgiveness, extension or other action taken by the Collateral Agent with
respect to the
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Receivables and/or the Project Documents. The reasonable costs and expenses
(including reasonable attorneys' fees) of collection, whether incurred by the
Grantor, the Collateral Agent or any other Senior Secured Party, shall be borne
by the Grantor.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
SECTION 6.1. SECURITY INTEREST IN CONTRACT RIGHTS. The
Grantor's grant, pursuant to SECTION 2.1, to the Collateral Agent of a security
interest in all of its right, title and interest in and to each and all of the
Contracts and the contract rights thereunder, includes, but is not limited to:
(i) all (A) rights to payment under any Contract and (B)
payments due and to become due under any Contract, in each case whether
as contractual obligations, damages or otherwise;
(ii) all of its claims, rights, powers, privileges and
remedies under any Contract; and
(iii) all of its rights under any Contract to make determina
tions, to exercise any election (including, without limitation,
election of remedies) or option or to give or receive any notice,
consent, waiver or approval together with full power and authority with
respect to any Contract to demand, receive, enforce or collect any of
the foregoing rights or any property the subject of any of the
Contracts, to enforce or execute any checks or other instruments or
orders, to file any claims and to take any action in connection with
any of the foregoing (the Contracts, together with all of the foregoing
in this SECTION 6.1, the "CONTRACT RIGHTS");
PROVIDED, HOWEVER, that, unless an Event of Default shall have occurred and be
continuing, notwithstanding anything else herein to the contrary, the Grantor
may, subject to the terms and provisions of the Financing Documents, exclusively
exercise all of its rights, powers, privileges and remedies under the Contracts.
SECTION 6.2. FURTHER PROTECTION. The Grantor shall defend the
title to the Contract Rights against the claims and demands of any Person other
than the Collateral Agent and the Senior Secured Parties, and hereby grants the
Collateral Agent full power and authority, upon the occurrence and during the
continuance of an Event of Default, to take all actions as the Collateral Agent,
acting upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y)
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the Senior Secured Parties acting pursuant to SECTION 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, reasonably deems necessary
or advisable to effectuate the provisions set forth in this sentence.
SECTION 6.3. LIABILITIES UNDER RECEIVABLES AND CONTRACTS. Any
thing herein to the contrary notwithstanding (including, without limitation, the
grant of any rights to the Collateral Agent), the Grantor shall remain liable
under each of the Receivables and Contracts to observe and perform all the
conditions and obliga tions to be observed and performed by it thereunder and
under or with respect to the Collateral, all in accordance with the terms of any
agreement giving rise to each such Receivable, Contract or procurement of
Collateral. Neither the Collateral Agent nor any other Senior Secured Party
shall have any obligation or liability under any Receivable (or any agreement
giving rise thereto) or Contract or with respect to the Collateral by reason of
or arising out of this Agreement or the receipt by the Collat eral Agent of any
payment relating to such Receivable, Contract or Collateral pursuant hereto, nor
shall the Collateral Agent or any other Senior Secured Party be obligated in any
manner to perform any of the obligations of the Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or under or pursuant to any
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Receivable (or any agreement giving rise
thereto) or under any Contract, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
SECTION 6.4. REMEDIES. Upon the occurrence of any Event of
Default, the Collateral Agent shall have the rights set forth in ARTICLE IX,
and, acting upon directions from (x) the Intercreditor Agent acting pursuant to
the Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
SECTION 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, may (i) enforce all remedies, rights, powers and privileges of the
Grantor under any or all of the Contracts, (ii) sell any or all of the Contract
Rights at public or private sale upon at least ten (10) days' prior written
notice and/or (iii) substitute itself or any nominee or trustee in lieu of the
Grantor as party to any of the Contracts and to notify the obligor of any
Contract Right (the Grantor hereby agreeing to deliver any such notice at the
request of the Collateral Agent) that all payments and performance under the
relevant Contract shall be made or rendered to the Collateral Agent or such
other Person as the Collateral Agent may designate.
ARTICLE VII
DUTY OF CARE OF COLLATERAL AGENT
SECTION 7.1. COLLATERAL AGENT'S DUTIES; REASONABLE CARE. (a)
The
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Collateral Agent shall have the duty to exercise reasonable care in the custody
and preservation of any Collateral in its possession, which duty shall be fully
satisfied if the Collateral Agent maintains safe custody of such Collateral in
accordance with customary banking standards.
(b) Except as hereinabove specifically set forth, the
Collateral Agent shall have no further obligation to ascertain the occurrence
of, or to notify the Grantor with respect to, any matters relating to any
Collateral and shall not be deemed to assume any such further obligation as a
result of the establishment by the Collateral Agent of any internal procedures
with respect to any Collateral in its possession, nor shall the Collateral Agent
be deemed to assume any other responsi bility for, or obligations or duty with
respect to, any Collateral, or its use, including, without limitation, any
obligation or duty to take any action to collect, preserve or protect its or the
Grantor's rights in the Collateral, but the same shall be at the sole risk and
responsibility of the Grantor at all times.
(c) The Grantor hereby releases the Collateral Agent and each
other Senior Secured Party from any claims, causes of action and demands at any
time arising out of or with respect to this Agreement, the Senior Secured
Obligations, the Collateral and its use and/or any actions taken or omitted to
be taken by the Collat eral Agent with respect thereto (except such claims,
causes of action and demands arising from the gross negligence or wilful
misconduct of the Collateral Agent).
ARTICLE VIII
REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT
For the avoidance of doubt, the provisions of SECTION 8.1,
SECTION 8.2 and SECTION 8.4 shall apply only upon the occurrence and during the
continuance of an Event of Default.
SECTION 8.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT.
(a) Upon the occurrence and during the continuance of an Event of Default, the
Collat eral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to SECTION 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, shall be entitled to exercise on behalf of itself and
the other Senior Secured Parties, all the rights and remedies of a secured party
under the UCC as in effect in any relevant jurisdiction and all rights now or
hereafter existing under all other applicable law to enforce this Agreement and
the security interests contained herein, and, in addition, subject to any
Applicable Laws then in effect, the Collateral
18
<PAGE>
Agent, acting upon directions from (x) the Intercreditor Agent acting pursuant
to the Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant
to SECTION 7.15 of the Intercreditor Agreement, or as otherwise expressly
provided herein, may, in addition to its other rights and remedies hereunder,
including without limitation under SECTION 8.2 and SECTION 8.6, and also the
rights of the Collateral Agent and the other Senior Secured Parties under any of
the Transaction Documents, do any of the following to the fullest extent
permitted by applicable law:
(i) personally, or by agents, trustees or attorneys,
immediately take possession of the Collateral or any part thereof, from the
Grantor or any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon the
Grantor's premises or such other Person's premises where any of the Collateral
is located and remove the same and use in connection with such removal any and
all services, supplies, aids and other facilities of the Grantor;
(ii) instruct the obligor or obligors of any agreement,
instrument or other obligation (including, without limitation, the Receivables
and the Contracts) constituting the Collateral to make any payment required by
the terms of such instrument or agreement directly to the Collateral Agent; and
(iii) take possession of the Collateral or any part thereof,
by directing the Grantor in writing to turn over the same to the Collateral
Agent at the Site or, to the extent such Collateral may be moved, to deliver the
same to the Collateral Agent at any other place or places designated by the
Collateral Agent, in which event the Grantor shall, at its own expense, (A)
forthwith turn over the same to the Collateral Agent at one of the locations on
SCHEDULE 4.2 or cause the same to be moved to the place or places so designated
by the Collateral Agent and there delivered to the Collateral Agent, as the case
may be, (B) store and keep any Collateral so turned over or delivered to the
Collateral Agent at one of the locations shown on SCHEDULE 4.2 or at such place
or places pending further action by the Collateral Agent as provided in SECTION
8.2, and (C) while the Collateral shall be so stored and kept, provide such
guards and maintenance services as shall be necessary to protect the same and to
preserve and maintain the Collateral in good condition.
(b) The Grantor's obligation to turn over or deliver the
Collateral as set forth above is of the essence of this Agreement and,
accordingly, upon application to a court of equity having jurisdiction, the
Collateral Agent shall be entitled to obtain a decree requiring specific
performance by the Grantor of said obligation.
19
<PAGE>
(c) When Collateral is in the Collateral Agent's possession,
(i) the Grantor shall pay (or reimburse the Collateral Agent on demand for) all
reasonable expenses (including the cost of any insurance and payment of taxes or
other charges) incurred in the custody, preservation, use or operation of the
Collateral, and the obligation to reimburse all such expenses shall be secured
hereby, and (ii) the risk of accidental loss or damage shall be on the Grantor
to the extent of any deficiency in any effective insurance coverage.
SECTION 8.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any
Collateral repossessed by the Collateral Agent under or pursuant to SECTION 8.1
and any other Collateral, whether or not so repossessed by the Collateral Agent,
may, to the extent permitted by any contract terms governing such Collateral and
to the fullest extent permitted by applicable law, be sold, leased or otherwise
disposed of under one or more contracts or as an entirety, whether by public or
private sale and without the necessity of gathering at the place of sale the
property to be sold, may be sold in such manner, at such time or times, at such
place or places and on such terms (whether cash or credit, and in the case of
credit, without assumption of future credit risk), in compliance with Applicable
Laws, as are commercially reasonable. If any Collateral is sold by the
Collateral Agent upon credit or for future delivery the Collateral Agent shall
not be liable for the failure of the purchaser to pay for the same and in such
event the Collateral Agent may resell the Collateral. In no event shall the
Grantor be credited with any part of the proceeds of sale of any Collateral
until payment thereof in cash or cash equivalents has actually been received by
the Collateral Agent. Any of the Collateral may be sold, leased or otherwise
disposed of, or options or contracts may be entered to do so, in the condition
in which the same existed when taken by the Collateral Agent or after any
overhaul or repair in a commercially reasonable manner. Any such disposition
shall be made upon not less than ten (10) days' written notice to the Grantor
specifying the time such disposition is to be made and, if such disposition
shall be a public sale, specifying the place of such sale. Any such sale may be
adjourned by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by applicable law, the Collateral Agent or
any other Senior Secured Party may itself bid for and become the buyer of the
Collateral or any item thereof offered for sale at a public auction without
accountability to the Grantor.
SECTION 8.3. WAIVER. (a) EXCEPT AS OTHERWISE PRO VIDED IN THIS
AGREEMENT, THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE OR JUDICIAL HEAR ING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING
POSSES SION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL IN
ACCORDANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR
NOTICE AND
20
<PAGE>
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE
GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTI TUTION OR ANY STATUTE OF THE
UNITED STATES OR OF ANY STATE, AND THE GRANTOR HEREBY FURTHER WAIVES:
(i) all damages occasioned by such taking of
possession except any damages which are finally judicially determined
to have been the direct result of the Collateral Agent's gross
negligence or wilful misconduct;
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of
the Collateral Agent's and the other Senior Secured Parties' rights
hereunder;
(iii) demand of performance or other demand, notice
of intent to demand or accelerate, notice of acceleration, presentment,
protest, adver tisement or notice of any kind to or upon the Grantor or
any other Person; and
(iv) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in force
under any applicable law in order to prevent or delay the enforcement
of this Agreement or the absolute sale of the Collateral or any portion
thereof, and the Grantor, for itself and all who may claim under it,
insofar as it may now or hereafter lawfully do so, hereby waives the
benefit of such laws.
(b) Without limiting the generality of the foregoing, the
Grantor hereby: (i) authorizes the Collateral Agent, without notice to or demand
upon the Grantor and without otherwise affecting the obligations of the Grantor
hereunder from time to time, to take and hold other collateral granted to it by
any other Person (in addition to the Collateral) for payment of any Senior
Secured Obligations, or any part thereof, and to exchange, enforce or release
such other collateral or any part thereof, and to accept and hold any
endorsement or guarantee of payment of the Senior Secured Obligations or any
part thereof, and to release or substitute any endorser or guarantor or any
other Person granting security for or in any way obli gated upon any Senior
Secured Obligations, or any part thereof; and (ii) waives and releases any and
all right to require the Collateral Agent or the other Senior Secured Parties to
collect any of the Senior Secured Obligations from any specific item or items of
Collateral or from any other party liable as guarantor or in any other manner in
respect of any of the Senior Secured Obligations or from any collateral (other
than the Collateral) for any of the Senior Secured Obligations.
(c) Any sale of, or the grant of options to purchase, or any
other
21
<PAGE>
realization upon, any Collateral shall, provided that it is done in accordance
with applicable law and this Agreement, operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Grantor therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Grantor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Grantor.
SECTION 8.4. APPLICATION OF PROCEEDS; GRANTOR LIABLE FOR DEFI
CIENCY. Except as otherwise expressly provided herein or in the other Financing
Documents, following the occurrence of an Event of Default and the acceleration
of the maturity of the Senior Secured Obligations (whether automatically, by
declara tion or otherwise), the proceeds of any collection, sale or other
realization of all or any part of the Collateral pursuant to this Agreement, and
any other cash at the time of such collection, sale or other realization held by
the Collateral Agent under this Agreement, shall be applied by the Collateral
Agent in accordance with ARTICLE IV of the Collateral Agency Agreement. For
avoidance of doubt, it is understood that the Grantor shall remain liable to the
extent of any deficiency between the amount of proceeds of the Collateral and
the aggregated amount of the Senior Secured Obliga tions in accordance with the
Financing Documents.
SECTION 8.5. NO WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of the Collateral Agent or any other Senior Secured Party in
exercising any right, remedy, power or privilege hereunder and no course of
dealing between the Grantor and any other Senior Secured Party shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. A waiver by the
Collateral Agent or any other Senior Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Collateral Agent or any other Senior Secured Party would
otherwise have on any future occasion. The rights and remedies herein expressly
provided are cumulative and may be exercised singly or concurrently and as often
and in such order as the Collateral Agent or any other Senior Secured Party
deems expedient and are not exclusive of any rights or reme dies which the
Collateral Agent or the other Senior Secured Parties would otherwise have
whether by agreement or now or hereafter existing under applicable law. No
notice to or demand on the Grantor in any case shall entitle the Grantor to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Collateral Agent or the other Senior
Secured Parties to any other or future action in any circumstances without
notice or demand.
SECTION 8.6. DISCONTINUANCE OF PROCEEDINGS. In case the
Collateral
22
<PAGE>
Agent or any other Senior Secured Party shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Collateral Agent or such other Senior Secured Party, then, in every such case,
subject to the terms of any final non-appealable judgment rendered in any such
proceeding, the Grantor, the Collateral Agent, the other Senior Secured Parties
and each holder of any of the Senior Secured Obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral,
subject to the Security Interest created under this Agree ment, and all rights,
remedies and powers of the Collateral Agent and the other Senior Secured Parties
shall continue as if no such proceeding had been instituted.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. Unless otherwise specifically herein
provided, all notices required or permitted under the terms and provisions
hereof shall be in writing and any such notice shall become effective if given
in accordance with the provisions of SECTION 1.4 of the Indenture.
SECTION 9.2. AMENDMENT. No waiver, amendment, modification or
termination of any provision of this Agreement, or consent to any departure by
the Grantor therefrom, shall in any event be effective without the prior written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to SECTION 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, and none of the Collateral
shall be released without the written consent of the Collateral Agent, acting
upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
SECTION 7.15 of the Intercreditor Agreement, or as other wise expressly provided
herein. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 9.3. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the Grantor, the Collateral Agent and
the other Senior Secured Parties, all future holders of the Senior Secured
Obligations and their respective successors, transferees and assigns (to the
extent such successors, transferees and assigns are permitted under the
Financing Documents).
SECTION 9.4. SURVIVAL. All agreements, statements,
representations and warranties made by the Grantor herein or in any certificate
or other instrument delivered by the Grantor or on its behalf under this
Agreement shall be considered to
23
<PAGE>
have been relied upon by the Collateral Agent and the other Senior Secured
Parties and shall survive the execution and delivery of this Agreement and the
other Financ ing Documents regardless of any investigation made by the
Collateral Agent or any other Senior Secured Party or made on their behalf.
SECTION 9.5. HEADINGS DESCRIPTIVE. The headings of the
several sections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
SECTION 9.6. SEVERABILITY. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.7. GRANTOR'S DUTIES. Anything herein contained to
the contrary notwithstanding, the Grantor shall remain liable to perform all of
its obligations under or with respect to the Collateral, and neither the
Collateral Agent nor any other Senior Secured Party shall have any obligations
or liabilities under or with respect to any Collateral by reason of or arising
out of this Agreement, nor shall the Collateral Agent or the other Senior
Secured Parties be required or obligated in any manner to perform or fulfill any
of the obligations of the Grantor under or with respect to any Collateral.
SECTION 9.8. TERMINATION; RELEASE. Upon the date at which all
of the Senior Secured Obligations have been indefeasibly paid in full in cash or
cash equivalents and all commitments of the Senior Secured Parties under the
Financing Documents have terminated, this Agreement shall terminate, and the
Collateral Agent, at the request, pursuant to instructions from, and at expense
of, the Grantor, will promptly execute and deliver to the Grantor the proper
instruments (including UCC termination statements on form UCC-3) acknowledging
the termination of this Agreement, and will duly assign, transfer and deliver to
the Grantor (without recourse and without any representation or warranty of any
kind) such of the Collat eral as may be in the possession of the Collateral
Agent and has not theretofore been disposed of or otherwise applied or released.
SECTION 9.9. REINSTATEMENT. This Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or any other Senior Secured Party in respect of
the Senior Secured Obligations is rescinded or must otherwise be restored or
returned by the Collateral Agent or such other Senior Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Grantor or upon the
24
<PAGE>
appointment of any intervenor or conservator of, or trustee or similar official
for, the Grantor or any substantial part of its assets, or upon the entry of an
order by a bankruptcy court avoiding payment of such amount, or otherwise, all
as though such payments had not been made.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which, taken together, shall constitute one
and the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
SECTION 9.11 GOVERNING LAW. This Agreement shall be governed
by the laws of the State of New York of the United States of America and shall
for all purposes be governed by and construed in accordance with the laws of
such state without regard to the conflict of law rules thereof other than
Section 5-1401 of the New York General Obligations Law.
SECTION 9.12 CONSENT TO JURISDICTION. Any legal action or
proceed ing by or against the Grantor with respect to or arising out of this
Agreement may be brought in or removed to the courts of the State of New York,
in and for the County of New York, or of the United States of America for the
Southern District of New York. By execution and delivery of this Agreement, the
Grantor accepts, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts for legal proceedings
arising out of or in connection with this Agreement and irrevocably consents to
the appointment of CT Corporation System, with offices on the date hereof at
1633 Broadway, New York, New York 10019, as its agent to receive service of
process in New York, New York. If for any reason such agent shall cease to be
available to act as such, the Grantor agrees to appoint a new agent on the terms
and for the purposes of this provision. Nothing herein shall affect the right to
serve process in any other manner permitted by law or any right to bring legal
action or proceedings in any other competent jurisdiction, including judicial or
non-judicial foreclosure of real property interests which are part of the
Collateral. The Grantor further agrees that the aforesaid courts of the State of
New York and of the United States of America for the Southern District of New
York shall have exclusive jurisdiction with respect to any claim or counterclaim
of the Grantor based upon the assertion that the rate of interest charged by or
under this Agreement or under the other Financing Documents is usurious. The
Grantor hereby waives any right to stay or dismiss any action or proceeding
under or in connection with the Project, this Agreement or any other Transaction
Document brought before the foregoing courts on the basis of FORUM
NON-CONVENIENS or improper venue.
SECTION 9.13 WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE
COLLATERAL AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL
25
<PAGE>
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE OTHER PARTIES HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT TO ENTER INTO
THIS AGREEMENT.
SECTION 9.14. AUTHORITY OF COLLATERAL AGENT. The Grantor ac
knowledges that the rights and responsibilities of the Collateral Agent under
this Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the Senior
Secured Parties, be governed by this Agreement and the other Financing Documents
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Collateral Agent and the Grantor, the Collateral
Agent shall be conclusively pre sumed to be acting as agent for the Senior
Secured Parties with full and valid authority so to act or refrain from acting,
and the Grantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
SECTION 9.15. INDEMNITIES AND EXPENSES. The obligation of the
Grantor to pay the costs and expenses of, and to indemnify, defend and hold harm
less, the Collateral Agent and the other Senior Secured Parties under and in
connec tion with this Agreement shall be as provided in SECTION 7.15 of the
Intercreditor Agreement as in effect as of the date hereof. No amendment to such
SECTION 7.15 or termination of the Intercreditor Agreement shall affect the
provisions of this SECTION 9.15 unless such amendment or termination shall have
been consented to by the parties to this Agreement in accordance with the
provisions hereof and of the other Financing Documents.
SECTION 9.16. ENTIRE AGREEMENT. This Agreement, together with
any other agreement executed in connection herewith, is intended by the parties
as a final expression of their agreement as to the matters covered hereby and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
SECTION 9.17. INDEPENDENT SECURITY. The security provided for
in this Agreement shall be in addition to and shall be independent of every
other security which the Collateral Agent or the other Senior Secured Parties
may at any time hold for any of the Senior Secured Obligations hereby secured,
whether or not under the Senior Security Documents. The execution of any other
Senior Security Document shall not modify or supersede the security interest or
any rights or
26
<PAGE>
obligations contained in this Agreement and shall not in any way affect, impair
or invalidate the effectiveness and validity of this Agreement or any term or
condition hereof. The Grantor hereby waives its right to plead or claim in any
court that the execution of any other Senior Security Document is a cause for
extinguishing, invalidating, impairing or modifying the effectiveness and
validity of this Agreement or any term or condition contained herein. The
Collateral Agent shall be at liberty to accept further security from the Grantor
or from any third party and/or release such security without notifying the
Grantor and without affecting in any way the obligations of the Grantor under
the Senior Security Documents or the other Financing Documents. The Collateral
Agent, upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
SECTION 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, shall determine if any security conferred upon the Collateral Agent and
the other Senior Secured Parties under the Senior Security Documents shall be
enforced by the Collateral Agent, as well as the sequence of securities to be so
enforced.
SECTION 9.18. THIRD PARTY BENEFICIARIES. The agreements of the parties
hereto are intended to benefit the Senior Secured Parties and their respective
successors and assigns.
SECTION 9.19 LIMITATION OF LIABILITY. The provisions of SECTION 14.1 of
the Indenture shall apply to this Agreement.
SECTION 9.20 COLLATERAL AGENCY AGREEMENT. The rights, benefits,
privileges and immunities given to the Collateral Agent and set forth in the
Collateral Agency Agreement are expressly incorporated herein by reference
thereto.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Partnership Security Agreement to be duly executed and
delivered by their duly authorized officers as of the date first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LPS Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
----------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
as Collateral Agent
By: /s/ Mary Beth Lewicki
----------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Second Amended and Restated Partnership Security Agreement
<PAGE>
Schedule I to
Second Amended and Restated Security Agreement
----------------------------------------------
Grantor's Filing Offices
------------------------
New Jersey Secretary of State
Mississippi Secretary of State
Panola County Local Filing Office
<PAGE>
Schedule II to
Second Amended and Restated Security Agreement
----------------------------------------------
Instruments
-----------
None.
<PAGE>
Schedule III to
Second Amended and Restated Security Agreement
----------------------------------------------
Copyrights
----------
None.
<PAGE>
Schedule IV to
Second Amended and Restated Security Agreement
----------------------------------------------
Patents
-------
None.
<PAGE>
Schedule V to
Second Amended and Restated Security Agreement
----------------------------------------------
Trademarks
----------
None.
<PAGE>
Schedule VI to
Second Amended and Restated Security Agreement
----------------------------------------------
Grantor's Chief Executive Office and
Principal Place of Business
------------------------------------
Chief Executive Office:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
Principal Place of Business:
570 Highway 6 East
P.O. Box 1166
Batesville, Mississippi 38606
<PAGE>
Schedule 4.2 to
Second Amended and Restated Security Agreement
----------------------------------------------
Locations of Inventory and Equipment
------------------------------------
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
570 Highway 6 East
P.O. Box 1166
Batesville, Mississippi 38606
<PAGE>
Exhibit 4.20
================================================================================
SECURITY AGREEMENT
dated as of May 21, 1999
between
LSP BATESVILLE FUNDING CORPORATION
and
THE BANK OF NEW YORK,
as Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS......................................................................1
AGREEMENT.....................................................................1
ARTICLE I: DEFINITIONS; PRINCIPLES OF CONSTRUCTION........................2
SECTION 1.1. Definitions.....................................2
ARTICLE II: ASSIGNMENT AND GRANT OF SECURITY
INTEREST.......................................................6
SECTION 2.1. Assignment and Grant of Security Interest.......6
SECTION 2.2. Security Interest Absolute......................7
SECTION 2.3. Power of Attorney...............................8
SECTION 2.4. Inspection and Verification....................11
ARTICLE III: GENERAL REPRESENTATIONS, WARRANTIES
AND COVENANTS.................................................11
SECTION 3.1. Title and Authority............................11
SECTION 3.2. Validity, Perfection and Priority of Lien......12
SECTION 3.3. No Liens; Other Financing Statements...........12
SECTION 3.4. Chief Executive Office; Name; Records..........13
SECTION 3.5. Additional Statements and Schedules............14
SECTION 3.6. Further Actions................................14
ARTICLE IV: SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT.........14
SECTION 4.1. Maintenance of Insurance; Protection of
Security Interest..............................14
SECTION 4.2. Location of Inventory and Equipment............14
ARTICLE V: SPECIAL PROVISIONS CONCERNING
RECEIVABLES, CONTRACTS AND INSTRUMENTS .......................15
SECTION 5.1. Additional Representations and Warranties......15
SECTION 5.2. Maintenance of Records; Legending of Records...15
SECTION 5.3. Modification of Terms; No Payment to Grantor...15
SECTION 5.4. Collection.....................................16
SECTION 5.5. Direction to Account Debtors; Grantor Bound....16
SECTION 5.6. Instruments....................................16
ARTICLE VI: SPECIAL PROVISIONS CONCERNING CONTRACTS.......................17
i
<PAGE>
Page
----
SECTION 6.1. Security Interest in Contract Rights...........17
SECTION 6.2. Further Protection.............................17
SECTION 6.3. Liabilities Under Receivables and Contracts....18
SECTION 6.4. Remedies.......................................18
ARTICLE VII: DUTY OF CARE OF COLLATERAL AGENT..............................19
SECTION 7.1. Collateral Agent's Duties; Reasonable Care.....19
ARTICLE VIII: REMEDIES UPON OCCURRENCE OF AN
EVENT OF DEFAULT..............................................19
SECTION 8.1. Remedies; Obtaining the Collateral upon
Default........................................19
SECTION 8.2. Remedies; Disposition of the Collateral........21
SECTION 8.3. Waiver.........................................22
SECTION 8.4. Application of Proceeds; Grantor Liable for
Deficiency.....................................23
SECTION 8.5. No Waiver; Remedies Cumulative.................23
SECTION 8.6. Discontinuance of Proceedings..................24
ARTICLE IX: MISCELLANEOUS.................................................24
SECTION 9.1. Notices........................................24
SECTION 9.2. Amendment......................................24
SECTION 9.3. Successors and Assigns.........................25
SECTION 9.4. Survival.......................................25
SECTION 9.5. Headings Descriptive...........................25
SECTION 9.6. Severability...................................25
SECTION 9.7. Grantor's Duties...............................25
SECTION 9.8. Termination; Release...........................26
SECTION 9.9. Reinstatement..................................26
SECTION 9.10. Counterparts...................................26
SECTION 9.11 Governing Law..................................26
SECTION 9.12 Consent to Jurisdiction........................26
SECTION 9.13 Waiver of Jury Trial...........................27
SECTION 9.14. Authority of Collateral Agent..................27
SECTION 9.15. Indemnities and Expenses.......................28
SECTION 9.16. Entire Agreement...............................28
SECTION 9.17. Independent Security...........................28
SECTION 9.18. Third Party Beneficiaries......................29
SECTION 9.19 Limitation of Liability........................29
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Schedule I - Filing Offices
Schedule II - Instruments
Schedule III - Copyrights
Schedule IV - Patents
Schedule V - Trademarks
Schedule VI - Chief Executive Office and Principal Place of Business
Schedule 4.2 - Locations of Collateral
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 21, 1999 (this "Agreement"),
made by LSP BATESVILLE FUNDING CORPORATION, a Delaware corporation (the
"Grantor"), in favor of THE BANK OF NEW YORK, as collateral agent (together with
its successors in such capacity, the "Collateral Agent") for the benefit of the
Senior Secured Parties pursuant to the Second Amended and Restated Collateral
Agency Agreement, dated as of May 21, 1999 (the "Collateral Agency Agreement"),
among (as of the date hereof) the LSP Energy Limited Partnership (the
"Partnership"), the Grantor, the Trustee, the VEPCO L/C Agent, the Collateral
Agent, the Intercreditor Agent and the Administrative Agent.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, collectively with the Series
A Bonds, the "Bonds") pursuant to the Trust Indenture, dated as of the date
hereof (the "Indenture"), among the Partnership, the Funding Corporation and The
Bank of New York, as trustee (the "Trustee");
WHEREAS, the Partnership and the Funding Corporation will use the
proceeds of the Bonds to (i) repay in full the Indebtedness outstanding under
the Amended and Restated Bank Facility Credit Agreement, dated as of December
15, 1998, by and among the Partnership, the banks and other financial
institutions party thereto and Credit Suisse First Boston as agent, and (ii) pay
the remaining Project Costs;
WHEREAS, the execution by the Grantor of this Agreement is a
condition precedent to the issuance and sale of the Bonds and the execution by
the Senior Secured Parties of the related Financing Documents.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantor hereby agrees with the Collateral Agent as follows:
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1. Definitions.
(a) For all purposes of this Agreement, capitalized terms used but
not otherwise defined herein shall have the meanings set forth in the Indenture.
(b) The following terms shall have the following respective meanings
unless the context otherwise requires. Commercial terms used but not defined
herein or in the Indenture shall have the meanings specified for such terms in
the UCC as in effect in the State of New York.
"Chattel Paper" shall mean "chattel paper" as such term is defined
in the UCC as in effect in any relevant jurisdiction.
"Collateral" shall have the meaning specified in Section 2.1(a).
"Contract Rights" shall have the meaning specified in Section 6.1.
"Contracts" shall mean all contracts to which the Grantor now is, or
hereafter will be, bound, or a party, beneficiary or assignee, including,
without limitation, all of the Transaction Documents (to the extent the Grantor
is a party thereto), including all exhibits, schedules and appendices thereto,
and all other instruments, agreements and documents executed and delivered with
respect to such contracts, and all revenues, rentals, Proceeds and other sums of
money due and to become due from any of the foregoing, as the same may be
modified, supplemented or amended from time to time in accordance with their
respective terms.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by the Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States, whether as author, assignee, transferee or
otherwise; and (b) all registrations and applications for registration of any
such copyright rights in the United
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States, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including, without limitation, those listed on Schedule III.
"Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Documents" shall mean "documents" as such term is defined in the
UCC as in effect in any relevant jurisdiction.
"Equipment" shall mean all "equipment" (as such term is defined in
the UCC as in effect in any relevant jurisdiction) now or hereafter owned or
leased by the Grantor.
"Event of Default" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"Financing Statements" shall mean all financing statements,
recordings, filings or other instruments of registration necessary and
appropriate to perfect a security interest or Lien by filing in any appropriate
filing or recording office in accordance with the UCC as enacted in any and all
relevant jurisdictions or any other relevant applicable law.
"Financial Assets" shall mean "financial assets" as such term is
defined in the UCC as in effect in any relevant jurisdiction.
"Fixtures" shall mean "fixtures" as such term is defined in the UCC
as in effect in any relevant jurisdiction.
"General Intangibles" shall mean all "general intangibles" (as such
term is defined in the UCC as in effect in any relevant jurisdiction) now or
hereafter owned by the Grantor and shall include, but not be limited to, all
Trademarks, trademark applications, trademark registrations, tradenames,
fictitious business names, business names, company names, business identifiers,
prints, labels, trade styles and service marks (whether or not registered),
including logos and/or designs, Copyrights, Patents, patent applications,
goodwill of the Grantor's business symbolized by any of the foregoing, trade
secrets, license rights, license agreements, permits, franchises and any rights
to tax refunds to which the Grantor is now or hereafter may be entitled.
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"Instruments" shall mean "instruments" as such term is defined in
the UCC as in effect in any relevant jurisdiction.
"Insurance Policies" shall mean all insurance policies to which the
Grantor now is, or hereafter will be, a party, including, without limitation,
all insurance policies required pursuant to this Agreement and the other
Financing Documents.
"Insurance Proceeds" shall mean all amounts and proceeds of any kind
(including interest, if any, thereon) paid or payable pursuant to any Insurance
Policy.
"Intellectual Property" shall mean, collectively, Copyrights,
Patents and Trademarks.
"Inventory" shall mean all of the inventory of the Grantor of every
type or description, including all "inventory" as such term is defined in the
UCC as in effect in any relevant jurisdiction, now owned or hereafter acquired
and wherever located, whether raw, in process or finished, all materials usable
in processing the same and all documents of title covering any inventory,
including, without limitation, work in process, materials used or consumed in
the Grantor's businesses, now owned or hereafter acquired or manufactured by the
Grantor and held for sale in the ordinary course of its business, all present
and future substitutions therefor, parts and accessories thereof and all
additions thereto, and all proceeds thereof and products of such inventory in
any form whatsoever.
"Inventory Records" shall mean all books, records and other property
and General Intangibles at any time relating to the Inventory.
"Investment Property" shall mean "investment property" as such term
is defined in the UCC as in effect in any relevant jurisdiction.
"Patents" shall mean all of the following now owned or hereafter
acquired by the Grantor: (a) all letters patent of the United States, all
registrations and recordings thereof, and all applications for letters patent of
the United States, including registrations, recordings and pending applications
in the United States Patent and Trademark Office, including, without limitation,
those listed on Schedule IV; and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
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"Proceeds" shall mean "proceeds" as such term is defined in the UCC
as in effect in any relevant jurisdiction or under other relevant law and, in
any event, shall include, but shall not be limited to, (i) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to the Collateral
Agent or the Grantor from time to time, and claims for insurance, indemnity,
warranty or guaranty effected or held for the benefit of the Grantor with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to the Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of Governmental Authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in
the UCC as in effect in any relevant jurisdiction and in any event shall
include, but not be limited to, all of the Grantor's rights to payment for goods
(including, without limitation, electricity) sold or leased, or services
performed, by the Grantor, whether now in existence or arising from time to time
hereafter, including, without limitation, rights evidenced by an account, note,
contract, contract rights (including any and all rights to liquidated damage
payments), security agreement, chattel paper, or other evidence of indebtedness
or security, together with (i) all security pledged, assigned, hypothecated or
granted to or held by the Grantor to secure the foregoing, (ii) all guarantees,
warranties, endorsements, indemnifications or collateral on, or of, any of the
foregoing, (iii) all powers of attorney for the execution of any evidence of
indebtedness or security or other writing in connection therewith, (iv) all
books, correspondence, credit files, records, ledger cards, invoices and other
papers relating thereto, including, without limitation, all similar information
stored on a magnetic medium or other similar storage device and other papers and
documents in the possession or under the control of the Grantor or any computer
bureau from time to time acting for the Grantor, (v) all evidences of the filing
of Financing Statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (vi) all credit information, reports and memoranda relating thereto,
and (vii) all other writings related in any way to the foregoing.
"Security Entitlement" shall have the meaning assigned to that term
under the UCC as in effect in the State of New York.
"Security Interest" shall have the meaning specified in Section 2.1.
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<PAGE>
"Trademarks" shall mean all of the following now owned or hereafter
acquired by the Grantor: (i) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any political subdivision thereof, and all
extensions or renewals thereof, including, without limitation, those listed on
Schedule V; (ii) all goodwill associated therewith or symbolized thereby; and
(iii) all other assets, rights and interests that uniquely reflect or embody
such goodwill.
SECTION 1.2. Principles of Construction. Except as otherwise
expressly provided herein, the principles of construction set forth in the
Indenture shall apply to this Agreement.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTEREST
SECTION 2.1. Assignment and Grant of Security Interest. (a) As
security for the prompt and complete payment and performance when due of all of
the Senior Secured Obligations, the Grantor hereby grants to the Collateral
Agent, for itself and for the ratable benefit of the other Senior Secured
Parties, a continuing security interest of first priority (the "Security
Interest") in the Grantor's right, title and interest (if any) in, to and under
the following, in each case, whether now owned or existing or hereafter
acquired, arising or created, and wherever located: (i) all Receivables; (ii)
all Documents; (iii) all Equipment; (iv) all General Intangibles; (v) all
Inventory; (vi) all cash collateral accounts established with respect to the
Grantor, and all checking, savings, deposit or other accounts of the Grantor,
including, without limitation, the Accounts (other than the Aquila PPA Reserve
Account, the Panola County Account and the Distribution Account) and any
successor accounts thereto, and all property on deposit therein or credited
thereto, including, without limitation, all Investment Property, Security
Entitlements, Financial Assets, securities, instruments or cash on deposit
therein or credited thereto and all Security Entitlements with respect thereto;
(vii) all Contracts and Contract Rights; (viii) all cash, accounts, deposits,
securities and insurance policies now or at any time hereafter in the possession
or under control of the Grantor or its bailees and any interest therein; (ix)
all Insurance Policies and all Insurance Proceeds and Loss Proceeds; (x) all
Governmental Approvals, provided that any Governmental Approval which by its
terms or by operation of law would become void, voidable, terminable or
revocable (or would constitute a
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breach or default thereunder or under applicable law) if mortgaged, pledged or
assigned hereunder or if a security interest therein were granted hereunder are
expressly excepted and excluded from the Lien and the terms of this Agreement to
the extent, and only to the extent, necessary so as to avoid such voidness,
voidability, terminability or revocability or breach or default; (xi) all
Fixtures; (xiii) without limiting the generality of the foregoing, all other
personal property, Goods, Instruments, Chattel Paper, credits, claims, demands,
assets, books and records, customer lists, ledger cards, credit files,
print-outs and other materials and records pertaining to any of the foregoing,
of the Grantor, whether now existing or hereafter acquired from time to time and
whether or not of a type which may be subject to a security interest under the
UCC as in effect in the State of New York; and (xiv) any and all additions and
accessions to any of the foregoing, all improvements thereto, all substitutions
and replacements therefor and all products and Proceeds thereof (all of the
above collectively, the "Collateral").
(b) The security interest granted to the Collateral Agent pursuant
to this Agreement extends to all Collateral of the kind which is the subject of
this Agreement which the Grantor may acquire at any time during the continuation
of this Agreement, whether such Collateral is in transit or in the Grantor's,
the Collateral Agent's, any other Senior Secured Party's or any other Person's
constructive, actual or exclusive occupancy or possession until the release
thereof pursuant to Section 9.8.
(c) The assignments and security interests under this Agreement
granted to the Collateral Agent shall not relieve the Grantor from the
performance of any term, covenant, condition or agreement on the Grantor's part
to be performed or observed under or in respect of any of the Collateral pledged
by it hereunder or from any liability to any Person under or in respect of any
of such Collateral or impose any obligation on the Collateral Agent to perform
or observe any such term, covenant, condition or agreement on the Grantor's
part to be so performed or observed or impose any liability on the Collateral
Agent for any act or omission on the part of the Grantor or for any breach of
any representation or warranty on the part of the Grantor contained in this
Agreement or any other Transaction Document, or in respect of the Collateral
pledged by it hereunder or made in connection herewith or therewith. The
obligations of the Grantor contained in this paragraph shall survive the
termination of this Agreement and the discharge of the Grantor's other
obligations hereunder.
(d) This Agreement shall create a continuing security interest in
the Collateral until the release thereof pursuant to Section 9.8.
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SECTION 2.2. Security Interest Absolute. The parties hereto shall
not challenge or question in any proceeding the validity or enforceability of
this Agreement as a whole or any term or provision contained herein or the
validity of any Lien or Financing Statement in favor of the Collateral Agent.
All rights of the Collateral Agent and the other Senior Secured Parties and all
security interests hereunder shall, to the fullest extent permitted by law, be
absolute and unconditional irrespective of:
(a) any invalidity, irregularity or unenforceability of any
Financing Document or any other agreement or instrument relating thereto, or any
amendment, change or modification of any of the Financing Documents;
(b) any impairment, modification, change, exchange, release or
subordination of or limitation on, any liability to, or stay of actions or lien
enforcement proceedings against, the Grantor, its property or its estate in
bankruptcy resulting from any bankruptcy, arrangement, readjustment,
composition, liquidation, rehabilitation or similar proceeding against or
otherwise involving or affecting the Grantor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Secured Obligations, or any other
amendment or waiver of or any consent to any departure from, any Financing
Document;
(d) any change in the time, order or method of attachment or
perfection of Liens or the filing or recording of Financing Statements or other
security documents and irrespective of anything contained in any filing or
agreement to which any the Collateral Agent or any other Senior Secured Party
may now or hereafter be a party;
(e) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of, or consent to departure from, any
guaranty for all or any of the Senior Secured Obligations; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor or a third party pledgor,
except as otherwise provided herein.
SECTION 2.3. Power of Attorney. (a) The Grantor hereby irrevocably
constitutes and appoints the Collateral Agent, on behalf of itself and the other
Senior Secured Parties, or any Person, officer or agent thereof whom the
Collateral Agent may designate, as the Grantor's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Grantor and in the name of the Grantor or in its own
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name, at the Grantor's cost and expense, to exercise all or any of the following
powers, which, being coupled with an interest, shall be irrevocable until the
Senior Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under the
Financing Documents have been terminated:
(i) to receive, take, endorse, sign, assign and deliver, all
in the Collateral Agent's name or the Grantor's name, any and all checks,
notes, drafts, and other documents or instruments relating to the
Collateral;
(ii) to receive, open and dispose of all mail addressed to the
Grantor and to notify postal authorities to change the address for
delivery thereof to such address as the Collateral Agent designates;
(iii) to request from account debtors of the Grantor, in the
Grantor's name or in the name of the Collateral Agent or the Collateral
Agent's designee, information concerning the Receivables and the amounts
owing thereon;
(iv) to transmit to account debtors indebted on Receivables
notice of the Collateral Agent's interest therein;
(v) to notify account debtors indebted on Receivables to make
payment directly to the Collateral Agent;
(vi) to take or bring, in the Grantor's name or in the
Collateral Agent's name on behalf of the Senior Secured Parties, all
steps, actions, suits or proceedings deemed by the Collateral Agent to be
necessary or desirable to enforce or effect collection of the Receivables;
(vii) to the fullest extent permitted by law, to prepare, sign
and file any Financing Statements or file this Agreement in the name of
the Grantor as debtor;
(viii) if the Grantor shall have failed to do so in a timely
manner, to take or cause to be taken all actions necessary to perform or
comply, or cause performance or compliance with, the covenants of the
Grantor contained in any Financing Document;
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(ix) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in
connection with any of the Collateral;
(x) to defend any suit, action or proceeding brought against
the Grantor with respect to any Collateral;
(xi) to settle, compromise or adjust any suit, action or
proceeding described in the preceding clause (x) and, in connection
therewith, to give such discharges or releases as the Collateral Agent,
acting upon directions from (x) the Intercreditor Agent acting pursuant
to the Intercreditor Agreement or (y) the Senior Secured Parties acting
pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, may deem appropriate;
(xii) generally, to sell or transfer and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Collateral Agent was the absolute owner thereof
for all purposes, and to do, at the Collateral Agent's option and the
Grantor's expense, at any time, or from time to time, all reasonable acts
and things which the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y)
the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein, deems
necessary to protect, preserve or realize upon the Collateral and the
Liens of the Collateral Agent thereon;
(xiii) to execute, in connection with any foreclosure, any
endorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral;
(xiv) to exercise the Grantor's rights under any Contract in
accordance with Section 6.1; and
(xv) to exercise any and all other rights, remedies, powers
and privileges of the Grantor with respect to the Collateral,
provided, however, that the Collateral Agent shall not exercise its powers under
clauses (i), (ii), (iii), (iv), (vi), (viii), (ix), (x), (xi), (xii), (xiii),
(xiv) or (xv) unless an Event of Default has occurred and is continuing.
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(b) The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. The Grantor hereby
acknowledges and agrees that in acting pursuant to this power-of-attorney the
Collateral Agent shall be acting in its own interest and in the interest of the
other Senior Secured Parties and the Grantor acknowledges and agrees that the
Collateral Agent and the other Senior Secured Parties shall have no fiduciary
duties to the Grantor and the Grantor hereby waives any claims to the rights of
a beneficiary of a fiduciary relationship hereunder.
SECTION 2.4. Inspection and Verification. The Collateral Agent and
such Persons as the Collateral Agent may reasonably designate shall have the
right, no more often than once each year, unless an Event of Default has
occurred and is continuing, and, if an Event of Default has occurred and is
continuing, at any reasonable time or times, in each case upon ten (10) days'
notice and at the Grantor's own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantor's affairs with the appropriate officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of Receivables or Collateral
in the possession of any third party, by contacting account debtors or the third
party possessing such Collateral for the purpose of making such a verification.
The Collateral Agent shall have the absolute right to share any information it
gains from such inspection or verification with any other Senior Secured Party.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Grantor hereby represents, warrants and covenants to the
Collateral Agent and the other Senior Secured Parties, which representations,
warranties and covenants shall survive execution and delivery of this Agreement
and the making and repayment of the other Senior Secured Obligations, as
follows:
SECTION 3.1. Title and Authority. The Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
the Collateral Agent the Security Interest in the Collateral (to the extent of
the Grantor's right, title and interest therein) pursuant hereto and to execute,
deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any Person other than any consent
or approval that has been obtained and is in full force and effect.
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SECTION 3.2. Validity, Perfection and Priority of Lien.
(a) This Agreement creates in favor of the Collateral Agent, for
itself and for the ratable benefit of the other Senior Secured Parties, a legal,
valid and enforceable security interest in the Collateral and the proceeds
thereof owned by the Grantor, and when Financing Statements in appropriate form
are filed by the Grantor in the offices specified on Schedule I hereto, the Lien
created under this Agreement will constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Grantor in such
Collateral and the proceeds thereof, in each case prior and superior in right to
any other Person.
(b) (i) Fully executed Financing Statements or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been filed in each governmental, municipal or other office specified in
Schedule I, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish a
valid and perfected security interest in favor of the Collateral Agent (for the
benefit of itself and for the ratable benefit of the Senior Secured Parties) in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements and except
that recordation of the Security Interest in the United States Patent and
Trademark Office may be necessary with respect to Collateral consisting of
Patents and Trademarks and recordation of the Security Interest, in addition to
registration of any unregistered copyrights, in the United States Copyright
Office may be necessary with respect to Collateral consisting of Copyrights. The
Grantor will pay any applicable filing fees and related expenses. The Grantor
hereby irrevocably authorizes the Collateral Agent to file any such Financing
Statements without its signature as the debtor.
(ii) The Instruments listed on Schedule II hereto, which, as of the
date hereof, constitute all instruments of the Grantor, and all other Chattel
Paper have been stamped to indicate the Security Interest of the Collateral
Agent for itself and the ratable benefit of the Senior Secured Parties
hereunder.
SECTION 3.3. No Liens; Other Financing Statements. (a) Except for
the Lien granted to the Collateral Agent for itself and the ratable benefit of
the Senior Secured Parties hereunder and other Permitted Liens, and, further,
except for the interest in and control over the Accounts (other than the Aquila
PPA Reserve Account and the
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Panola County Account) of and by the Collateral Agent and the Administrative
Agent as provided in the Common Agreement and the Securities Account Control
Agreement, and the interest in and control over the Indenture Funds of and by
the Trustee and the Securities Intermediary as provided in the Indenture, the
Grantor owns and will continue to own valid and marketable title in and to each
item of the Collateral free and clear of any and all Liens and the Grantor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent or any
other Senior Secured Party.
(b) Other than Financing Statements filed in connection herewith,
there is no Financing Statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering or purporting to cover
any interest of any kind in the Collateral. The Grantor will not execute or
authorize any Financing Statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral to be filed in any public office, except Financing Statements filed
or to be filed in respect of and covering the security interests granted hereby
to the Collateral Agent by the Grantor.
SECTION 3.4. Chief Executive Office; Name; Records. (a) The chief
executive office and principal place of business of the Grantor is located at
the address set forth on Schedule VI. The originals of all documents evidencing
all Contracts and Receivables of the Grantor, and the only original books of
account and records concerning the Collateral are, and will continue to be, kept
at, and controlled and directed (including, without limitation, for general
accounting purposes) from, the chief executive office of the Grantor as set
forth on Schedule VI, or at such new location for such chief executive office as
the Grantor may establish in accordance with Section 3.4(b).
(b) The Grantor shall not establish a new location for its chief
executive office or change its name or the name under which it presently
conducts its business unless (i) it has given to the Collateral Agent not less
than sixty (60) days' prior written notice of its intention so to do, clearly
describing such new location or specifying such new name, as the case may be,
and providing such other information in connection therewith as the Collateral
Agent may reasonably request, and (ii) with respect to such new location or such
new name, as the case may be, the Grantor shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
SECTION 3.5. Additional Statements and Schedules. The Grantor shall
execute and deliver to the Collateral Agent, from time to time, for its
convenience in
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maintaining a record of the Collateral, such written statements and schedules
as is necessary or as the Collateral Agent may reasonably require, designating,
identifying or describing the Collateral.
SECTION 3.6. Further Actions. The Grantor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, Financing Statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the Security Interest hereby granted by the Grantor, which is
necessary or as the Collateral Agent deems reasonably appropriate or advisable
to perfect, preserve or protect its security interest in the Collateral within
thirty (30) days after any request by the Collateral Agent or such earlier date
as may be required by applicable law or necessary to preserve or protect the
security interests in the Collateral granted by the Grantor pursuant to this
Agreement, including the payment of any fees and taxes required in connection
with the execution and delivery of this Agreement, the granting of the Lien
created hereby and the filing of any Financing Statements or other documents in
connection here with.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
SECTION 4.1. Maintenance of Insurance; Protection of Security
Interest. The Grantor shall carry with respect to the Collateral and its use
such insurance as shall be required under the Transaction Documents.
SECTION 4.2. Location of Inventory and Equipment. All Inventory and
Equipment owned on the date hereof by the Grantor is located at one of the
locations shown on Schedule 4.2 (other than Equipment undergoing repairs). The
Grantor agrees that all Inventory and Equipment now held or subsequently
acquired by it shall be kept at (or shall be in transport to) one of the
locations on Schedule 4.2.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
RECEIVABLES, CONTRACTS AND INSTRUMENTS
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SECTION 5.1. Direction to Account Debtors; Grantor Bound. (a) The
Grantor agrees that the Collateral Agent may (i) directly notify the account
debtors or obligors with respect to any Receivables and/or under any Project
Documents to make payments with respect thereto directly to the Revenue
Account, and (ii) from and after the occurrence of an Event of Default, directly
notify the account debtors or obligors with respect to any Receivables and/or
under any Project Documents to make payments with respect thereto directly to
the Collateral Agent.
(b) Upon the occurrence and during the continuance of an Event of
Default, the Grantor agrees to be bound by any collection, compromise,
forgiveness, extension or other action taken by the Collateral Agent with
respect to the Receivables and/or the Project Documents. The reasonable costs
and expenses (including reasonable attorneys' fees) of collection, whether
incurred by the Grantor, the Collateral Agent, any other Senior Secured Party,
shall be borne by the Grantor.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
SECTION 6.1. Security Interest in Contract Rights. The Grantor's
grant, pursuant to Section 2.1, to the Collateral Agent, of a security interest
in all of its right, title and interest in and to each and all of the Contracts
and the contract rights thereunder, includes, but is not limited to:
(i) all (A) rights to payment under any Contract and (B)
payments due and to become due under any Contract, in each case whether as
contractual obligations, damages or otherwise;
(ii) all of its claims, rights, powers, privileges and
remedies under any Contract; and
(iii) all of its rights under any Contract to make
determinations, to exercise any election (including, without limitation,
election of remedies) or option or to give or receive any notice, consent,
waiver or approval together with full power and authority with respect to
any Contract to demand, receive, enforce or collect any of the foregoing
rights or any property the subject of any of the Contracts, to enforce or
execute any checks or other instruments or orders, to file any claims and
to take any action in connection with any of the foregoing (the Contracts,
together with all of the foregoing in this Section 6.1, the "Contract
Rights");
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provided, however, that, unless an Event of Default shall have occurred and be
continuing, notwithstanding anything else herein to the contrary, the Grantor
may, subject to the terms and provisions of the Financing Documents, exclusively
exercise all of its rights, powers, privileges and remedies under the Contracts.
SECTION 6.2. Further Protection. The Grantor shall defend the title
to the Contract Rights against the claims and demands of any Person other than
the Collateral Agent and the other Senior Secured Parties, and hereby grants the
Collateral Agent full power and authority, upon the occurrence and during the
continuance of an Event of Default, to take all actions as the Collateral Agent,
acting upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, reasonably deems necessary or advisable to effectuate the provisions set
forth in this sentence.
SECTION 6.3. Liabilities Under Receivables and Contracts. Any thing
herein to the contrary notwithstanding (including, without limitation, the grant
of any rights to the Collateral Agent), the Grantor shall remain liable under
each of the Receivables and Contracts to observe and perform all the conditions
and obligations to be observed and performed by it thereunder and under or with
respect to the Collateral, all in accordance with the terms of any agreement
giving rise to each such Receivable, Contract or procurement of Collateral.
Neither the Collateral Agent nor any other Senior Secured Party shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract or with respect to the Collateral by reason of or arising
out of this Agreement or the receipt by the Collateral Agent of any payment
relating to such Receivable, Contract or Collateral pursuant hereto, nor shall
the Collateral Agent or any other Senior Secured Party be obligated in any
manner to perform any of the obligations of the Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or under or pursuant to any
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Receivable (or any agreement giving rise
thereto) or under any Contract, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
SECTION 6.4. Remedies. Upon the occurrence of any Event of Default,
the Collateral Agent shall have the rights set forth in Article IX, and, acting
upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or
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as otherwise expressly provided herein, may (i) enforce all remedies, rights,
powers and privileges of the Grantor under any or all of the Contracts, (ii)
sell any or all of the Contract Rights at public or private sale upon at least
ten (10) days' prior written notice and/or (iii) substitute itself or any
nominee or trustee in lieu of the Grantor as party to any of the Contracts and
to notify the obligor of any Contract Right (the Grantor hereby agreeing to
deliver any such notice at the request of the Collateral Agent) that all
payments and performance under the relevant Contract shall be made or rendered
to the Collateral Agent or such other Person as the Collateral Agent may
designate.
ARTICLE VII
DUTY OF CARE OF COLLATERAL AGENT
SECTION 7.1. Collateral Agent's Duties; Reasonable Care. (a) The
Collateral Agent shall have the duty to exercise reasonable care in the custody
and preservation of any Collateral in its possession, which duty shall be fully
satisfied if the Collateral Agent maintains safe custody of such Collateral in
accordance with customary banking standards.
(b) Except as hereinabove specifically set forth, the Collateral
Agent shall have no further obligation to ascertain the occurrence of, or to
notify the Grantor with respect to, any matters relating to any Collateral and
shall not be deemed to assume any such further obligation as a result of the
establishment by the Collateral Agent of any internal procedures with respect to
any Collateral in its possession, nor shall the Collateral Agent be deemed to
assume any other responsibility for, or obligations or duty with respect to,
any Collateral, or its use, including, without limitation, any obligation or
duty to take any action to collect, preserve or protect its or the Grantor's
rights in the Collateral, but the same shall be at the sole risk and
responsibility of the Grantor at all times.
(c) The Grantor hereby releases the Collateral Agent and each other
Senior Secured Party from any claims, causes of action and demands at any time
arising out of or with respect to this Agreement, the Senior Secured
Obligations, the Collateral and its use and/or any actions taken or omitted to
be taken by the Collateral Agent with respect thereto (except such claims,
causes of action and demands arising from the gross negligence or wilful
misconduct of the Collateral Agent).
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ARTICLE VIII
REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT
For the avoidance of doubt, the provisions of Section 8.1, Section
8.2 and Section 8.4 shall apply only upon the occurrence and during the
continuance of an Event of Default.
SECTION 8.1. Remedies; Obtaining the Collateral upon Default. (a)
Upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent, acting upon directions from (x) the Intercreditor Agent
acting pursuant to the Intercreditor Agreement or (y) the Senior Secured Parties
acting pursuant to Section 7.15 of the Intercreditor Agreement, or as otherwise
expressly provided herein, shall be entitled to exercise on behalf of itself and
the other Senior Secured Parties, all the rights and remedies of a secured party
under the UCC as in effect in any relevant jurisdiction and all rights now or
hereafter existing under all other applicable law to enforce this Agreement and
the security interests contained herein, and, in addition, subject to any
Applicable Laws then in effect, the Collateral Agent, acting upon directions
from (x) the Intercreditor Agent acting pursuant to the Intercreditor Agreement
or (y) the Senior Secured Parties acting pursuant to Section 7.15 of the
Intercreditor Agreement, or as otherwise expressly provided herein, may, in
addition to its other rights and remedies hereunder, including without
limitation under Section 8.2 and Section 8.6, and also the rights of the
Collateral Agent and the other Senior Secured Parties under any of the
Transaction Documents, do any of the following to the fullest extent permitted
by applicable law:
(i) personally, or by agents, trustees or attorneys, immediately
take possession of the Collateral or any part thereof, from the Grantor or any
other Person who then has possession of any part thereof with or without notice
or process of law, and for that purpose may enter upon the Grantor's premises or
such other Person's premises where any of the Collateral is located and remove
the same and use in connection with such removal any and all services, supplies,
aids and other facilities of the Grantor;
(ii) instruct the obligor or obligors of any agreement, instrument
or other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the terms
of such instrument or agreement directly to the Collateral Agent; and
(iii) take possession of the Collateral or any part thereof, by
directing the Grantor in writing to turn over the same to the Collateral Agent
at the Site or, to the extent such Collateral may be moved, to deliver the same
to the Collateral Agent at any other
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place or places designated by the Collateral Agent, in which event the Grantor
shall, at its own expense, (A) forthwith turn over the same to the Collateral
Agent at one of the locations on Schedule 4.2 or cause the same to be moved to
the place or places so designated by the Collateral Agent and there delivered to
the Collateral Agent, as the case may be, (B) store and keep any Collateral so
turned over or delivered to the Collateral Agent at one of the locations shown
on Schedule 4.2 or at such place or places pending further action by the
Collateral Agent as provided in Section 8.2, and (C) while the Collateral shall
be so stored and kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain the Collateral in
good condition.
(b) The Grantor's obligation to turn over or deliver the Collateral
as set forth above is of the essence of this Agreement and, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent
shall be entitled to obtain a decree requiring specific performance by the
Grantor of said obligation.
(c) When Collateral is in the Collateral Agent's possession, (i) the
Grantor shall pay (or reimburse the Collateral Agent on demand for) all
reasonable expenses (including the cost of any insurance and payment of taxes or
other charges) incurred in the custody, preservation, use or operation of the
Collateral, and the obligation to reimburse all such expenses shall be secured
hereby, and (ii) the risk of accidental loss or damage shall be on the Grantor
to the extent of any deficiency in any effective insurance coverage.
SECTION 8.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 8.1 and any
other Collateral, whether or not so repossessed by the Collateral Agent, may, to
the extent permitted by any contract terms governing such Collateral and to the
fullest extent permitted by applicable law, be sold, leased or otherwise
disposed of under one or more contracts or as an entirety, whether by public or
private sale and without the necessity of gathering at the place of sale the
property to be sold, may be sold in such manner, at such time or times, at such
place or places and on such terms (whether cash or credit, and in the case of
credit, without assumption of future credit risk) in compliance with Applicable
Laws, determine to be commercially reasonable. If any Collateral is sold by the
Collateral Agent upon credit or for future delivery the Collateral Agent shall
not be liable for the failure of the purchaser to pay for the same and in such
event the Collateral Agent may resell the Collateral. In no event shall the
Grantor be credited with any part of the proceeds of sale of any Collateral
until payment thereof in cash or cash equivalents has actually been received by
the Collateral Agent. Any of the Collateral may be sold, leased or otherwise
disposed of, or options or contracts may be entered to do so, in the condition
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in which the same existed when taken by the Collateral Agent or after any
overhaul or repair in a commercially reasonable manner. Any such disposition
shall be made upon not less than ten (10) days' written notice to the Grantor
specifying the time such disposition is to be made and, if such disposition
shall be a public sale, specifying the place of such sale. Any such sale may be
adjourned by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by applicable law, the Collateral Agent or
any other Senior Secured Party may itself bid for and become the buyer of the
Collateral or any item thereof offered for sale at a public auction without
accountability to the Grantor.
SECTION 8.3. Waiver. (a) EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING
POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL IN
ACCORDANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH
RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND THE GRANTOR HEREBY FURTHER
WAIVES:
(i) all damages occasioned by such taking of possession except
any damages which are finally judicially determined to have been the
direct result of the Collateral Agent's gross negligence or wilful
misconduct;
(ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's and the other Senior Secured Parties' rights hereunder;
(iii) demand of performance or other demand, notice of intent
to demand or accelerate, notice of acceleration, presentment, protest,
advertisement or notice of any kind to or upon the Grantor or any other
Person; and
(iv) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and the Grantor,
for itself and all who may
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claim under it, insofar as it may now or hereafter lawfully do so, hereby
waives the benefit of such laws.
(b) Without limiting the generality of the foregoing, the Grantor
hereby: (i) authorizes the Collateral Agent, without notice to or demand upon
the Grantor and without otherwise affecting the obligations of the Grantor
hereunder from time to time, to take and hold other collateral granted to it by
any other Person (in addition to the Collateral) for payment of any Senior
Secured Obligations, or any part thereof, and to exchange, enforce or release
such other collateral or any part thereof, and to accept and hold any
endorsement or guarantee of payment of the Senior Secured Obligations or any
part thereof, and to release or substitute any endorser or guarantor or any
other Person granting security for or in any way obligated upon any Senior
Secured Obligations, or any part thereof; and (ii) waives and releases any and
all right to require the Collateral Agent or the other Senior Secured Parties to
collect any of the Senior Secured Obligations from any specific item or items of
Collateral or from any other party liable as guarantor or in any other manner in
respect of any of the Senior Secured Obligations or from any collateral (other
than the Collateral) for any of the Senior Secured Obligations.
(c) Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall, provided that it is done in accordance
with applicable law and this Agreement, operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Grantor therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Grantor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Grantor.
SECTION 8.4. Application of Proceeds; Grantor Liable for Deficiency.
Except as otherwise expressly provided herein or in the other Financing
Documents, following the occurrence of an Event of Default and the acceleration
of the maturity of the Senior Secured Obligations (whether automatically, by
declaration or otherwise), the proceeds of any collection, sale or other
realization of all or any part of the Collateral pursuant to this Agreement, and
any other cash at the time of such collection, sale or other realization held by
the Collateral Agent under this Agreement, shall be applied by the Collateral
Agent in accordance with Article IV of the Collateral Agency Agreement. For
avoidance of doubt, it is understood that the Grantor shall remain liable to the
extent of any deficiency between the amount of proceeds of the Collateral and
the aggregated amount of the Senior Secured Obligations in accordance with the
Financing Documents.
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SECTION 8.5. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Collateral Agent or any other Senior Secured Party in exercising
any right, remedy, power or privilege hereunder and no course of dealing between
the Grantor and the Collateral Agent or any other Senior Secured Party shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. A waiver
by the Collateral Agent or any other Senior Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Collateral Agent or any other Senior Secured Party would
otherwise have on any future occasion. The rights and remedies herein expressly
provided are cumulative and may be exercised singly or concurrently and as often
and in such order as the Collateral Agent any other Senior Secured Party deems
expedient and are not exclusive of any rights or remedies which the Collateral
Agent or the other Senior Secured Parties would otherwise have whether by
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Grantor in any case shall entitle the Grantor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Collateral Agent or the other Senior Secured Parties
to any other or future action in any circumstances without notice or demand.
SECTION 8.6. Discontinuance of Proceedings. In case the Collateral
Agent or any other Senior Secured Party shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Collateral Agent or such other Senior Secured Party, then, in every such case,
subject to the terms of any final non-appealable judgment rendered in any such
proceeding, the Grantor, the Collateral Agent, the other Senior Secured Parties
and each holder of any of the Senior Secured Obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral,
subject to the Security Interest created under this Agreement, and all rights,
remedies and powers of the Collateral Agent and the other Senior Secured Parties
shall continue as if no such proceeding had been instituted.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. Unless otherwise specifically herein provided,
all notices required or permitted under the terms and provisions hereof shall be
in writing and any such notice shall become effective if given in accordance
with the provisions of Section 1.4 of the Indenture.
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SECTION 9.2. Amendment. No waiver, amendment, modification or
termination of any provision of this Agreement, or consent to any departure by
the Grantor therefrom, shall in any event be effective without the prior written
consent of the Collateral Agent, acting upon directions from (x) the
Intercreditor Agent acting pursuant to the Intercreditor Agreement or (y) the
Senior Secured Parties acting pursuant to Section 7.15 of the Intercreditor
Agreement, or as otherwise expressly provided herein, and none of the Collateral
shall be released without the written consent of the Collateral Agent, acting
upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or as other wise expressly provided
herein. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 9.3. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Grantor, the Collateral Agent and the other
Senior Secured Parties, all future holders of the Senior Secured Obligations and
their respective successors, transferees and assigns (to the extent such
successors, transferees and assigns are permitted under the Financing
Documents).
SECTION 9.4. Survival. All agreements, statements, representations
and warranties made by the Grantor herein or in any certificate or other
instrument delivered by the Grantor or on its behalf under this Agreement shall
be considered to have been relied upon by the Collateral Agent and the other
Senior Secured Parties and shall survive the execution and delivery of this
Agreement and the other Financing Documents regardless of any investigation
made by the Collateral Agent or any other Senior Secured Party or made on their
behalf.
SECTION 9.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
SECTION 9.6. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.7. Grantor's Duties. Anything herein contained to the
contrary notwithstanding, the Grantor shall remain liable to perform all of its
obligations under or with respect to the Collateral, and neither the Collateral
Agent nor any other Senior Secured Party shall have any obligations or
liabilities under or with respect to any
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Collateral by reason of or arising out of this Agreement, nor shall the
Collateral Agent or the other Senior Secured Parties be required or obligated in
any manner to perform or fulfill any of the obligations of the Grantor under or
with respect to any Collateral.
SECTION 9.8. Termination; Release. Upon the date at which all of the
Senior Secured Obligations have been indefeasibly paid in full in cash or cash
equivalents and all commitments of the Senior Secured Parties under the
Financing Documents have terminated, this Agreement shall terminate, and the
Collateral Agent, at the request, pursuant to instructions from, and at expense
of, the Grantor, will promptly execute and deliver to the Grantor the proper
instruments (including UCC termination statements on form UCC-3) acknowledging
the termination of this Agreement, and will duly assign, transfer and deliver to
the Grantor (without recourse and without any representation or warranty of any
kind) such of the Collateral as may be in the possession of the Collateral
Agent and has not theretofore been disposed of or otherwise applied or released.
SECTION 9.9. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or any other Senior Secured Party in respect of
the Senior Secured Obligations is rescinded or must otherwise be restored or
returned by the Collateral Agent or such other Senior Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Grantor or upon the appointment of any intervenor or conservator of, or trustee
or similar official for, the Grantor or any substantial part of its assets, or
upon the entry of an order by a bankruptcy court avoiding payment of such
amount, or otherwise, all as though such payments had not been made.
SECTION 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, taken together, shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
SECTION 9.11 Governing Law. This Agreement shall be governed by the
laws of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
SECTION 9.12 Consent to Jurisdiction. Any legal action or proceeding
by or against the Grantor with respect to or arising out of this Agreement may
be brought in or removed to the courts of the State of New York, in and for the
County of New
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York, or of the United States of America for the Southern District of New York.
By execution and delivery of this Agreement, the Grantor accepts, for itself and
in respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts for legal proceedings arising out of or in connection with
this Agreement and irrevocably consents to the appointment of CT Corporation
System, with offices on the date hereof at 1633 Broadway, New York, New York
10019, as its agent to receive service of process in New York, New York. If for
any reason such agent shall cease to be available to act as such, the Grantor
agrees to appoint a new agent on the terms and for the purposes of this
provision. Nothing herein shall affect the right to serve process in any other
manner permitted by law or any right to bring legal action or proceedings in any
other competent jurisdiction, including judicial or non-judicial foreclosure of
real property interests which are part of the Collateral. The Grantor further
agrees that the aforesaid courts of the State of New York and of the United
States of America for the Southern District of New York shall have exclusive
jurisdiction with respect to any claim or counterclaim of the Grantor based upon
the assertion that the rate of interest charged by or under this Agreement or
under the other Financing Documents is usurious. The Grantor hereby waives any
right to stay or dismiss any action or proceeding under or in connection with
the Project, this Agreement or any other Transaction Document brought before the
foregoing courts on the basis of forum non-conveniens or improper venue.
SECTION 9.13 Waiver of Jury Trial. EACH OF THE GRANTOR AND THE
COLLATERAL AGENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR
ACTIONS OF THE OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE COLLATERAL AGENT TO ENTER INTO THIS AGREEMENT.
SECTION 9.14. Authority of Collateral Agent. The Grantor
acknowledges that the rights and responsibilities of the Collateral Agent under
this Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the other
Senior Secured Parties, be governed by this Agreement and the other Financing
Documents and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Collateral Agent and the Grantor,
the Collateral Agent shall be conclusively presumed to be acting as agent for
the
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other Senior Secured Parties with full and valid authority so to act or refrain
from acting, and the Grantor shall not be under any obligation, or entitlement,
to make any inquiry respecting such authority.
SECTION 9.15. Indemnities and Expenses. The obligation of the
Grantor to pay the costs and expenses of, and to indemnify, defend and hold harm
less, the Collateral Agent and the other Senior Secured Parties under and in
connection with this Agreement shall be as provided in Section 7.15 of the
Intercreditor Agreement as in effect as of the date hereof. No amendment to such
Section 7.15 or termination of the Intercreditor Agreement shall affect the
provisions of this Section 7.15 unless such amendment or termination shall have
been consented to by the parties to this Agreement in accordance with the
provisions hereof and of the other Financing Documents.
SECTION 9.16. Entire Agreement. This Agreement, together with any
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement as to the matters covered hereby and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
SECTION 9.17. Independent Security. The security provided for in
this Agreement shall be in addition to and shall be independent of every other
security which the Collateral Agent or the other Senior Secured Parties may at
any time hold for any of the Senior Secured Obligations hereby secured, whether
or not under the Senior Security Documents. The execution of any other Senior
Security Document shall not modify or supersede the security interest or any
rights or obligations contained in this Agreement and shall not in any way
affect, impair or invalidate the effectiveness and validity of this Agreement or
any term or condition hereof. The Grantor hereby waives its right to plead or
claim in any court that the execution of any other Senior Security Document is a
cause for extinguishing, invalidating, impairing or modifying the effectiveness
and validity of this Agreement or any term or condition contained herein. The
Collateral Agent shall be at liberty to accept further security from the Grantor
or from any third party and/or release such security without notifying the
Grantor and without affecting in any way the obligations of the Grantor under
the Senior Security Documents or the other Financing Documents. The Collateral
Agent, upon directions from (x) the Intercreditor Agent acting pursuant to the
Intercreditor Agreement or (y) the Senior Secured Parties acting pursuant to
Section 7.15 of the Intercreditor Agreement, or as otherwise expressly provided
herein, shall determine if any security conferred upon the Collateral Agent or
the other Senior Secured Parties under the Senior Security Documents shall be
enforced by the Collateral Agent, as well as the sequence of securities to be so
enforced.
26
<PAGE>
SECTION 9.18. Third Party Beneficiaries. The agreements of the
parties hereto are intended to benefit the Senior Secured Parties and their
respective successors and assigns.
SECTION 9.19 Limitation of Liability. The provisions of Section 14.1
of the Indenture shall apply to this Agreement.
SECTION 9.20 Collateral Agency Agreement. The rights, benefits,
privileges and immunities given to the Collateral Agent and set forth in the
Collateral Agency Agreement are expressly incorporated herein by reference
thereto.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Collateral Agent
By: /s/ Mary Beth Lewicki
---------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
Signature Page to Funding Corporation Security Agreement
28
<PAGE>
Schedule I to
Security Agreement
Grantor's Filing Offices
New Jersey Secretary of State
Mississippi Secretary of State
Panola County Local Filing Office
<PAGE>
Schedule II to
Security Agreement
Instruments
None.
<PAGE>
Schedule III to
Security Agreement
Copyrights
None.
<PAGE>
Schedule IV to
Security Agreement
Patents
None.
<PAGE>
Schedule V to
Security Agreement
Trademarks
None.
<PAGE>
Schedule VI to
Security Agreement
Grantor's Chief Executive Office and
Principal Place of Business
Chief Executive Office:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
Principal Place of Business:
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
<PAGE>
Schedule 4.2 to
Security Agreement
Locations of Inventory and Equipment
Two Tower Center
20th Floor
East Brunswick, New Jersey 08816
<PAGE>
Exhibit 4.21
This instrument was prepared by the Indexing instructions set forth on
attorney referenced below in the property description in
consultation with counsel admitted to Exhibit A.
practice in the state in which the
property is located, and when recorded,
counterparts should be returned to:
Jay Sobel, Esq.
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York 10022-3897
(212) 735-2002
- --------------------------------------------------------------------------------
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND
RENTS AND FIXTURE FILING
Dated as of May 21, 1999
by
LSP ENERGY LIMITED PARTNERSHIP
Trustor
to
JAMES W. O'MARA
Trustee
for the benefit of
THE BANK OF NEW YORK
as Administrative Agent and Collateral Agent
Beneficiary
SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE
TRUST PROPERTY IS OR IS TO BE AFFIXED TO THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO
THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS
THIS DEED OF TRUST COVERS
AFTER-ACOUIRED PROPERTY
THE FINAL MATURITY DATE FOR THIS
DEED OF TRUST IS JULY 15, 2025
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS...........................................................8
1.1 Definitions..................................................8
1.2 Principles of Construction..................................15
ARTICLE 2
COVENANTS OF TRUSTOR.................................................15
2.1 Covenants...................................................15
ARTICLE 3
ABSOLUTE ASSIGNMENT OF LEASES AND RENTS..............................19
3.1 Absolute Assignment of Leases and Rents.....................19
ARTICLE 4
SECURITY AGREEMENT...................................................21
4.1 Rights to UCC Collateral under the Uniform Commercial
Code........................................................22
4.2 Fixture Filing Financing Statements.........................22
4.3 Trustee or Beneficiary as Senior Secured Party..............23
ARTICLE 5
REPRESENTATIONS OF TRUSTOR...........................................23
5.1 Representations and Warranties..............................23
ARTICLE 6
DEFAULT AND FORECLOSURE..............................................23
6.1 Remedies....................................................23
6.2 Rescission of Notice of Event of Default....................29
6.3 Application of Proceeds.....................................29
6.4 Additional Security.........................................29
6.5 Remedies Cumulative.........................................30
6.6 Attorney-in-Fact............................................30
6.7 Waiver of Notice............................................31
6.8 Payment of Costs and Expenses...............................31
6.9 Trustor's Waivers...........................................31
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Page
ARTICLE 7
MISCELLANEOUS........................................................33
7.1 Performance at Trustor's Expense............................33
7.2 Beneficiary's Right to Perform the Senior Secured
Obligations.................................................33
7.3 Survival of Senior Secured Obligations......................33
7.4 Notices.....................................................34
7.5 Delay not a Waiver..........................................34
7.6 Covenants Running with the Land.............................35
7.7 Further Assurances..........................................35
7.8 Severability................................................36
7.9 Entire Agreement and Modification...........................36
7.10 Applicable Law..............................................36
7.11 Limitation on Beneficiary's Responsibility..................36
7.12 Headings....................................................37
7.13 Marshalling.................................................37
7.14 Waiver of Jury Trial and Consent to Jurisdiction............37
7.15 Maximum Indebtedness and Future Advances....................38
7.16 Lien Absolute; Multiple Collateral Transaction..............39
7.17 Discharge of Deed...........................................39
7.18 Renewal or Extension of Senior Secured Obligations..........40
7.19 Conflicts...................................................40
7.20 Assumption Not a Novation...................................40
7.21 Substitute Or Successor Trustees............................40
7.22 Limitation of Recourse......................................41
7.23 Counterparts................................................41
Exhibit A
Exhibit B
ii
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND
RENTS AND FIXTURE FILING
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FILING, dated as of May 21, 1999 (as amended, restated, supplemented or
otherwise modified from time to time, this "Deed of Trust"), by LSP ENERGY
LIMITED PARTNERSHIP, a Delaware limited partnership, the grantor hereunder
(together with its permitted successors and assigns, "Trustor"), to JAMES W.
O'MARA ("Trustee"), for the benefit of THE BANK OF NEW YORK, a New York banking
corporation as Administrative Agent and as Collateral Agent under the Common
Agreement referred to below, the beneficiary hereunder (together with its
successors and assigns, "Beneficiary").
W I T N E S S E T H :
WHEREAS, Trustor is the owner of that certain real property
described on Exhibit A annexed hereto and made a part hereof (the "Land").
WHEREAS, Trustor has entered into certain Project Documents
providing for, among other things, the ownership, development, construction,
operation and maintenance of an approximately 837 MW (net) gas-fired combined
cycle electric generating facility to be located on the Land.
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among Trustor, the banks
and other financial institutions party thereto (the "Initial Banks") and Credit
Suisse First Boston ("Credit Suisse") as agent for the Initial Banks, the
Initial Banks agreed to provide loans (the "Initial Loans") to Trustor to
finance a portion of the development, construction and start-up of the Project.
WHEREAS, Trustor also entered into the Letter of Credit Agreement
dated as of August 28, 1998 (the "VEPCO L/C Agreement"), as amended by Amendment
No. 1 to Letter of Credit Agreement, dated as of December 15, 1998, and by
Amendment No. 2 to Letter of Credit Agreement, dated as of the date hereof, with
Credit Suisse, in its capacities as VEPCO L/C Agent and VEPCO L/C Issuer, and
the VEPCO L/C Banks listed therein, pursuant to which the VEPCO L/C Issuer
agreed to issue, and has issued, for the account of Trustor, one or more VEPCO
Letters of Credit for use by Trustor as security in connection with the Project.
WHEREAS, in connection with the execution of the Initial Credit
Agreement, the VEPCO L/C Agreement and the related financing documents, and as a
condition precedent to the Initial Banks providing the Initial Loans to Trustor,
Trustor, LSP Batesville Funding Corporation (the "Funding Corporation"), LSP
Batesville Holding, LLC, IBJ Schroder Bank & Trust Company in its
<PAGE>
capacities as intercreditor agent, administrative agent, collateral agent and
securities intermediary, Credit Suisse as Tranche A Facility Agent and VEPCO L/C
Agent entered into the Common Agreement, dated as of August 28 1998, (the
"Initial Common Agreement").
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among Trustor, the banks and other financial institutions party thereto (the
"Supplemental Banks") and Credit Suisse as agent for the Supplemental Banks, (a)
Trustor, the Supplemental Banks and Credit Suisse amended and restated the
Initial Credit Agreement in its entirety and (b) the Supplemental Banks agreed
to provide loans (the "Supplemental Loans") to Trustor to finance a portion of
the development, construction and start-up of the Project.
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the related financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to Trustor, Trustor and
Credit Suisse as bank facility agent, VEPCO L/C agent, administrative agent,
collateral agent and securities intermediary executed the Amended and Restated
Common Agreement, dated as of the December 15, 1998 (the "Supplemental Common
Agreement"), pursuant to which the Initial Common Agreement was amended and
restated in its entirety;
WHEREAS, Trustor and the Funding Corporation have determined to
issue certain Bonds pursuant to the Trust Indenture, dated as of the date hereof
(the "Indenture"), among Trustor, the Funding Corporation and The Bank of New
York, as trustee, and to sell such bonds to Credit Suisse, as initial purchaser,
pursuant to the Purchase Agreement.
WHEREAS, Trustor and the Funding Corporation will use the proceeds
of the Bonds to (i) repay in full the Indebtedness outstanding under the
Supplemental Credit Agreement and (ii) pay the remaining Project Costs.
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, Trustor, the Funding
Corporation, the Collateral Agent, the Administrative Agent and the
Intercreditor Agent are entering into the Second Amended and Restated Common
Agreement, dated as of the date hereof (the "Common Agreement"), in order to
amend and restate the Supplemental Common Agreement in its entirety.
WHEREAS, this Deed of Trust is given pursuant to the Common
Agreement, the Indenture and the VEPCO L/C Agreement, and payment, fulfillment,
and performance by Trustor of its obligations thereunder and under the other
Financing Documents to which it is a party are secured hereby, and each and
every term and provision of the Common Agreement, the Indenture, the VEPCO L/C
Agreement and the Financing Documents, including the rights, remedies,
obligations, covenants, conditions, agreements, indemnities, representations and
warranties of the parties therein, are hereby
2
<PAGE>
incorporated by reference herein as though set forth in full and shall be
considered a part of this Deed of Trust.
WHEREAS, the Common Agreement, the Indenture and the VEPCO L/C
Agreement contemplate the execution, delivery and implementation of this Deed of
Trust and it is a condition precedent to the transactions contemplated by the
Indenture, the VEPCO L/C Agreement, the Common Agreement and the Financing
Documents that Trustor shall have executed and delivered this Deed of Trust to
Beneficiary on behalf of the Senior Secured Parties.
WHEREAS, except as otherwise expressly provided herein, capitalized
terms used in this Deed of Trust shall have the meanings given thereto in the
Common Agreement or the Indenture, as applicable. Except as otherwise expressly
provided herein, the rules of interpretation set forth in the Indenture shall
apply to this Deed of Trust.
NOW, THEREFORE, with reference to the foregoing Recitals, and for
ten dollars cash in-hand and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and intending to be legally
bound hereby:
Trustor does hereby irrevocably grant, bargain, sell, convey, confirm,
release, warrant, assign and transfer to Trustee its successors and assigns, IN
TRUST, WITH POWER OF SALE AND RIGHT TO ENTRY AND POSSESSION, pursuant to this
Deed of Trust and applicable law, for the benefit and use of Beneficiary, for
itself and as Administrative Agent and Collateral Agent on behalf of the Senior
Secured Parties, the following property, whether now owned or hereafter acquired
by Trustor (collectively, the "Trust Property") for the purpose of securing the
payment and performance of the Senior Secured Obligations (as hereinafter
defined):
(i) the Land, and any rights, privileges and appurtenances thereunto belonging
or in any way pertaining thereto, all reversions, remainders, dower and
right of dower, curtesy and right of curtesy, and all of Trustor's right,
title and interest in and to all transferable development rights arising
therefrom or transferred thereto, and shares of stock evidencing the same,
and, to the extent assignable, all appurtenances to such property,
including any now or hereafter belonging or in any way appertaining
thereto, and all claims or demands of Trustor, either at law or in equity,
in possession or expectancy, now or hereafter acquired, of, in or to the
same;
(ii) all Trustor's right, title and interest in and to the Improvements on the
Land, including any alterations thereto or replacements thereof, now or
hereafter erected upon the Land;
(iii) all of Trustor's right, title and interest in and to all Fixtures now or
at any time hereafter affixed to, attached to, placed upon or used in any
way in connection with the use, occupancy, enjoyment, development,
operation or ownership of the Land or the Improvements, together with any
and all replacements thereof and additions thereto;
3
<PAGE>
(iv) all of Trustor's right, title and interest in and to all Equipment and
Personalty now or at any time hereafter located at the Land or the
Improvements, together with any and all replacements thereof and
additions thereto;
(v) all right, title and interest of Trustor in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of, and
all additions and appurtenances to, the Real Property and the Equipment,
hereafter acquired by or released to Trustor or constructed, assembled or
placed by Trustor on the Real Property, and all conversions of the
security constituted thereby; immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be,
and in each such case, without any further mortgage, conveyance,
assignment or other act by Trustor, any of such extensions, improvements,
betterments, renewals, substitutes and replacements shall become subject
to the Lien of this Deed of Trust as fully and completely, and with the
same effect, as though now owned by Trustor and specifically described
herein;
(vi) all of Trustor's right, title and interest in and to all easements
(including, without limitation, the Easements), rights of way, streets,
roads, alleys, passages, rights of way, air rights, lateral support,
drainage rights, options to purchase, water rights (whether riparian,
appropriative, or otherwise), utility rights, privileges, franchises,
servitudes, tenements, hereditaments, and appurtenances now or hereafter
belonging or appertaining to any of the foregoing or to the Land, all
mineral, mining, gravel, oil, gas, hydrocarbon substances and other
rights to produce or share in the production of anything related to such
property, all drainage, crop, timber, agricultural, and horticultural
rights with respect to such property, and all of Trustor's right, title
and interest in and to any streets, ways, alleys, roadbeds, inclines,
tunnels, culverts, strips or gores of land adjoining or serving the Land
or any part thereof, whether now owned or hereafter acquired by Trustor;
(vii) all of Trustor's right, title and interest in and to all of the real
estate and personal property tax refunds or rebates or charges in lieu of
Taxes now or hereafter assessed or levied against the Real Property or
any other part of the Trust Property, including interest thereon, and the
right to receive the same, whether such refunds or rebates relate to
fiscal periods before or during the term of this Deed of Trust, payable
to Trustor with respect to the Land or the Improvements, and refunds,
credits or reimbursements payable with respect to bonds, escrow accounts
or other sums payable in connection with the use, occupation, enjoyment,
development, operation or ownership of the Land or Improvements;
(viii) all of Trustor's right, title and interest in and to all Leases and
Rents;
(ix) all of Trustor's right, title and interest in and to all insurance
policies and the proceeds thereof, now or hereafter in effect with
respect to the Real Property or the UCC Collateral, including any and all
title and property insurance proceeds, and all unearned premiums and
premium
4
<PAGE>
refunds, accrued, accruing or to accrue under such insurance policies,
and all of Trustor's right, title and interest in and to all proceeds,
judgments, claims, compensation, awards or payments made for any taking
of or damage to all or any part of the Real Property or the UCC
Collateral by eminent domain or condemnation, or by any purchase in lieu
thereof, and all awards resulting from a change of grade of streets or
for severance damages, and all other proceeds of the conversion,
voluntary or involuntary, of any of the Trust Property into cash or other
liquidated claims, and all judgments, damages, awards, settlements and
compensation (including interest thereon) heretofore or hereafter made to
the present and all subsequent owners of the Trust Property or any part
thereof for any injury to or decrease in the value thereof for any
reason;
(x) to the extent assignable, all of Trustor's right, title and interest in
and to all abstracts of title, plans, specifications, operating manuals,
computer programs, computer data, maps, surveys, studies, reports,
permits and licenses (including but not limited to the permits and
licenses described on Exhibit B hereto), records, plans, designs,
drawings, surveys, title insurance policies, agreements, contract rights,
approvals, actions, appraisals, architectural, engineering and
construction contracts, books of account, insurance policies and other
documents, of whatever kind or character, relating to the Real Property;
(xi) all of Trustor's right, title and interest in and to all present and
future Leases, Property Agreements, Contracts and all Proceeds and
Receivables, the proceeds from the sale, transfer, disposition,
conveyance or refinancing of all or any portion of the Trust Property and
other benefits paid or payable and to become due or payable to Trustor in
respect of the use, occupancy, license or possession of any portion or
portions of the Trust Property;
(xii) all the right, as and to the extent set forth in the Common Agreement and
the Indenture in the name and on behalf of Trustor, to appear in and
defend any action or proceeding brought with respect to the Trust
Property, and to commence any action or proceeding to protect the
interest of Trustor in the Trust Property;
(xiii) rights, titles, interests, estates or other claims, both in law and in
equity, which Trustor now has or may hereafter acquire in the Real
Property or in and to any greater estate in the Real Property or in and
to any greater estate in the Trust Property;
(xiv) all of Trustor's right, title and interest in and to all property
hereafter acquired or constructed by Trustor located at or used in
connection with the Land of the type described in the foregoing Granting
Clauses which shall forthwith, upon acquisition or construction thereof
by Trustor and without any act or deed by Trustor or Beneficiary, become
subject to the Lien of this Deed of Trust as if such property were now
owned by Trustor and were specifically described in this Deed of Trust
and were specifically conveyed or encumbered hereby;
5
<PAGE>
(xv) all of Trustor's right, title and interest in and to accessions,
additions or attachments to, and all receipts, issues, profits, proceeds
and products arising from, any of the foregoing and any and all proceeds
of the conversion, voluntary or involuntary, of any of the foregoing into
cash or liquidated claims;
(xvi) all of Trustor's right, title and interest in and to all Inventory now or
at any time hereafter located at the Land or the Improvements or used in
any way in connection with the use, occupancy, enjoyment, development,
operation or ownership of the Land or the Improvements, together with any
and all replacements thereof and additions thereto, together with all of
Trustor's right, title and interest in and to all Accounts; and
(xvii) Trustor's right, title and interest in and to all pipelines and pipeline
gathering systems used in connection with the Project lying on, in or
across lands or any part thereof located in Panola and Yalobusha
Counties, Mississippi, including but not limited to the lands, easements,
leases and rights of way described on Exhibit A hereto, together with all
equipment, fittings, fixtures, pipe, machinery, pumps, appliances,
valves, meters, tanks and other personal or real property appertaining to
said pipeline gathering systems and all tenements, hereditaments and
appurtenances now owned or hereafter acquired in connection therewith
together with all rights of way, servitudes, easements and permits
(including but not limited to the permits and licenses described on
Exhibit B hereto) for said pipeline gathering systems including, but not
limited to all the rights, titles and interests whether now owned or
hereafter acquired by Trustor in, to and under the instruments described
in attached Exhibit A hereto.
"Trust Property," including each component thereof, shall be expressly
interpreted as meaning all or, where the context permits or requires, any
portion of the above, and all or, where the context permits or requires, any
interest of Trustor therein.
AND without limiting any of the other provisions of this Deed of Trust,
Trustor expressly grants to Beneficiary, as secured party for itself and for the
rateable benefit of the Senior Secured Parties, a security interest in the
portion of the Trust Property which is or may be subject to the provisions of
the Uniform Commercial Code as in effect from time to time in the state in which
the Land is located (as the same may have been or may hereafter be amended, the
"Uniform Commercial Code") which are applicable to secured transactions; it
being understood and agreed that the Improvements and Fixtures are part and
parcel of the Real Property and appropriated to the use thereof and, whether
affixed or annexed to the Real Property or not, shall for the purposes of this
Deed of Trust be deemed conclusively to be real estate and conveyed hereby.
TO HAVE AND TO HOLD as provided herein, the above granted and described
Trust Property to Trustee and its assigns, substitutes and successors hereunder,
in trust, for the security and benefit of Beneficiary and its assigns and
successors forever, for itself and for the rateable benefit of the Senior
Secured Parties and their respective assigns and successors forever, and Trustor
hereby binds
6
<PAGE>
itself and its successors and assigns to warrant and forever defend the title to
the Trust Property unto Trustee and its assigns, substitutes and successors
forever against the claim or claims of all parties claiming or to claim the
same, or any part thereof.
AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Trustor represents,
warrants, covenants and agrees as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions.
Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Common Agreement or the Indenture, as
applicable. As used herein, the following terms shall have the following
meanings:
"Accounts" shall mean all Trustor's accounts whether now existing or
hereafter arising and resulting from the sale or other disposition of
Inventory or from the services performed at the Project or any other
accounts however arising, including but not limited to the "Accounts" as
such term is defined in the Indenture, and all chattel paper, documents
and instruments relating to the Accounts or constituting the proceeds
thereof.
"Administrative Agent" shall have the meaning set forth in the Common
Agreement.
"Applicable Law" shall have the meaning set forth in the Indenture.
"Beneficiary" has the meaning set forth in the introducing paragraph
hereof.
"Bonds" has the meaning set forth in the Indenture.
"Collateral Agency Agreement" shall have the meaning set forth in the
Indenture.
"Collateral Agent" shall have the meaning set forth in the Common
Agreement.
"Common Agreement" has the meaning set forth in the Recitals hereof.
"Consents" shall have the meaning set forth in the Indenture.
"Contracts" means all contracts to which the Trustor now is, or hereafter
will be, bound, or a party, beneficiary or assignee, including, without
limitation, all of the Project Documents,
7
<PAGE>
including exhibits thereto, and all other instruments, agreements and
documents executed and delivered with respect to such contracts, all
Consents, and all revenues, rentals, Proceeds and other sums of money due
and to become due from any of the foregoing, as the same may be modified,
supplemented or amended from time to time in accordance with their terms.
"Credit Suisse" has the meaning set forth in the Recitals hereof.
"Deed of Trust" means this Deed of Trust, Security Agreement, Assignment
of Leases and Rents and Fixture Filing, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Easements" shall have the meaning set forth in the Indenture.
"Equipment" means all "equipment," as such term is defined in Article 9 of
the Uniform Commercial Code, now owned or hereafter acquired by Trustor,
which is used at or in connection with the Improvements or the Land or is
located thereon or therein (including all machinery, appliances,
apparatus, fittings, materials, equipment, pipes, pipelines (including
meters, connections, values and associated equipment), tanks, mains,
lines, pumps, cables, lines, wires, conduits, poles and related equipment,
loading and unloading equipment, motors, switchboards, cleaning, fire
prevention, fire extinguishing, cooling and ventilation equipment,
furnishings, and electronic data-processing and other office equipment now
owned or hereafter acquired by Trustor and any and all additions,
substitutions and replacements of any of the foregoing), together with all
attachments, components, parts, equipment and accessories installed
thereon or affixed thereto. Notwithstanding the foregoing, Equipment shall
not include any property belonging to tenants under leases except to the
extent that Trustor shall have any right or interest therein.
"Event of Default" shall have the meaning set forth in the Intercreditor
Agreement.
"Financing Documents" shall have the meaning set forth in the Indenture.
"Fixtures" means all Equipment now owned, or the ownership of which is
hereafter acquired, by Trustor which is so related to the Land and
Improvements forming part of the Trust Property that it is deemed fixtures
or real property under the law of the state in which the Land is located,
including all building or construction materials intended for
construction, reconstruction, alteration or repair of or installation on
the Trust Property, construction equipment, appliances, machinery, plant
equipment, fittings, apparatuses, fixtures and other items now or
hereafter attached to, installed in or used in connection with
(temporarily or permanently) any of the Improvements or the Land,
including engines, devices for the operation of pumps, pipes, plumbing,
cleaning, call and sprinkler systems, fire extinguishing apparatuses and
equipment, heating, ventilating, plumbing, laundry, incinerating,
electrical, air conditioning and air cooling
8
<PAGE>
equipment and systems, gas and electric machinery, appurtenances and
equipment, pollution control equipment, security systems, disposals,
cables, wires, pipelines (including meters, connections, valves and other
associated equipment), conduits, mains, lines, ducts, fences, lighting
fixtures, recreational equipment and facilities of all kinds, and water,
gas, electrical, storm and sanitary sewer facilities, utility lines and
electric transmission equipment (whether owned individually or jointly
with others, and, if owned jointly, to the extent of Trustor's interest
therein) and all other utilities whether or not situated in easements, all
water tanks, water supply, water power sites, fuel stations, fuel tanks,
fuel supply, and all other structures, together with all accessions,
appurtenances, additions, replacements, betterments and substitutions for
any of the foregoing and the proceeds thereof.
"Funding Corporation" has the meaning set forth in the Recitals hereof.
"Governmental Approval" shall have the meaning set forth in the Indenture.
"Impositions" All taxes (including, without limitation, all ad valorem,
sales (including those imposed on lease rentals), use, gross receipts,
value added, intangible transaction, privilege or license or similar
taxes; and excluding mortgage recording taxes, transfer taxes, transfer
gains taxes, gift and inheritance taxes, franchise taxes and analogous
taxes on non-corporate entities, and income taxes), assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof
and whether or not commenced or completed within the term of this Deed of
Trust), water, sewer or other rents and charges, excises, levies, fees
(including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Trust Property and/or any
Rents (including all interest and penalties thereon), which at any time
prior to, during or in respect of the term hereof shall be assessed or
imposed on or in respect of or be a Lien upon (a) Trustor that are in the
nature of a real estate tax, whether in addition to, or in lieu of, real
estate taxes, (b) the Trust Property, or any other collateral delivered or
pledged to Beneficiary in connection with the Common Agreement or the
Indenture, or any part thereof, or any Rents therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection
with the Trust Property or the leasing or use of all or any part thereof.
"Improvements" means any and all buildings, structures, foundations,
storage and other tanks, utility sheds, workrooms, towers, retention
basins, generating units, pump stations, transformers, retaining walls,
pipes, cables, landscaping, irrigation and drainage pipes and facilities,
open parking areas, and all other structures, improvements and fixtures of
every kind whatsoever, whether above or below the land surface, and
whether permanent or temporary, and any and all additions, alterations,
betterments or appurtenances thereto, and all renewals,
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substitutions or replacements now or at any time owned, or hereafter
acquired by Trustor and situated, placed or constructed on, over or under
the Land or any part thereof.
"Indenture" has the meaning set forth in the Recitals hereof.
"Initial Banks" has the meaning set forth in the Recitals hereof.
"Initial Common Agreement" has the meaning set forth in the Recitals
hereof.
"Initial Credit Agreement" has the meaning set forth in the Recitals
hereof.
"Initial Loans" has the meaning set forth in the Recitals hereof.
"Inventory" means all of Trustor's inventory of liquid and gaseous hydro
carbons whether now owned or hereafter acquired including without
limitation oil, gas, casinghead gas, ethane, butane, propane and other
natural gas liquids, drip gasoline, natural gasoline and condensate, and
all ethylene, polyethylene, propylene, polypropylene, benzene, stynene,
plastic film and other products refined therefrom and from time to time
located in storage or transportation facilities in or near the Site or in
tank trucks or other facilities owned, operated or used by Trustor in
connection with the Trust Property.
"Land" has the meaning set forth in the Recitals hereof.
"Leases" means, collectively, any lease or ground lease, or, to the extent
of the interest therein of Trustor, any sublease or subsublease, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which Trustor holds the interest of
lessor, sublessor, subsublessor or licensor, as the case may be, and
pursuant to which any Person is granted a possessory interest in, or right
to use or occupy all or any portion of the Trust Property, and every
modification, amendment or other agreement relating to such lease, ground
lease, sublease, subsublease, license, concession or other agreement
entered into in connection therewith, and every guarantee of the
performance and observance of the covenants, conditions and agreements to
be performed and observed by the other party or parties thereto.
"Lien" shall have the meaning set forth in the Indenture.
"LOC Loans" shall have the meaning set forth in the VEPCO L/C Agreement.
"Material Adverse Effect" shall have the meaning set forth in the
Indenture.
"Permitted Encumbrances" has the meaning set forth in Section 5.1(a)
hereof.
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"Permitted Liens" shall have the meaning set forth in the Indenture.
"Person" shall have the meaning set forth in the Indenture.
"Personalty" means all furniture, furnishings, machinery, goods, tools,
supplies, appliances, general intangibles, contract rights, accounts
(including, without limitation, the Accounts), accounts receivable,
franchises, reserve accounts, escrows, documents, instruments, chattel
paper, claims, deposits, licenses, trade names, trademarks, symbols,
service marks, books, records, business names, company names, trade
secrets, certificates and permits, and all other personal property of any
kind or character whatsoever (as defined in and subject to the provisions
of the Uniform Commercial Code), which are now or hereafter owned by
Trustor and which are related to the Real Property, together with all
accessories, replacements and substitutions thereto or therefor and the
proceeds thereof.
"Proceeds" means "proceeds" as such term is defined in the Uniform
Commercial Code as in effect in any relevant jurisdiction or under other
relevant law and, in any event, shall include, but shall not be limited
to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to Trustor from time to time, and claims for insurance,
indemnity, warranty or guaranty effected or held for the benefit of
Trustor, with respect to any of the Senior Collateral, (ii) any and all
payments (in any form whatsoever) made or due and payable to Trustor from
time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Senior
Collateral by any Governmental Authority (or any person acting under color
of Governmental Authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Senior
Collateral.
"Project" shall have the meaning set forth in the Indenture.
"Project Costs" shall have the meaning set forth in the Indenture.
"Project Documents" shall have the meaning set forth in the Indenture.
"Property Agreements" means all material option agreements, purchase and
sale agreements, construction contracts, architect contracts, engineering
contracts, service contracts, utility contracts, equipment leases,
equipment maintenance contracts and equipment warranties, purchase
contracts, purchase orders and similar agreements and all amendments
thereto now or hereafter relating to any portion of the Trust Property and
entered into or assumed by or on behalf of Trustor.
"Real Property" means, collectively, the Land, the Improvements and the
Fixtures.
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"Receivables" means any "account" as such term is defined in the Uniform
Commercial Code as in effect in any relevant jurisdiction and in any event
shall include, but not be limited to, all of the Trustor's rights to
payment for goods (including, without limitation, electricity) sold or
leased, or services performed, by the Trustor, whether now in existence or
arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, contract rights (including any
and all rights to liquidated damage payments), security agreement, chattel
paper, or other evidence of indebtedness or security, together with (i)
all security pledged, assigned, hypothecated or granted to the Trustor to
secure the foregoing, (ii) all of each of the Trustor's right, title and
interest in and to any goods (including, without limitation, electricity),
the sale of which gave rise thereto, (iii) all guarantees, warranties,
endorsements, indemnifications or collateral on, or of, any of the
foregoing, (iv) all powers of attorney for the execution of any evidence
of indebtedness or security or other writing in connection therewith, (v)
all books, correspondence, credit files, records, ledger cards, invoices,
and other papers relating thereto, including without limitation all
similar information stored on a magnetic medium or other similar storage
device and other papers and documents in the possession or under the
control of the Trustor or any computer bureau from time to time acting for
the Trustor, (vi) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured
parties, and certificates from filing or other registration officers,
(vii) all credit information, reports and memoranda relating thereto, and
(viii) all other writings related in any way to the foregoing.
"Rents" means all rents, issues, revenues, income, proceeds, profits,
royalties, security (including all oil and gas or other hydrocarbon
substances, earnings, receipts, revenues, accounts, accounts receivable,
security deposits and other deposits (subject to the prior right of the
tenants making such deposits)) and income, including fixed, additional and
percentage rents, operating expense reimbursements, reimbursements for
increases in Taxes, sums paid by tenants to Trustor to reimburse Trustor
for amounts originally paid or to be paid by Trustor or Trustor's agents
or affiliates for which such tenants were liable, as, for example, tenant
improvements costs in excess of any work letter, lease takeover costs,
moving expenses and tax and operating expense pass-throughs for which a
tenant is solely liable, parking, maintenance, common area, tax,
insurance, utility and service charges and contributions, deficiency rents
and liquidated damages, and other benefits now or hereafter derived from
any portion of the Real Property or the use, enjoyment, development,
operation, ownership or occupancy thereof and all cash or security
deposits, advance rentals, and all deposits or payments of a similar
nature relating thereto, now or hereafter, including during any period of
redemption, derived from the Real Property or any other portion of the
Trust Property and all proceeds from the cancellation, surrender, sale or
other disposition of the Leases and other benefits paid or payable and to
become due or payable to Trustor in respect of the use, occupation,
enjoyment, development, operation or ownership of any portion or portions
of the Trust Property pursuant to the Leases.
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"Senior Collateral" shall have the meaning set forth in the Indenture.
"Senior Secured Obligations" means, collectively, (a) the obligations and
liabilities of Trustor in respect of (i) all Indebtedness, financial
liabilities and obligations of Trustor, of whatsoever nature and howsoever
evidenced (including, but not limited to, principal, interest, fees,
reimbursement obligations, penalties, indemnities and legal and other
expenses, whether due after acceleration or otherwise) to the
Administrative Agent, the Collateral Agent or any other Senior Secured
Party under or pursuant to the Indenture, the Bonds, the VEPCO L/C
Agreement, any Working Capital Agreement, any Reserve L/C Agreement, any
Additional Indebtedness Agreement, the Security Documents, the Equity
Documents, any other Financing Document or any other agreement, document
or instrument evidencing, securing or relating to such indebtedness,
financial liabilities or obligations, in each case, direct or indirect,
primary or secondary, fixed or contingent, now or hereafter arising out of
or relating to any such agreements; (ii) any and all sums advanced by the
Collateral Agent or any other Senior Secured Party in accordance with the
provisions of the Financing Documents in order to preserve the Senior
Collateral or preserve the Senior Secured Parties' security interest in
the Senior Collateral; and (iii) in the event of any proceeding for the
collection or enforcement of the sums or obligations described in clauses
(i) and (ii) above, after an Event of Default shall have occurred and be
continuing, the expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Senior
Collateral, or of any exercise by the Collateral Agent or the Secured
Parties of their rights under the Financing Documents, together with
reasonable attorneys' fees and court costs relating thereto. The maximum
principal amount described in clause (i) above shall not at any time
exceed Four Hundred Million and 00/100 Dollars ($400,000,000), together
with interest thereon, and shall become due and payable no later than July
15, 2025.
"Senior Secured Parties" (each a "Senior Secured Party") shall have the
meaning set forth in the Indenture.
"Site" shall have the meaning set forth in the Indenture.
"Supplemental Banks" has the meaning set forth in the Recitals hereof.
"Supplemental Common Agreement" has the meaning set forth in the Recitals
hereof.
"Supplemental Credit Agreement" has the meaning set forth in the Recitals
hereof.
"Supplemental Loans" has the meaning set forth in the Recitals hereof.
"Taxes" has the meaning set forth in Section 2.1(h) hereof.
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"Transaction Documents" shall have the meaning set forth in the Indenture.
"Transfer" has the meaning set forth in Section 2.1(i) hereof.
"Trustor" has the meaning set forth in the introducing paragraph hereof.
"Trust Property" has the meaning set forth in the Granting Clauses hereof.
"UCC Collateral" has the meaning set forth in Section 4.1 hereof.
"Uniform Commercial Code" has the meaning set forth in the Granting
Clauses hereof.
"VEPCO L/C Agreement" has the meaning set forth in the Recitals hereof.
"VEPCO Letters of Credit" shall have the meaning set forth in the
Indenture.
1.2 Principles of Construction.
All references to sections, schedules and exhibits are to sections,
schedules and exhibits in or to this Deed of Trust unless otherwise
specified. Unless otherwise specified, the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Deed of Trust
shall refer to this Deed of Trust as a whole and not to any particular
provision of this Deed of Trust. The words and phrases "including," "shall
include," "inclusive of" and words and phrases of similar import shall be
deemed to be followed by "without limitation" or "but not limited to."
Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms
of the terms so defined. All persons stated in the masculine, feminine or
neuter gender shall include other genders as appropriate.
ARTICLE 2
COVENANTS OF TRUSTOR
2.1 Covenants.
Trustor hereby covenants and agrees with Beneficiary that:
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(a) Books of Record and Access.
Trustor shall keep proper books of record and accounts in accordance
with the provisions of Section 4.1(f) of the Indenture.
(b) Impositions and Other Liens.
Trustor shall duly pay and discharge any Impositions prior to the
date the same become delinquent, provided, however, that Trustor may
in good faith, by means of an appropriate proceeding, contest the
validity, applicability or amount of any asserted Imposition in
accordance with the provisions of the Indenture.
(c) Maintenance of Trust Property.
(i) Trustor shall maintain and preserve the Trust Property in good
order, condition and repair and in accordance with the
provisions of Section 4.1(i) of the Indenture.
(ii) Subject to the provisions of Section 6.3 of the Indenture,
Trustor shall promptly restore or cause to be restored in like
manner any portion of the Improvements which may be damaged or
destroyed at the Trust Property from any cause whatsoever, and
pay or cause to be paid when due all claims for labor
performed and materials furnished therefor.
(iv) The Partnership shall comply with all Applicable Laws and
Governmental Approvals, except where non-compliance would not
reasonably be expected to result in a Material Adverse Effect.
(vi) Trustor shall not commit or permit any waste of the Trust
Property.
(d) Insurance.
Trustor shall at all times provide, maintain and keep in force or
cause to be provided, maintained and kept in force, at no expense to
any Senior Secured Party, the policies of insurance required
pursuant to Section 4.1(d) of the Indenture with respect to the
Trust Property.
(e) Casualty and Condemnation.
Trustor shall comply with the provisions of Section 3.10 of the
Common Agreement in respect of any casualty at or condemnation of
all or any portion of the Trust Property.
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(f) Recording Taxes and Fees.
Trustor shall pay, together with interest, fines, and penalties, if
any, any documentary stamp, recording, transfer, mortgage,
intangibles or other Taxes or fees whatsoever due under Applicable
Law in connection with the making, execution, delivery, filing of
record, recordation, release, or discharge of this Deed of Trust.
(g) Governmental Approvals; Applicable Law.
Trustor will obtain on or prior to the time required, and maintain
in full force and effect and comply in all material respects with
the conditions and obligations under, all applicable Governmental
Approvals and Applicable Law, which may from time to time become
necessary in connection with the ownership, operation, maintenance
or use of the Trust Property or the execution, delivery and
performance in accordance with the respective terms of each of the
Transaction Documents to which it is a party, in each case except to
the extent that failure to do so would not be reasonably likely to
have a Material Adverse Effect.
(h) Taxes.
Subject to the provisions of Section 4.1(t) of the Indenture, if, as
a result of any change in Applicable Laws occurring after the date
hereof, any tax, assessment, imposition, interest or penalties
thereon is levied, assessed or charged by the United States or any
political subdivision or taxing authority thereof or therein
(collectively, "Taxes") upon this Deed of Trust, the obligations or
indebtedness secured by this Deed of Trust, the interest of any
Senior Secured Party in and to the Trust Property, or any Senior
Secured Party by reason of or as holder of this Deed of Trust,
Trustor shall pay all such Taxes to, for, or on account of
Beneficiary (or provide funds to Beneficiary for such payment) as
they become due and payable, and shall promptly furnish written
notice of the date and amount of such payment to Beneficiary. In the
event of passage of any law or regulation occurring after the date
hereof permitting, authorizing or requiring such Taxes to be levied,
assessed or charged, which law or regulation in the opinion of
counsel to Beneficiary may prohibit Trustor from paying the Taxes to
or for Beneficiary, Trustor shall enter into such further
instruments as may be permitted by law to obligate Trustor to pay
such Taxes.
(i) Transfers of Trust Property.
(i) Due on Transfer. Trustor acknowledges that a Transfer of the
Trust Property may significantly and materially impair the
security for the payment and performance of the Senior Secured
Obligations and Trustor agrees that, if
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Trustor, without the prior written consent of Beneficiary,
shall cause, permit or suffer a Transfer of the Trust
Property, then Beneficiary shall have the absolute right, at
its option without prior demand or notice (other than as may
be expressly otherwise provided in the Indenture) to declare
all sums secured by this Deed of Trust immediately due and
payable. Beneficiary shall not be required to demonstrate any
actual impairment of the security interest of the Senior
Secured Parties or any increased risk of default hereunder in
order to declare all sums secured by this Deed of Trust
immediately due and payable upon a Transfer in violation of
this Section 2.1(i).
(ii) Definition of Transfer. For the purposes of this Section 2.1,
a "Transfer" of the Trust Property means any transfer, sale,
conveyance, assignment, mortgage, encumbrance, pledge or other
disposition of, or the grant of any easements, leases or other
material rights with respect to, all or any portion of the
Trust Property or any interest therein in any manner
whatsoever, whether voluntarily or involuntarily, but shall
not include any such "Transfer" which may be otherwise
permitted by the terms of the Indenture.
(iii) Consent May Be Conditioned. The consent of Beneficiary
required for a Transfer without the Beneficiary declaring all
sums secured by this Deed of Trust immediately due and payable
may be withheld or conditioned by Beneficiary in its sole
discretion. Trustor agrees that in the event the ownership of
the Trust Property or any part thereof becomes vested in a
person other than Trustor, Beneficiary may, without notice to
Trustor, deal in any way with such successor or successors in
interest with reference to this Deed of Trust and the Senior
Secured Obligations hereby secured without in any way
vitiating or discharging Trustor's liability hereunder or
under the documents and instruments evidencing the
indebtedness secured hereby. No transfer or encumbrance of the
Trust Property or any interest herein and no forbearance or
assumption by any person with respect to this Deed of Trust
and no extension to any person of the time for payment of the
Senior Secured Obligations hereby secured given by Beneficiary
shall operate to release, discharge, modify, change or affect
the liability of Trustor, either in whole or in part, unless
Beneficiary specifically agrees in writing to the contrary.
This provision of this Section 2.1(i) shall apply to each and
every Transfer of the Trust Property or any part thereof
regardless of whether or not Beneficiary has consented to, or
waived under this Deed of Trust with respect to, any previous
Transfer of the Trust Property without the Beneficiary
declaring all sums secured by this Deed of Trust immediately
due and payable.
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(iv) Release of Trust Property. If Trustor is entitled to remove
any part of the Senior Collateral pursuant to and in
accordance with Sections 5.1(g) of the Indenture, after all
conditions to such removal have been satisfied, the
Beneficiary, at the request and expense of Trustor, will
promptly execute and deliver to Trustor the proper instruments
acknowledging the release of such part from the Lien created
by this Deed of Trust. Trustor agrees to execute any
amendments to this Deed of Trust or to execute such other
documents that are necessary in the opinion of Beneficiary to
confirm the first priority Lien of this Deed of Trust on the
remaining Trust Property.
(j) General Rights of Beneficiary and Trustee.
At any time and from time to time, without liability therefor,
without notice and without affecting the liability of any person,
including, without limitation, Trustor, for the payment or
performance of any indebtedness secured by this Deed of Trust, or
the Lien of this Deed of Trust on the Trust Property or any portion
thereof: (i) Beneficiary may release any person liable for the
payment of any Senior Secured Obligations, extend the time or
otherwise alter the terms of payment of any Senior Secured
Obligations and make compositions or other arrangements with any
debtor in relation thereto, alter, substitute, increase or release
any portion of the Trust Property or any other collateral securing
any Senior Secured Obligations, and grant such other indulgences as
Beneficiary may determine in its sole discretion; and (ii) Trustee
may, upon the written consent of Beneficiary, consent to the making
of any map or plot of the Real Property, join in granting any
easements or creating any restrictions on the Real Property and join
in any extension agreement or any agreement subordinating the Lien
or charge of this Deed of Trust.
ARTICLE 3
ABSOLUTE ASSIGNMENT OF LEASES AND RENTS
3.1 Absolute Assignment of Leases and Rents.
Trustor absolutely and unconditionally assigns, transfers and sets over to
Beneficiary all right, title and interest in and to all Rents and all
right, title and interest under or by virtue of any and all Leases and,
with respect to the foregoing:
(a) Beneficiary grants to Trustor a license to collect, subject to the
provisions herein, all Rents as they respectively become due, but
not more than thirty (30) days in advance, and to enforce the
agreements of the Leases, so long as there is no Event of Default;
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(b) This absolute and present assignment shall be fully operative
without any further action on the part of Trustor or Beneficiary
and, specifically, Beneficiary shall be entitled, at its sole
option, to all Rents whether or not Beneficiary takes possession of
the Real Property, including, without limitation, all Rents in
Trustor's possession or control. Upon any Event of Default,
Beneficiary may, in its absolute discretion, at any time and without
notice (either in person, by agent or representative, or by a
receiver appointed by a court) and without regard to the adequacy of
any security for the Senior Secured Obligations secured by this Deed
of Trust: (i) enter upon and take possession of the Real Property or
any part thereof, in its own name or in the name of Trustor
(provided, however, such entering upon and taking possession of the
Real Property shall not be a condition precedent or limitation of
Beneficiary's right to collect the Rents); (ii) sue for or otherwise
collect the Rents (including those past due and unpaid or which are
in Trustor's possession or control at the time of such Event of
Default) and apply such Rents, less costs and expenses of
collection, including, without limitation, attorneys' fees and
expenses, and costs of upkeep, maintenance, repair and operation of
the Real Property, to the payment of the Senior Secured Obligations
in such order and in proportions as Beneficiary in its absolute
discretion may determine; (iii) take all steps which may be
desirable in Beneficiary's judgment to complete any unfinished
construction, and to operate and manage the Real Property; and (iv)
perform such other reasonable acts or repairs or protections as may
be reasonably necessary or proper in Beneficiary's sole judgment to
conserve the value thereof. The entering upon and taking of
possession of the Real Property and/or the collection and
application of the Rents shall not cure or waive any Event of
Default or notice of default hereunder or invalidate any act done
pursuant to such notice;
(c) Notwithstanding the right to collect the Rents, following an Event
of Default, Trustor agrees that Beneficiary, and not Trustor, shall
be and be deemed to be the creditor of each tenant with respect to
assignments for the benefit of creditors and bankruptcy,
arrangement, reorganization, insolvency, dissolution or receivership
proceedings affecting such tenant, but without obligation on the
part of Beneficiary, however, to file or make timely filings of
claims in such proceedings or otherwise to pursue creditor's rights
therein. Beneficiary in its sole and absolute discretion may apply
any money received by Beneficiary as such creditor in reduction of
the Senior Secured Obligations, whether or not same is then due and
payable;
(d) Trustor irrevocably consents that the tenant(s) under the Leases,
upon demand and notice from Beneficiary to such tenant(s) of an
Event of Default, shall pay all Rents under the Leases to
Beneficiary without liability of the tenant(s) for the determination
of the actual existence of any Event of Default claimed by
Beneficiary. Trustor hereby irrevocably authorizes and directs the
tenant(s), upon receipt of any notice of Beneficiary stating that an
Event of Default exists, to pay to Beneficiary the Rents due
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and to become due under the Leases. Trustor agrees that the
tenant(s) shall have the right to rely upon any such notices of
Beneficiary and that tenant(s) shall pay such Rents to Beneficiary,
without any obligation or without any right to inquire whether such
Event of Default actually exists and notwithstanding any claim of or
notice by Trustor to the contrary. Trustor shall have no claim
against tenant(s) for any Rents and Profits paid by such tenant(s)
to Beneficiary;
(e) Beneficiary shall have the right to assign Beneficiary's right,
title and interest in the Leases to any subsequent holder of this
Deed of Trust and to any person acquiring title to any of the Real
Property through foreclosure or otherwise. After Trustor shall have
been barred and foreclosed of all right, title and interest in the
leased premises, no assignee of Trustor's interest in the Leases
shall be liable to account to Trustor for the Rents thereafter
accruing;
(f) Nothing herein contained shall be construed to bind Beneficiary to
the performance of any of the terms or provisions contained in the
Leases, or otherwise to impose any obligation on Beneficiary
whatsoever. Prior to actual entry and taking possession of the Real
Property by Beneficiary, this assignment shall not operate to make
Beneficiary a "mortgagee-in-possession" or to place any
responsibility for the control, care, management, or repair of the
Real Property upon Beneficiary;
(g) Trustor shall duly perform and discharge each covenant, condition
and obligation of the lessor under the Leases, and agrees not to
enter into any Lease, or cancel, terminate, modify or otherwise vary
any provision of any Lease without Beneficiary's prior written
consent, such consent not to be unreasonably withheld or delayed, or
discount any Rents or collect any Rents for any period of more than
one month in advance. Trustor will give prompt written notice to
Beneficiary of any default by any tenant(s) or by the lessor under
the Leases known to Trustor, and shall furnish Beneficiary with
complete copies of all notices in respect thereof given or received
by Trustor. If requested by Beneficiary, Trustor will enforce the
Leases and all remedies available to Trustor thereunder in the event
of default and, in the event of default thereof by Trustor,
Beneficiary may, at its sole option and without obligation so to do,
and without waiving any Event of Default in respect thereof, enforce
the same at Trustor's expense;
(h) The Leases shall remain in full force and effect irrespective of any
merger of the interest of the lessor and any tenant thereunder.
Trustor shall, at the request of Beneficiary, execute such further
assignments to Beneficiary of all Leases and Rents, as Beneficiary
shall require, and provide to Beneficiary true and correct copies of
all Leases and documents and instruments, executed in connection
therewith; and
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(i) It is the expressed intention of Trustor and Beneficiary that this
Section 3.1 establish an absolute transfer and assignment of the
Leases and Rents, and is not intended or given as additional
security for the Senior Secured Obligations. This absolute
assignment is separate from, and senior in priority to, the security
interest granted in this Deed of Trust to Trustee in such leases and
rents.
ARTICLE 4
SECURITY AGREEMENT
4.1 Rights to UCC Collateral under the Uniform Commercial Code.
This Deed of Trust is both a real property deed of trust and a "security
agreement" within the meaning of the Uniform Commercial Code. The Trust
Property includes both real and personal property and all other rights and
interests, whether tangible or intangible in nature, of Trustor in the
Trust Property. Trustor, by executing and delivering this Deed of Trust,
has granted and does hereby grant to Beneficiary as security for the
Senior Secured Obligations, a continuing first priority security interest
in the Trust Property to the full extent that the Trust Property may be
subject to the Uniform Commercial Code (said portion of the Trust Property
so subject to the Uniform Commercial Code, the "UCC Collateral"). If an
Event of Default shall occur and be continuing, Beneficiary, in addition
to any other rights and remedies which it may have, shall have, and may
exercise immediately and without demand, any and all rights and remedies
granted to a secured party under the Uniform Commercial Code, including
the right to take possession of the UCC Collateral or any part thereof,
and to take such other measures as Beneficiary may deem necessary for the
care, protection and preservation of the UCC Collateral. Any sale of UCC
Collateral may be held as part of and in conjunction with a sale of the
Land. Upon request or demand of Beneficiary, Trustor shall, at its
expense, assemble the UCC Collateral and make it available to Beneficiary
at a convenient place acceptable to Beneficiary. Trustor shall pay to
Beneficiary on demand any and all expenses, including legal expenses and
attorneys' fees, incurred or paid by Beneficiary in protecting its
interest in and to the UCC Collateral and in enforcing its rights
hereunder with respect to the UCC Collateral. Any notice of sale,
disposition or other intended action by Beneficiary with respect to the
UCC Collateral sent to Trustor in accordance with the provisions hereof at
least ten (10) Business Days prior to such action, shall, except as
otherwise provided by applicable law, constitute reasonable notice to
Trustor. The proceeds of any disposition of the UCC Collateral, or any
part thereof, may, except as otherwise required by applicable law, be
applied by Beneficiary to the payment of the Senior Secured Obligations in
such priority and proportions set forth in the Collateral Agency
Agreement. Trustor's (Debtor's) address and principal place of business
and the address of Beneficiary (Secured Party) are as set forth in Section
7.4 hereof.
4.2 Fixture Filing Financing Statements.
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Portions of the Trust Property are goods which are or are to become
fixtures, and Trustor expressly covenants and agrees that, to the extent
permitted by Applicable Law, the filing of this Deed of Trust in the real
property records of the county where the Land is located shall operate, at
the time of filing therein, as a financing statement filed as a fixture
filing in accordance with Section 75-9-401(1)(b) of the Uniform Commercial
Code of the state in which the Land is located. The address of Trustor
(the debtor) and the address of Beneficiary (the secured party) are as set
forth in Section 7.4 hereof. Trustor is the record owner of the Land.
4.3 Trustee or Beneficiary as Senior Secured Party.
If and to the extent that Trustee shall act as the secured party for any
security interest created in the Trust Property, Trustor acknowledges and
agrees that Trustee may do so, in trust and for the benefit of Beneficiary
and the other Senior Secured Parties. As such, Trustee may act in its own
name, or in the name of Beneficiary, and shall have all the rights of the
secured party, and shall observe all of the requirements of the secured
party, contained in this Section 4.
ARTICLE 5
REPRESENTATIONS OF TRUSTOR
5.1 Representations and Warranties.
Trustor represents, covenants and warrants that:
(a) subject only to the rights of others provided in the documents and
instruments approved by Beneficiary and described in the Title
Policy insuring the Lien of this Deed of Trust ("Permitted
Encumbrances") and to the Permitted Liens, Trustor is seized of an
indefeasible estate in fee simple in, and has good, valid, and
marketable title to the Land and has good right, full power and
lawful authority to mortgage and pledge the same as provided herein,
and Beneficiary may at all times peaceably and quietly enter upon,
hold, occupy and enjoy the Trust Property in accordance with the
terms hereof;
(b) the Trust Property is free and clear of all Liens, security
interests, charges, encumbrances and encroachments whatsoever except
as permitted under the terms of the Indenture and except Permitted
Encumbrances and Permitted Liens; and
(c) Trustor will maintain and preserve the first priority Lien and
charge of this Deed of Trust until the Senior Secured Obligations
have been fully paid and performed in accordance with the terms of
the Indenture and the other Financing Documents.
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ARTICLE 6
DEFAULT AND FORECLOSURE
6.1 Remedies.
Upon the commencement and during the continuance of an Event of Default,
Beneficiary may, at its election, and through the Trustee or otherwise,
take or cause the Trustee to take such action permitted at law or in
equity, without notice or demand, as it deems advisable to protect and
enforce its rights and the rights of the other Senior Secured Parties
against Trustor and in and to the Trust Property, in accordance with the
requirements of applicable law, including any one or more of the following
actions, each of which may be pursued concurrently or otherwise, at such
time and in such order as Beneficiary may determine in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary and without impairing any notice of default or
election to cause the Trust Property to be sold or any sale proceeding
predicated thereon:
(a) declare all of the sums secured by this Deed of Trust to be
immediately due and payable;
(b) demand, collect or realize upon all or any part of the Trust
Property and assemble or require Trustor to assemble all or any part
of the Trust Property;
(c) commence, appear in or defend any action or proceeding purporting to
affect all or any part of the Trust Property or the interests,
rights, powers or duties of any Senior Secured Party or Trustee
therein, whether brought by or against Trustor, Trustee or any
Senior Secured Party;
(d) pay, purchase, contest or compromise any claim, debt, Lien, charge
or encumbrance which in the judgment of Beneficiary may adversely
affect the Trust Property or the interest, rights, powers or duties
of any Senior Secured Party or Trustee therein;
(e) in such manner and to such extent as Beneficiary or Trustee may deem
necessary to protect the Trust Property or the interests, rights,
powers or duties of any Senior Secured Party therein, Beneficiary or
Trustee may by itself, its agents or attorneys, enter into and upon
the Trust Property or any part thereof or any other property at
which the Trust Property may be located without being deemed a
mortgagee in possession and take and hold exclusive possession of
all or any part of the Trust Property (which Trustor agrees to
surrender) and exclude Trustor from the Trust Property, and with or
without the appointment of a receiver, whether appointed pursuant to
Section 6.1(l) hereof or otherwise, (i) operate and manage the Trust
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Property or any part thereof either itself or by other Persons, (ii)
rent and lease the same, (iii) perform such acts of repair or
protection as may be necessary or proper to conserve the value of
the Trust Property, (iv) make such useful additions, alterations,
betterments and improvements to the Trust Property as Beneficiary
may deem advisable, (v) collect any and all income, Rents, issues,
profits and proceeds from the Trust Property, the same being hereby
assigned and transferred to Beneficiary, and (vi) from time to time
apply or accumulate such income, Rents, issues, profits and proceeds
in such order and manner as Beneficiary shall determine, it being
understood that the collection or receipt of income, Rents, issues,
profits or proceeds from the Trust Property after an Event of
Default and election to cause the Trust Property to be sold under
and pursuant to the terms of this Deed of Trust shall not affect or
impair any Event of Default or election to cause the Trust Property
to be sold or any sale proceedings predicated thereon, but such
proceedings may be conducted and sale effected notwithstanding the
collection or receipt of any such income, Rents, issues, profits and
proceeds;
(f) commence an action to foreclose on the Trust Property judicially or,
commence an action to foreclose on the Trust Property pursuant to
the power of sale granted herein. If Trustor shall pay said Senior
Secured Obligations promptly when due and shall perform all
covenants made by Trustor, then this conveyance shall be void and of
no effect. If an Event of Default shall occur, then, in that event,
the entire Senior Secured Obligations, together with all interest
accrued thereon, shall, at the option of Beneficiary be and become
at once due and payable without notice to Trustor, and Trustee
shall, at the request of Beneficiary, sell the Trust Property
conveyed, or a sufficiency thereof, to satisfy the Senior Secured
Obligations at public outcry to the highest bidder for cash. Sale of
the Trust Property shall be advertised for three (3) consecutive
weeks preceding the sale in a newspaper published in the county
where the Trust Property is situated, or if none is so published,
then in some newspaper having a general circulation therein, and by
posting a notice for the same time at the courthouse of the same
county. The notice and advertisement shall disclose the names of the
original Trustor in this Deed of Trust. Trustor waives the
provisions of Section 89-1-55 of the Mississippi Code of 1972, as
amended, if any, as far as this section restricts the right of
Trustee to offer at sale more than 160 acres at a time, and Trustee
may offer the property herein conveyed as a whole, regardless of how
it is described. If the Trust Property is situated in two (2) or
more counties, or in two (2) judicial districts of the same county,
Trustee shall have full power to select in which county, or judicial
district, the sale of the Trust Property is to be made, newspaper
advertisement to be published and notice of sale to be posted, and
Trustee's selection shall be binding upon Trustor and Beneficiary.
Should Beneficiary be a corporation or an unincorporated
association, then any officer thereof may declare an Event of
Default and request Trustee to sell the Trust Property.
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Beneficiary shall have the same right to purchase the Trust Property
at the foreclosure sale as would a purchaser who is not a party to
this Deed of Trust.
Without limiting the foregoing:
(i) In connection with any sale or sales hereunder, Beneficiary
and Trustee shall be entitled to elect to treat any of the
Trust Property which consists of a right in action or which is
property that can be severed from the Real Property covered
hereby or any Improvements without causing structural damage
thereto as if the same were personal property, and dispose of
the same in accordance with applicable law, separate and apart
from the sale of Real Property. Where the Trust Property
consists of Real Property and Personalty, whether or not such
Personalty is located on or within the Real Property,
Beneficiary and Trustee shall be entitled to elect to exercise
rights and remedies against any or all of the Real Property
and Personalty in such order, at such times and in such manner
as is now or hereafter permitted by applicable law;
(ii) Beneficiary and Trustee shall be entitled to elect to proceed
against any or all of the Trust Property in any manner
permitted under applicable law; and if Beneficiary or Trustee
so elects pursuant to applicable law, the power of sale herein
granted shall be exercisable with respect to all or any of the
Trust Property, as designated by Beneficiary or Trustee, and
Beneficiary and Trustee are each hereby authorized and
empowered to conduct any such sale of any Trust Property in
accordance with the procedures applicable to Real Property;
(iii) If the Trust Property consists of several lots, parcels or
items of property, Trustee shall, subject to applicable law,
(A) designate, in Trustee's discretion or at the direction of
Beneficiary, the order in which such lots, parcels or items
shall be offered for sale or sold, or (B) elect to sell such
lots, parcels or items through a single sale, or through two
or more successive sales, or in any other manner Beneficiary
or Trustee designates. Any person, including Trustor, Trustee
or Beneficiary, may purchase at any sale hereunder. Should
Trustee or Beneficiary desire that more than one sale or other
disposition of the Trust Property be conducted, Trustee shall,
subject to applicable law, cause such sales or dispositions to
be conducted simultaneously, or successively, on the same day,
or at such different days or times and in such order as
Beneficiary may designate, and no such sale shall terminate or
otherwise affect the Lien and security title of this Deed of
Trust on any part of the Trust Property not sold until all the
Senior Secured Obligations have been paid in full. In the
event Beneficiary or Trustee elects to dispose of the Trust
Property through more
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than one sale, Trustor agrees to pay the costs and expenses of
each such sale and of any judicial proceedings wherein such
sale may be made;
(iv) Beneficiary or Trustee may adjourn from time to time any sale
by it to be made under or by virtue of this Deed of Trust by
announcement at the time and place appointed for such sale or
for such adjourned sale or sales; and, except as otherwise
provided by any applicable provision of law, Beneficiary or
Trustee, without further notice or publication, may make such
sale at the time and place to which the same shall be so
adjourned; or Beneficiary or Trustee may, in its discretion,
give a new notice of sale.
(v) Upon any sale made under or by virtue of this Section 6.1(f)
(whether made under the power of sale herein granted or under
or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale), Beneficiary may bid for and
acquire the Trust Property or any part thereof and in lieu of
paying cash therefor may make settlement for the purchase
price by crediting upon the Senior Secured Obligations the net
sales price after deducting therefrom the expenses of the sale
and the costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust
or any other Financing Document.
(vi) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon
any other property of Trustor shall affect in any manner or to
any extent, the Lien of this Deed of Trust upon the Trust
Property or any part thereof, or any Liens, titles, rights,
powers or remedies of Beneficiary hereunder or under any other
Financing Document, but such Liens, titles, rights, powers and
remedies of Beneficiary and Trustee shall continue unimpaired
as before.
(vii) Trustor agrees, to the fullest extent permitted by law, that
upon the occurrence of an Event of Default, neither Trustor
nor anyone claiming through or under Trustor shall or will set
up, claim or seek to take advantage of any appraisement,
valuation, stay, extension, homestead, exemption or redemption
laws now or hereafter in force, in order to prevent or hinder
the enforcement or foreclosure of this Deed of Trust, or the
absolute sale of the Trust Property, or the final and absolute
putting into possession thereof, immediately after such sale,
of the purchasers thereat, and Trustor, for itself and all who
may at any time claim through or under it, hereby waives to
the fullest extent that it may lawfully so do, the benefit of
all such laws, and any and all right to have the assets
comprised in the security intended to be created hereby
marshalled upon any foreclosure of the Lien hereof.
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(viii) Beneficiary, at its option, is authorized to foreclose, or to
cause Trustee to foreclose, this Deed of Trust subject to the
rights of any tenants of the Trust Property, and the failure
to make any such tenants parties to any such foreclosure
proceedings and to foreclose such tenants' rights will not
be, nor be asserted to be by Trustor, a defense to any
proceedings instituted by Beneficiary or Trustee to collect
the sums secured hereby.
(g) subject to any applicable provisions of the Indenture, take over and
direct collection of the Rents, the Proceeds and the Receivables
that are included in the Trust Property and the proceeds thereof,
give notice of the Lien of this Deed of Trust upon the Rents, the
Proceeds and the Receivables and the proceeds thereof to any or all
Persons obligated to Trustor thereon, direct such Persons to make
payment of all moneys paid or payable thereon directly to
Beneficiary (and, at the request of Beneficiary, Trustor shall
indicate on all billings that payments thereon are to be made to
Beneficiary) and give any Person so notified and directed the
receipt of Beneficiary for any such payment as full release for the
amount so paid;
(h) subject to any applicable provisions of the Indenture, take control
of any and all of the Rents, Proceeds and Receivables, accounts,
contractual and other rights that are included in the Trust Property
and proceeds arising from any such contractual and other rights, and
enforce collection, either in the name of Beneficiary or in the name
of Trustor, of any or all of the Rents, Proceeds and Receivables,
accounts, contractual and other rights that are included in the
Trust Property and proceeds thereof by suit or otherwise, and
receive, receipt for, surrender, release or exchange all or any part
thereof or compromise, settle, extend or renew (whether or not
longer than the original period) any indebtedness thereunder;
(i) endorse in the name of Trustor any instrument, howsoever received by
Beneficiary, representing Trust Property, or proceeds of any of the
Trust Property;
(j) subject to the provisions of Article 3 hereof, exercise all the
rights and remedies granted to a secured party under Article 9 of
the Uniform Commercial Code in effect in the jurisdiction where the
Trust Property is located and all other rights and remedies given to
Beneficiary by this Deed of Trust or any other Financing Document
otherwise available at law or in equity; and
(k) to the fullest extent permitted by Applicable Law, without further
notice to Trustor and as a matter of right, and without regard to
the then value of the Trust Property or the interest of Trustor in
and to the Trust Property, apply to any court having jurisdiction to
appoint a receiver or receivers of the Trust Property, and Trustor
hereby irrevocably
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consents to such appointment. Notwithstanding the foregoing, Trustor
hereby waives any right to require appointment of a receiver.
Neither Beneficiary nor Trustee shall be under any obligation to make any
of the payments or do any of the acts referred to in this Section 6.1 and,
except as otherwise required by law, any of the actions referred to in
this Section 6.1 may be taken irrespective of whether any notice of Event
of Default or election to sell has been given hereunder and without regard
to the adequacy of the security for the Senior Secured Obligations. To the
fullest extent permitted by Applicable Law, Trustor hereby expressly
waives any and all rights of redemption from sale under any order or
judgment of foreclosure of the Lien of this Deed of Trust on behalf of
Trustor and each and every person acquiring any interest in or title to
the Trust Property subsequent to the date of this Deed of Trust and on
behalf of any other Persons. The reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) of Beneficiary incurred in
connection with the preservation, collection and enforcement of this Deed
of Trust or of the Lien granted hereby, including any amounts advanced by
Beneficiary to protect or preserve the Trust Property, shall be secured by
this Deed of Trust and Trustor covenants and agrees to pay them to the
order of Beneficiary promptly upon demand.
6.2 Rescission of Notice of Event of Default.
Beneficiary, at any time before the sale, may rescind any notice of Event
of Default and/or of election to cause any portion of the Trust Property
to be sold. The exercise by Beneficiary of such right of rescission shall
not (unless otherwise expressly provided by the terms of such rescission)
constitute a waiver of any Event of Default then existing or subsequently
occurring, shall not impair the right of Beneficiary to cause any portion
of the Trust Property to be sold and shall not otherwise affect any
provision, agreement, covenant or condition of this Deed of Trust, the
Indenture or any other Financing Document or the rights, obligations or
remedies of the parties hereunder or thereunder.
6.3 Application of Proceeds.
(a) All proceeds received from the sale or other disposition of any
portion of the Trust Property pursuant to this Deed of Trust shall
be applied by Beneficiary in accordance with the priority set forth
in Article IV of the Collateral Agency Agreement.
(b) If Beneficiary shall be ordered, in connection with any bankruptcy,
insolvency or reorganization of Trustor, to restore or repay to or
for the account of Trustor or its creditors any amount theretofore
received under this Section 6.3, the amount of such restoration or
repayment shall be deemed to be a Senior Secured Obligations as to
place Beneficiary in the position it would have been in had such
amount never been received by Beneficiary.
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6.4 Additional Security.
Subject to any applicable provisions of the Indenture, if Beneficiary at
any time shall have a security interest securing any Senior Secured
Obligation in addition to the Lien created hereby on the Trust Property,
Beneficiary may enforce the terms of the security documents or otherwise
realize upon the Trust Property, at its option, either before or
concurrently with the exercise of remedies as to such other security or
after a sale is made of such other security, and may apply the proceeds to
the Senior Secured Obligations without affecting the status of or waiving
any right to exhaust all or any other security, including the Trust
Property, and without waiving any breach or Event of Default or any right
or power whether exercised under the Financing Documents, contained in the
Financing Documents or provided for in respect of any such other security.
6.5 Remedies Cumulative.
The rights, powers and remedies of Beneficiary under this Deed of Trust,
or any other security agreement or any other Financing Document shall be
cumulative and not exclusive of any other right, power or remedy which
Beneficiary may have against Trustor pursuant to this Deed of Trust or the
other Financing Documents, or existing at law or in equity or otherwise.
Beneficiary's rights, powers and remedies shall be cumulative and
concurrent and may be pursued independently, singly, successively,
together or otherwise, at such time and in such order as Beneficiary may
determine to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Beneficiary permitted
by law, equity or contract or as set forth herein or in the other
Financing Documents. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default shall impair any such remedy,
right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as
may be deemed expedient. A waiver of one Default or Event of Default shall
not be construed to be a waiver of any subsequent Default or Event of
Default or to impair any remedy, right or power consequent thereon. The
obtaining of a judgment or decree on any of the Bonds, VEPCO Letters of
Credit or LOC Loans shall not in any manner affect the Lien of this Deed
of Trust upon the Trust Property, and any judgment or decree so obtained
shall be secured hereby to the same extent as the Bonds, VEPCO Letters of
Credit or LOC Loans are now secured. In case Beneficiary shall have
proceeded to enforce any right or remedy under this Deed of Trust by
receiver, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to Beneficiary, then and in every such case, but subject to
Applicable Law, Trustor and Beneficiary shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceeding had been taken. In the
event of any foreclosure sale hereunder, all net proceeds shall be
available for application to the Senior Secured Obligations whether or not
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such proceeds exceed the value of the Trust Property for recordation, tax,
insurance or other purposes. The only limitation upon the foregoing
agreements as to the exercise of Beneficiary's remedies is that there
shall be but one full and complete satisfaction of the Senior Secured
Obligations.
6.6 Attorney-in-Fact.
Upon the occurrence and during the continuance of an Event of Default,
Trustor hereby appoints Beneficiary attorney-in-fact of Trustor for the
purpose of carrying out the provisions of this Deed of Trust and taking
any action and executing any instrument that Beneficiary may deem
reasonably necessary or advisable to accomplish the purposes hereof, at
Trustor's expense, which appointment is irrevocable and coupled with an
interest.
6.7 Waiver of Notice.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, TRUSTOR HEREBY WAIVES ANY RIGHT
TRUSTOR MAY HAVE UNDER THE CONSTITUTION OR THE LAW OF THE STATE OF IN
WHICH THE LAND IS LOCATED OR THE CONSTITUTION OR THE LAWS OF THE UNITED
STATES OF AMERICA TO NOTICE, OTHER THAN EXPRESSLY PROVIDED FOR IN THIS
DEED OF TRUST, THE INDENTURE OR THE OTHER FINANCING DOCUMENTS, OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY
THIS DEED OF TRUST TO BENEFICIARY, AND TRUSTOR WAIVES TRUSTOR'S RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE
WITH THE PROVISIONS OF THIS DEED OF TRUST ON THE GROUND (IF SUCH BE THE
CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL
WAIVERS BY TRUSTOR IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER TRUSTOR HAS BY TRUSTOR'S ATTORNEY BEEN
FIRST APPRIZED OF AND COUNSELED WITH RESPECT TO TRUSTOR'S POSSIBLE
ALTERNATIVE RIGHTS.
6.8 Payment of Costs and Expenses.
Trustor shall immediately reimburse Beneficiary, the other Senior Secured
Parties and Trustee for their respective costs and expenses to the extent
set forth in and in accordance with the Indenture and the other Financing
Documents.
6.9 Trustor's Waivers.
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(a) Trustor has read and hereby approves the Indenture, the Common
Agreement, the Bonds, the VEPCO Letters of Credit, the LOC Loans,
the other Financing Documents and all other agreements and documents
relating thereto. Trustor acknowledges that it has been represented
by counsel of its choice to review this Deed of Trust, the Financing
Documents and all other documents relating thereto and said counsel
has explained and Trustor understands the provisions thereof, or
that Trustor has voluntarily declined to retain such counsel.
(b) Trustor hereby expressly waives diligence, demand, presentment,
protest and notice of every kind and nature whatsoever (unless as
otherwise required under this Deed of Trust) and waives any right to
require Beneficiary or any other Senior Secured Party to enforce any
remedy against any guarantor, endorser or other person whatsoever
prior to the exercise of its rights and remedies hereunder or
otherwise. Trustor waives any right to require Beneficiary or any
other Senior Secured Party to: (i) proceed or exhaust any collateral
security given or held by Beneficiary or any other Senior Secured
Party in connection with the Senior Secured Obligations; (ii) give
notice of the terms, time and place of any public or private sale of
any real or personal property security for the Senior Secured
Obligations or other guaranty of the Senior Secured Obligations; or
(iii) pursue any other remedy in Beneficiary's or any other Senior
Secured Party's power whatsoever.
(c) Until all Senior Secured Obligations shall have been paid in full,
Trustor: (i) shall not have any right of subrogation to any of the
rights of Beneficiary or any other Senior Secured Party against any
guarantor, maker or endorser; (ii) waives any right to enforce any
remedy which Beneficiary or other Senior Secured Party now has or
may hereafter have against any other guarantor, maker or endorser;
and (iii) waives any benefit of, and any other right to participate
in, any collateral security for the Senior Secured Obligations or
any guaranty of the Senior Secured Obligations now or hereafter held
by Beneficiary or any other Senior Secured Party.
(d) Subject to any applicable provisions of the Indenture, Trustor
hereby authorizes and empowers Beneficiary in its sole discretion,
without any notice or demand and without affecting the Lien and
charge of this Deed of Trust, to exercise any right or remedy which
Beneficiary or any other Senior Secured Party may have available to
it, including, but not limited to, judicial foreclosure, exercise of
rights of power of sale without judicial action as to any collateral
security for the Senior Secured Obligations, whether real, personal
or intangible property.
(e) To the full extent permitted by law, Trustor hereby covenants and
agrees that it shall not at any time insist upon or plead, or in any
manner whatsoever claim or take any advantage of, any stay,
exemption or extension law or any so-called "moratorium law"
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now or at any time hereafter in force, nor claim, take or insist
upon any benefit or advantage of or from any law now or hereafter in
force providing for the valuation or appraisement of the Trust
Property, or any part thereof, prior to any sale or sales thereof to
be made pursuant to any provisions herein contained, or to any
decree, judgment or order of any court of competent jurisdiction; or
after such sale or sales claim or exercise any rights under any
statute now or hereafter in force to redeem the property so sold, or
any part thereof, to the extent such covenant and agreement is
permitted by applicable law, or relating to the marshaling thereof,
upon foreclosure sale or other enforcement hereof. To the full
extent permitted by law, Trustor hereby expressly waives any and all
rights it may have to require that the Trust Property be sold as
separate tracts or units in the event of foreclosure. To the full
extent permitted by law, Trustor hereby expressly waives any and all
rights of redemption after sale under any order or decree of
foreclosure of this Deed of Trust, on its own behalf, on behalf of
all Persons claiming or having an interest (direct or indirect) by,
through or under Trustor and on behalf of each and every Person
acquiring any interest in or title to the Real Property subsequent
to the date hereof, it being the intent hereof that any and all such
rights of redemption of Trustor and of all other Persons, are and
shall be deemed to be hereby waived to the full extent permitted by
applicable law. To the full extent permitted by law, Trustor agrees
that it shall not, by invoking or utilizing any applicable law or
laws or otherwise, hinder, delay or impede the exercise of any
right, power or remedy herein or otherwise granted or delegated to
Beneficiary or any other Senior Secured Party, but shall suffer and
permit the exercise of every such right, power and remedy as though
no such law or laws have been or will have been made or enacted.
ARTICLE 7
MISCELLANEOUS
7.1 Performance at Trustor's Expense.
Except as expressly provided herein or in the other Financing Documents to
the contrary, no portion of the cost and expense of performing or
complying with any of the obligations imposed on Trustor by this Deed of
Trust shall be borne by Beneficiary or any other Senior Secured Party, and
no portion of such cost and expense shall be, in any way or to any extent,
credited against the aggregate amounts payable by Trustor pursuant to the
Indenture or any other Financing Document.
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7.2 Beneficiary's Right to Perform the Senior Secured Obligations.
If Trustor shall fail, refuse or neglect to make any payment or to perform
any act required of it by this Deed of Trust or any other Financing
Document, then at any time after the occurrence and during the continuance
of any Event of Default or as otherwise expressly permitted by the terms
of the Indenture or any other Financing Document, without waiving or
releasing any other right, remedy or recourse Beneficiary may have because
of same, Beneficiary may (but shall not be obligated to) make such payment
or perform such act for the account of and at the expense of Trustor. All
sums paid by Beneficiary pursuant to this Section 7.2 and all other sums
expended by Beneficiary in respect of which it shall be entitled to
indemnity, together with interest thereon from the date of such payment or
expenditure, shall constitute additions to the Senior Secured Obligations,
and shall be secured by this Deed of Trust, and Trustor covenants and
agrees to pay them to the order of Beneficiary upon demand.
7.3 Survival of Senior Secured Obligations.
Except as may be otherwise provided in the Indenture, all and every
portion of the Senior Secured Obligations shall survive the execution and
delivery of this Deed of Trust and the other Financing Documents, the
foreclosure or other exercise of remedies hereunder and the consummation
of the transactions called for therein and herein until the Senior Secured
Obligations shall be satisfied in full. This Deed of Trust secures, and
until the Senior Secured Obligations shall be paid and satisfied in full,
shall secure the entire amount of the Senior Secured Obligations. The
total amount of the indebtedness secured by this Deed of Trust may
increase or decrease from time to time.
7.4 Notices.
Notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed or
sent by facsimile as follows:
(a) if to Trustor, to it at LSP Energy Limited Partnership, Two Tower
Center, 20th Floor, East Brunswick, New Jersey 08816, Attn: General
Counsel, Fax: (732) 249-7290;
(b) if to Trustee, to James W. O'Mara at Phelps Dunbar, L.L.P., Suite
500, Skytel Centre, 200 S. Lamar Street, P.O. Box 23066, Jackson,
Mississippi 39225-3066, Fax: (601) 360-9777; and
(c) if to Beneficiary, to it at The Bank of New York, 101 Barclay
Street, Floor 21 West, New York, New York, Attn: Corporate Trust
Trustee Administration, Fax: (212) 815-5915.
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All notices and other communications given to any party hereto in
accordance with the provisions of this Deed of Trust shall be deemed to
have been given on the date of receipt if delivered by hand or overnight
courier service or sent by facsimile, or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided
in this Section 7.4 or in accordance with the latest unrevoked direction
from such party given in accordance with this Section 7.4.
7.5 Delay not a Waiver.
Neither any failure nor any delay on the part of Beneficiary in insisting
upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the
Bonds, the VEPCO Letters of Credit, the LOC Loans or under any other
Financing Document, or any other instrument given as security therefor,
shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular,
and not by way of limitation, by accepting payment after the due date of
any amount payable under this Deed of Trust, the Bonds, the VEPCO Letters
of Credit, the LOC Loans or any other Financing Document, Beneficiary
shall not be deemed to have waived any right either to require prompt
payment when due of all other amounts due under this Deed of Trust, the
Bonds, the VEPCO Letters of Credit, the LOC Loans or the other Financing
Documents, or to declare a default for failure to effect prompt payment of
any such other amount.
7.6 Covenants Running with the Land.
The Senior Secured Obligations and all obligations hereunder are intended
by the parties to be, and shall be construed as, covenants running with
the Trust Property until such Trust Property has been released from the
Lien of this Deed of Trust.
7.7 Further Assurances.
(a) Notwithstanding anything to the contrary herein, Trustor shall, at
Trustor's sole cost and expense:
(i) execute and deliver to Beneficiary such documents,
instruments, certificates, assignments and other writings, and
do such other acts necessary or desirable, to evidence,
preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Trustor under the
Financing Documents, as Beneficiary may reasonably require;
and
(ii) do and execute all and such further lawful and reasonable
acts, conveyances and assurances for the better and more
effective carrying out of the intents and
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purposes of this Deed of Trust and the other Financing
Documents, as Beneficiary shall reasonably require from time
to time; provided that Trustor shall not be required to pay
any material out-of-pocket costs or incur any material
obligations not contemplated by this Deed of Trust or the
other Financing Documents in connection with the performance
of its obligations under this Section 7.7(a)(ii).
(b) If at any time Beneficiary determines, based on applicable law, that
all applicable taxes (including mortgage recording taxes or similar
charges, but excluding Permitted Encumbrances) were not paid in
connection with the recordation of this Deed of Trust or the
perfection of the Liens granted pursuant to the Financing Documents,
Trustor shall pay the same upon demand.
(c) In the event that the legal description attached to any Financing
Document is inaccurate or does not fully describe all of the Real
Property in which Trustor has an interest, Trustor hereby agrees to
the amendment of such legal description and the legal description
contained in the corresponding title insurance policy so that such
error is corrected and Trustor shall execute and cause to be
recorded, if applicable, such documentation as may be necessary for
such purpose.
7.8 Severability.
If any provision of this Deed of Trust or the application thereof to any
Person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, then neither the remainder of this Deed of Trust nor the
application of such provision to other Persons or circumstances nor the
other instruments referred to hereinabove shall be affected thereby, but
rather shall be enforced to the greatest extent permitted by Applicable
Law.
7.9 Entire Agreement and Modification.
This Deed of Trust and the other Financing Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between
such parties, whether oral or written, are superseded by the terms of this
Deed of Trust and the other Financing Documents.
7.10 Applicable Law.
This Deed of Trust was negotiated in the State of New York, and the
proceeds of the Bonds and the VEPCO Letters of Credit delivered pursuant
to the Indenture and the Common Agreement will be disbursed from the State
of New York, which State Trustor and Beneficiary agree has a substantial
relationship to the parties and to the underlying transaction embodied
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hereby, and Trustor and, by its acceptance hereof, Beneficiary hereby
agree, in accordance with ss. 5-1401 of the New York General Obligations
Law, in all respects, including matters of construction, validity and
performance, this Deed of Trust and the Senior Secured Obligations shall
be governed by, and construed in accordance with, the laws of the State of
New York applicable to contracts made and performed in such State and any
applicable law of the United States of America, except that the provisions
for the creation, perfection, priority and enforcement of the Lien created
hereby shall be governed by and construed according to the law of the
state in which the Land is located, it being understood that, to the
fullest extent permitted by the law of the state in which the Land is
located, the law of the State of New York shall govern the validity and
the enforceability of the representations, warranties, covenants and
obligations of Beneficiary under this Deed of Trust and all other
Financing Documents and all of the indebtedness arising hereunder or
thereunder. To the fullest extent permitted by law, Trustor hereby
unconditionally and irrevocably waives any claim to assert that the law of
any other jurisdiction governs this Deed of Trust, except as expressly
otherwise provided above.
7.11 Limitation on Beneficiary's Responsibility.
No provision of this Deed of Trust shall operate to place any obligation
or liability for the control, care, management or repair of the Trust
Property upon Beneficiary or any other Senior Secured Party, nor shall it
operate to make Beneficiary or any other Senior Secured Party responsible
or liable for any waste committed on the Trust Property by the tenants or
any other Person, or for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or
control of the Trust Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger. Nothing herein contained shall be
construed as constituting Beneficiary or any other Senior Secured Party
"mortgagee in possession."
7.12 Headings.
The Article and/or Section headings and the Table of Contents herein are
included for convenience of reference only and shall not constitute a part
of this Deed of Trust for any other purpose.
7.13 Marshalling.
Notwithstanding anything herein to the contrary, Trustor will not: (a) at
any time insist upon, or plead, or in any manner whatever claim or take
any benefit or advantage of any stay or extension or moratorium law, any
exemption from execution or sale of the Trust Property or any part
thereof, whenever or wherever enacted, which may affect the covenants and
terms of performance of this Deed of Trust; (b) claim, take or insist upon
any benefit or advantage of any law now or hereafter in force providing
for the valuation or appraisal of the Trust Property, or any part thereof,
prior to any sale or sales thereof which may be made pursuant to any
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provision herein, or pursuant to the decree, judgment or order of any
court of competent jurisdiction; or (c) after any such sale or sales,
claim or exercise any right under any statute heretofore or hereafter
enacted to redeem the property so sold or any part thereof. Additionally,
Trustor hereby expressly waives all benefit or advantage of any such law
or laws. Trustor, for itself and all who may claim under it, waives, to
the extent that it lawfully may, all right to have the Trust Property
marshaled upon any foreclosure hereof. Beneficiary shall have the right to
determine the order in which any or all portions of the Senior Secured
Obligations are satisfied from the proceeds realized upon the exercise of
the remedies provided herein. Trustor, any party who consents to this Deed
of Trust and any party who now or hereafter acquires a Lien or security
interest in any of the Trust Property and who has actual or constructive
notice hereof hereby waives any and all right to require the marshaling of
assets in connection with the exercise of any of the remedies permitted by
applicable law or provided herein.
7.14 Waiver of Jury Trial and Consent to Jurisdiction.
TRUSTOR AND BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS DEED OF TRUST, ANY OTHER FINANCING DOCUMENT, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS DEED OF TRUST. The
scope of this waiver is intended to encompass any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty
claims, and all other common laws and statutory claims. Trustor and
Beneficiary each acknowledges that this waiver is a material inducement to
enter into this Deed of Trust, and that each will continue to rely on the
waiver in their related future dealing. Trustor warrants and represents
that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS DEED OF TRUST, OR ANY OTHER FINANCING DOCUMENTS. In the event of
litigation, this Deed of Trust may be filed as a written consent to a
trial by the court. Trustor hereby irrevocably submits to the jurisdiction
of any court of competent jurisdiction located in the state in which any
portion of the Trust Property is located in connection with any proceeding
arising out of or relating to this Deed of Trust involving such portion of
the Trust Property.
7.15 Maximum Indebtedness and Future Advances.
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This Deed of Trust shall secure not only existing Senior Secured
Obligations, but also such future advances, whether such advances are
obligatory or are to be made at the option of Beneficiary or the Senior
Secured Parties or otherwise related to or in connection with the
Indenture or the other Financing Documents, as are made by Beneficiary
and/or the Senior Secured Parties to Trustor to the same extent as if such
future advances were made on the date of the execution of this Deed of
Trust, including (a) any and all additional advances made by Beneficiary
or the Senior Secured Parties to protect or preserve the Trust Property or
the Lien hereof on the Trust Property, or to pay taxes, to pay premiums on
insurance on the Trust Property (whether or not the original Trustor
remains the owner of the Trust Property at the time of such advances and
whether or not the original Beneficiary remains the Administrative Agent
and/or the Collateral Agent); (b) any and all expenses incident to the
collection of the Senior Secured Obligations and the foreclosure hereof by
action in any court or by exercise of the power of sale herein contained;
(c) any and all amounts now owing or which may hereafter be owing by
Trustor to Beneficiary, and/or the Senior Secured Parties pursuant to the
Financing Documents, however and whenever incurred or evidenced, whether
direct or indirect, absolute or contingent, due or to become due, together
with any and all renewal or renewals and extension or extensions of the
Senior Secured Obligations; and (d) the full and prompt payment and
performance of any and all obligations or covenants of Trustor to
Beneficiary and/or the Senior Secured Parties under the terms of any other
agreements, assignments or other instruments now or hereafter evidencing,
securing or otherwise relating to the Senior Secured Obligations,
including the Financing Documents.
7.16 Lien Absolute; Multiple Collateral Transaction.
Trustor acknowledges that this Deed of Trust and a number of other
Financing Documents and those documents required by the Financing
Documents together secure the Senior Secured Obligations. Trustor agrees
that the Lien of this Deed of Trust and all Senior Secured Obligations
shall be absolute and unconditional and shall not in any manner be
affected or impaired by any lack of validity or enforceability of the
Indenture or any other Financing Document, any agreement with respect to
any of the Senior Secured Obligations or any other agreement or instrument
relating to any of the foregoing, and the Lien hereof shall not be
impaired by any acceptance by Beneficiary of any security for or
guarantees of any of the Senior Secured Obligations, or by any failure,
neglect or omission on the part of Beneficiary or Trustee to realize upon
or protect any of the Senior Secured Obligations or any collateral
security therefor, including the Financing Documents, or due to any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Trustor in respect of the Senior Secured Obligations or this
Deed of Trust (other than the indefeasible payment in full of all the
Senior Secured Obligations). The Lien hereof shall not in any manner be
impaired or affected by any change in the time, manner or place of payment
of, or in any other term of, all or any of the Senior Secured Obligations
or by any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, nonperfection, renewal, extension,
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indulgence, alteration, exchange, modification or disposition of any of
the Senior Secured Obligations or of any of the collateral security
therefor, or any amendment or waiver of or any consent to any departure
from the Indenture or any other Financing Document or of any guaranty
thereof, if any, and Beneficiary or Trustee may, in Beneficiary's
discretion, foreclose, exercise any power of sale, or exercise any other
remedy available under any or all of the Financing Documents without first
exercising or enforcing any other rights and remedies hereunder. Such
exercise of rights and remedies under any or all of the Financing
Documents shall not in any manner impair the Senior Secured Obligations or
the Lien of this Deed of Trust, and any exercise of any rights or remedies
hereunder shall not impair the Lien of any of the other Financing
Documents or any rights and remedies of any Senior Secured Party
thereunder. Trustor specifically consents and agrees that Beneficiary or
Trustee may exercise any rights and remedies hereunder and under the other
Financing Documents separately or concurrently and in any order that
Beneficiary or Trustee may deem appropriate.
7.17 Discharge of Deed.
Upon written request of Beneficiary stating that all Senior Secured
Obligations have been paid and performed, upon surrender of this Deed of
Trust and the documents evidencing the Senior Secured Obligations to
Trustee for cancellation and retention, and upon payment to Trustee of its
fees, costs and expenses incurred or to be incurred thereby, Trustee shall
reconvey, without warranty, the Trust Property then held hereunder. The
recitals in such reconveyance of any matters or facts shall be conclusive
proof of the truthfulness thereof. The grantee in such reconveyance may be
described as "the person or persons legally entitled thereto."
7.18 Renewal or Extension of Senior Secured Obligations.
This Deed of Trust and all other instruments evidencing or securing the
Senior Secured Obligations shall likewise secure any extension,
modification, renewal, or substitution of the Senior Secured Obligations
and any bond issued in substitution for the Bonds and any letter of credit
which may be executed and delivered in substitution for the VEPCO Letters
of Credit. The Lien of this Deed of Trust shall in no manner be affected
by any such extension, modification, renewal, or substitution.
7.19 Conflicts.
In the event of any conflict or inconsistency between the terms of this
Deed of Trust and those of the Indenture or the Common Agreement, it is
the intention of Trustor and Beneficiary that such documents shall be read
together and construed, to the fullest extent possible, to be in concert
with each other. In the event of a conflict or inconsistency that cannot
be resolved as aforesaid, the terms of the Indenture shall control.
Trustor hereto acknowledges that it was represented by counsel in
connection with the negotiation and drafting of this Deed of Trust and
that this Deed of Trust the other Financing Documents shall not be subject
to the principle of construing their meaning against the party which
drafted the same.
7.20 Assumption Not a Novation.
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Beneficiary's acceptance of an assumption of the obligations of this Deed
of Trust, the Bonds, the LOC Loans and the VEPCO Letters of Credit, and
the release of Trustor hereof, shall not constitute a novation.
7.21 Substitute Or Successor Trustees.
Beneficiary may remove Trustee at any time or from time to time and select
a successor Trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion
for any reason whatsoever Beneficiary may, without notice and without
specifying any reason therefor and without applying to any court, select
and appoint a successor Trustee, by substitution of trustee recorded in
the land records where this Deed of Trust is recorded and all powers,
rights, duties and authority of Trustee shall thereupon become vested in
such successor. Such substitute Trustee shall not be required to give bond
for the faithful performance of the duties of Trustee hereunder unless
required by Beneficiary. The procedure provided for in this paragraph for
substitution of Trustee shall be in addition to and not in exclusion of
any other provisions for substitution, by law or otherwise. Beneficiary
shall not be limited in the number of substitutions of the Trustee.
All moneys received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received,
but need not be segregated in any manner from any other moneys (except to
the extent required by applicable law) and Trustee shall be under no
liability for interest on any moneys received by Trustee hereunder.
Any substitute Trustee appointed pursuant to any of the provisions hereof
shall, without any further act, deed, or conveyance, other than recording
evidence of the appointment of such substitute Trustee in the land records
of each county of the state wherein the Land is located, become vested
with all the estates, properties, rights, powers and trusts of its or
his/her predecessor in the rights hereunder with like effect as if
originally named a Trustee herein: but nevertheless, upon the written
request of Beneficiary or of the substitute trustee, upon the trusts
herein expressed, all the estates, properties, rights, powers, and trusts
of the Trustee so ceasing to act, and shall duly assign, transfer and
deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in the Trustee's place.
7.22 Limitation of Recourse.
The provisions of Section 14.1 of the Indenture are made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein.
7.23 Counterparts.
This Deed of Trust has simultaneously been executed in a number of
identical counterparts, each of which shall be deemed to be an original
and constitute one and the same Deed of Trust.
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IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be signed by
Trustor's duly authorized representative as of the day and year first above
written.
TRUSTOR:
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc., its general partner
By: /s/ Frank Hardenbergh
--------------------------------
Name: Frank Hardenbergh
Title: Senior Vice-President
Signature Page to Deed of Trust
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ACKNOWLEDGEMENT
STATE OF NEW YORK
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for said
county and state, on this the ___ day of May, 1999, within my jurisdiction, the
within named Frank Hardenbergh who acknowledged that he is the Senior Vice
President of LSP Energy, Inc., a Delaware corporation, the general partner of
LSP Energy Limited Partnership, a Delaware limited partnership, as its act and
deed he executed the above and foregoing instrument, after first being duly
authorized by said corporation so to do.
(SEAL)
_________________________________
NOTARY PUBLIC
My commission expires:
_______________________________
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
[Exhibit begins on next page]
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
[Exhibit begins on next page]
<PAGE>
EXHIBIT B
PERMITS AND LICENSES
[Exhibit begins on next page]
<PAGE>
Exhibit 4.22
================================================================================
SECOND AMENDED AND RESTATED SECURITIES ACCOUNT
CONTROL AGREEMENT
dated as of May 21, 1999
between
LSP BATESVILLE FUNDING CORPORATION,
LSP ENERGY LIMITED PARTNERSHIP
and
THE BANK OF NEW YORK,
as Collateral Agent and Securities Intermediary
================================================================================
<PAGE>
TABLE OF CONTENTS
RECITALS ......................................................................1
AGREEMENT......................................................................3
Section 1. Establishment of Securities Accounts............................3
Section 2. "Financial Assets" Election.....................................4
Section 3. Entitlement Order...............................................4
Section 4. Subordination of Lien; Waiver of Set-Off........................5
Section 5. Choice of Law...................................................5
Section 6. Conflict with Other Agreements..................................5
Section 7. Adverse Claims..................................................6
Section 8. Representations, Warranties and Covenants of the Securities
Intermediary....................................................6
Section 9. Indemnification of Securities Intermediary......................7
Section 10. Successors; Assignment..........................................7
Section 11. Notices.........................................................7
Section 12. Termination.....................................................8
Section 13. Counterparts....................................................9
Section 14. References to Securities Account Control Agreement..............9
i
<PAGE>
SECOND AMENDED AND RESTATED
SECURITIES ACCOUNT CONTROL AGREEMENT
This SECOND AMENDED AND RESTATED SECURITIES ACCOUNT CONTROL
AGREEMENT, dated as of May 21, 1999 (this "Agreement"), among LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Partnership"), LSP BATESVILLE
FUNDING CORPORATION (the "Funding Corporation", and together with the
Partnership, the "Debtors"), THE BANK OF NEW YORK, as Collateral Agent (the
"Collateral Agent"), and THE BANK OF NEW YORK, as Administrative Agent (the
"Securities Intermediary"). Capitalized terms used but not defined herein shall
have the meanings assigned thereto in the Trust Indenture, dated as of May 21,
1999 (the "Indenture"), among the Debtors and The Bank of New York as trustee
(the "Trustee"). All references herein to the "UCC" shall mean the Uniform
Commercial Code as in effect in the State of New York.
RECITALS
WHEREAS, the Partnership was formed for the purpose of developing,
financing, constructing, owning and operating an approximately 837 MW (net)
natural gas-fired combined-cycle electric generation facility located in
Batesville, Mississippi (the "Project");
WHEREAS, pursuant to the Tranche A Facility Credit Agreement, dated
as of August 28, 1998 (the "Initial Credit Agreement"), among the Partnership,
the banks and other financial institutions party thereto (the "Initial Banks")
and Credit Suisse First Boston as agent for the Initial Banks, the Initial Banks
agreed to provide loans (the "Initial Loans") to the Partnership to finance a
portion of the development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Initial Credit
Agreement and the related financing documents, and as a condition precedent to
the Initial Banks providing the Initial Loans to the Partnership, the
Partnership, the Funding Corporation and LSP Batesville Holding, LLC ("Holding")
entered into the Common Agreement, dated as of August 28, 1998 (the "Initial
Common Agreement") with Credit Suisse First Boston as Tranche A Facility Lender
and L/C Facility Agent and IBJ Schroder Bank & Trust Company as Administrative
Agent, Collateral Agent, Intercreditor Agent and Securities Intermediary;
<PAGE>
WHEREAS, in connection with the execution of the Initial Credit
Agreement, the Initial Common Agreement and the related financing documents, the
Partnership executed the Securities Account Control Agreement, dated as of
August 28, 1998 (the "Initial Securities Account Control Agreement"), with IBJ
Schroder Bank & Trust Company as collateral agent;
WHEREAS, pursuant to the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Supplemental Credit Agreement"),
among the Partnership, the banks and other financial institutions party thereto
(the "Supplemental Banks") and Credit Suisse First Boston as agent for the
Supplemental Banks, (1) the Partnership, the Supplemental Banks and Credit
Suisse First Boston amended and restated the Initial Credit Agreement in its
entirety and (2) the Supplemental Banks agreed to provide loans (the
"Supplemental Loans") to the Partnership to finance a portion of the
development, construction and start-up of the Project;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the related financing documents, and as a condition precedent to
the Supplemental Banks providing the Supplemental Loans to the Partnership, the
Partnership and Credit Suisse First Boston as Bank Facility Agent, L/C Facility
Agent, Administrative Agent, Collateral Agent and Securities Intermediary
executed the Amended and Restated Common Agreement, dated as of the December 15,
1998 (the "Supplemental Common Agreement"), pursuant to which the Initial Common
Agreement was amended and restated in its entirety;
WHEREAS, in connection with the execution of the Supplemental Credit
Agreement and the related financing documents, the Partnership executed the
Amended and Restated Securities Account Control Agreement, dated as of December
15, 1998 (the "Supplemental Securities Account Control Agreement"), with Credit
Suisse First Boston as collateral agent, and pursuant to which the Initial
Securities Account Control Agreement was restated in its entirety;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (1) $150,000,000 aggregate principal amount of their 7.164% Series A
Senior Secured Bonds due January 15, 2014 (the "Series A Bonds") and (2)
$176,000,000 aggregate principal amount of their 8.160% Series B Senior Secured
Bonds due July 15, 2025 (the "Series B Bonds" and, together with the Series A
Bonds, the "Bonds") pursuant to the Indenture;
2
<PAGE>
WHEREAS, the Partnership and the Funding Corporation will use the
net proceeds of the Bonds to (1) repay in full the Indebtedness outstanding
under the Supplemental Credit Agreement and (2) pay a portion of the remaining
Project Costs;
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the related Financing Documents, the Partnership, the Funding
Corporation, with The Bank of New York as the Collateral Agent, the
Administrative Agent and the Intercreditor Agent are entering into the Second
Amended and Restated Common Agreement (the "Common Agreement"), in order to
amend and restate the Supplemental Common Agreement in its entirety;
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the Common Agreement, the Partnership, the Funding Corporation,
the Collateral Agent and the Administrative Agent desire to amend and restate
the Supplemental Securities Account Control Agreement in its entirety; and
WHEREAS, in order to secure the Debtors' obligations under the terms
of the Bonds, the Debtors have granted to the Collateral Agent, for the benefit
of the Secured Parties, a security interest in substantially all of their
tangible and intangible personal property pursuant to (i) the Second Amended and
Restated Security Agreement, dated as of May 21, 1999 (the "Partnership Security
Agreement"), between the Partnership and the Collateral Agent, and (ii) the
Security Agreement, dated as of May 21, 1999 (the "Funding Corporation Security
Agreement," and together with the Second Amended and Restated Partnership
Security Agreement, the "Security Documents") between the Funding Corporation
and the Collateral Agent.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Supplemental Securities Account Control Agreement is hereby
amended and restated in its entirety as follows:
Section 1. Establishment of Securities Accounts. The Securities
Intermediary hereby confirms and agrees that:
(a) The Securities Intermediary has established the accounts set
forth on
3
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Schedule I hereto (such accounts and any other successor accounts, collectively,
the "Securities Accounts") and the Securities Intermediary shall not change the
name or account number of any of the Securities Accounts without the prior
written consent of the Collateral Agent;
(b) All securities or other property underlying any financial assets
credited to any of the Securities Accounts shall be registered in the name of
the Securities Intermediary, indorsed to the Securities Intermediary or in blank
or credited to another securities account maintained in the name of the
Securities Intermediary and in no case will any financial asset credited to any
of the Securities Accounts be registered in the name of the Debtors, payable to
the order of the Debtors or specially indorsed to the Debtors except to the
extent the foregoing have been specially indorsed to the Securities Intermediary
or in blank;
(c) All property delivered to the Securities Intermediary pursuant
to the Senior Security Documents or the Common Agreement will be promptly
credited to the appropriate Securities Account;
(d) Each Securities Account is a "securities account" as such term
is defined in Section 8-501-(b) of the UCC; and
(e) The Securities Accounts are accounts to which financial assets
may be credited, and the Securities Intermediary shall, subject to the terms of
this Agreement, treat the Collateral Agent as (i) entitled to exercise the
rights that comprise any financial asset credited to any of the Securities
Accounts, and (ii) the "entitlement holder" (within the meaning of Section 8-102
of the UCC) with respect to the Securities Accounts on the books and records of
the Securities Intermediary.
Section 2. "Financial Assets" Election. The Securities Intermediary
hereby agrees that each item of property (whether investment property, financial
asset, security, instrument, cash or any other property of any kind) credited to
any of the Securities Accounts shall be treated as a "financial asset" within
the meaning of Section 8-102(a)(9) of the UCC.
Section 3. Entitlement Orders. If at any time the Securities
Intermediary shall receive any order from the Collateral Agent directing
transfer or redemption of any financial asset relating to any of the Securities
Accounts, the Securities Intermediary shall
4
<PAGE>
comply with such entitlement order without further consent by the Debtors or any
other person.
Section 4. Subordination of Lien; Waiver of Set-Off. In the event
that the Securities Intermediary has or subsequently obtains by agreement, by
operation of law or otherwise a security interest in any of the Securities
Accounts or any security entitlement credited thereto, the Securities
Intermediary hereby agrees that such security interest shall be subordinate to
the security interest of the Collateral Agent. The financial assets and other
items credited to the Securities Accounts will not be subject to deduction,
set-off, banker's lien or any other right in favor of any person other than the
Collateral Agent (except that the Securities Intermediary may set off (i) all
amounts due to the Securities Intermediary in respect of the Securities
Intermediary's customary fees and expenses for the routine maintenance and
operation of the Securities Accounts and (ii) the face amount of any checks
which have been credited to any of the Securities Accounts but are subsequently
returned unpaid because of uncollected or insufficient funds).
Section 5. Choice of Law. Both this Agreement and each of the
Securities Accounts (as well as the securities entitlements related thereto)
shall be governed by the laws of the State of New York. Regardless of any
provision in any other agreement, for purposes of the UCC, New York shall be
deemed to be the Securities Intermediary's jurisdiction.
Section 6. Conflict with Other Agreements.
(a) In the event of any conflict between this Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered into,
the terms of this Agreement shall prevail.
(b) No amendment or modification of this Agreement or waiver of any
right hereunder shall be binding on any party hereto unless it is in writing and
is signed by all of the parties hereto.
(c) The Securities Intermediary hereby confirms and agrees that:
(i) There are no other agreements entered into between the
Securities Intermediary and the Debtors with respect to any of the
Securities Accounts other than the Senior Security Documents and
agreements with respect
5
<PAGE>
to the making of Permitted Investments;
(ii) It has not entered into, and until the termination of
this agreement will not enter into, any agreement with any other person
relating to any of the Securities Accounts and/or any financial assets
credited thereto pursuant to which it has agreed to comply with
entitlement orders (as defined in Section 8-102(a)(8) of the UCC) of such
other person; and
(iii) It has not entered into, and until the termination of
this agreement will not enter into, any agreement with the Debtors or the
Collateral Agent purporting to limit or condition the obligation of the
Securities Intermediary to comply with entitlement orders as set forth in
Section 3 hereof.
Section 7. Adverse Claims. Except for the claims and interest of the
Collateral Agent and the Debtors in the Securities Accounts, the Securities
Intermediary does not have actual knowledge of any claim to, or interest in, any
of the Securities Accounts or in any "financial asset" (as defined in Section
8-102(a) of the UCC) credited thereto. If any person asserts any lien,
encumbrance or adverse claim (including any writ, garnishment, judgment, warrant
of attachment, execution or similar process) against any of the Securities
Accounts or in any financial asset carried therein, the Securities Intermediary
will promptly notify the Collateral Agent and the Debtors thereof.
Section 8. Representations, Warranties and Covenants of the
Securities Intermediary. The Securities Intermediary hereby makes the following
representations, warranties and covenants:
(a) The Securities Accounts have been established as set forth in
Section 1 above and the Securities Accounts will be maintained in the manner set
forth herein until termination of this Agreement. The Securities Intermediary
shall not change the name or account number of any of the Securities Accounts
without the prior written consent of the Collateral Agent;
(b) This Agreement is the valid and legally binding obligation of
the Securities Intermediary, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
subject to general equitable principles;
6
<PAGE>
(c) The Securities Intermediary shall, during the term of this
Agreement, act as a "securities intermediary" and have the obligations of a
"securities intermediary" under Article 8 of the UCC with respect to the
Securities Accounts; and
(d) No financial asset is or will be registered in the name of the
Debtors, payable to the Debtors' order or specifically indorsed to the Debtors,
except to the extent such financial asset has been endorsed to the Securities
Intermediary or in blank.
Section 9. Indemnification of Securities Intermediary. The Debtors
and the Collateral Agent hereby agree that the Securities Intermediary is
released from any and all liabilities to the Debtors and the Collateral Agent
arising from the terms of this agreement and the compliance of the Securities
Intermediary with the terms hereof, except to the extent that such liabilities
arise directly from the Securities Intermediary's gross negligence. The Debtors
and its successors and assigns shall at all times indemnify and save harmless
the Securities Intermediary from and against any and all claims, actions and
suits of others arising out of the terms of this agreement or the compliance of
the Securities Intermediary with the terms hereof, except to the extent that
such arises directly from the Securities Intermediary's gross negligence, and
from and against any and all liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising by reason
of the same, until the termination of this Agreement.
Section 10. Successors; Assignment. The terms of this Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and permitted assigns. The Collateral Agent may
assign its rights hereunder to any successor collateral agent in accordance with
the Common Agreement, the Collateral Agency Agreement and the other Financing
Documents. Any other assignment by the Collateral Agent shall be effective only
with the express written consent of the Securities Intermediary and by sending
written notice of such assignment to the Debtors.
Section 11. Notices. Any notice, request or other communication
required or permitted to be given under this Agreement shall be in writing and
deemed to have been properly given when delivered in person, or when sent by
telecopy or other electronic means and electronic confirmation of error free
receipt is received or upon receipt when sent by certified or registered United
States mail, return receipt requested, postage prepaid, addressed to the party
at the address set forth below.
Debtors: LSP Energy Limited Partnership
7
<PAGE>
LSP Batesville Funding Corporation
Two Tower Center
20th Floor East
East Brunswick, New Jersey 08816
Attention: General Counsel
Collateral Agent: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
Securities
Intermediary: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
Any party may change its address for notices in the manner set forth
above.
Section 12. Termination. The rights and powers granted herein to the
Collateral Agent have been granted in order to perfect its security interest in
the Securities Accounts, are powers coupled with an interest and will neither be
affected by the bankruptcy of either of the Debtors nor the lapse of time. The
obligations of the Securities Intermediary to the Collateral Agent pursuant to
this Agreement shall continue in effect until the security interests of the
Collateral Agent in the Securities Accounts have been terminated pursuant to the
terms of the Security Documents and the Collateral Agent has notified the
Securities Intermediary of such termination in writing. The Collateral Agent
agrees to provide a Notice of Termination in substantially the form of Exhibit A
hereto to the Securities Intermediary upon the request of the Debtors on or
after the termination of the Collateral Agent's security interest in the
Securities Accounts pursuant to the terms of the Partnership Security Agreement.
The termination of this Agreement shall not terminate the Securities Accounts or
alter the obligations of the Securities Intermediary to the
8
<PAGE>
Debtors pursuant to any other agreement with respect to the Securities Accounts.
Section 13. Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing and
delivering one or more counterparts.
Section 14. References to Securities Account Control Agreement. On
and after the date hereof, each reference in any of the Transaction Documents to
the "Securities Account Control Agreement" shall mean the Securities Account
Control Agreement as amended and restated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Securities Account Control Agreement to be executed by
their respective officers or representatives hereunto duly authorized as of the
day and year first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and
Secretary
THE BANK OF NEW YORK,
not in its individual capacity but solely as
Collateral Agent
By: /s/ Mary Beth Lewicki
------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE>
Signature Page to Securities Account Control Agreement
<PAGE>
THE BANK OF NEW YORK
not in its individual capacity but solely as
Administrative Agent
By: /s/ Mary Beth Lewicki
------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE>
Signature Page to Securities Account Control Agreement
<PAGE>
Schedule I
SECURITIES ACCOUNTS
--------------------------------------------------------------------------
Account Number Name of Account
-------------- ---------------
--------------------------------------------------------------------------
220776 Batesville - Revenue Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220775 Batesville - Constr. Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220781 Batesville - MMR Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220777 Batesville - O&M Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220785 Batesville - Prcd. Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220778 Batesville - DSP Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220779 Batesville - DSR Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220780 Batesville - DSR LOC Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
220783 Batesville - Dist. Susp. Acct. - BoNY as Coll. Agent
--------------------------------------------------------------------------
<PAGE>
Exhibit A
[Letterhead of Collateral Agent]
[Date]
The Bank of New York,
as Securities Intermediary
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
Re: Termination of Securities Account Control Agreement
You are hereby notified that the Second Amended and Restated
Securities Account Control Agreement (the "Agreement") between you, LSP
Batesville Funding Corporation, LSP Energy Limited Partnership and the
undersigned (a copy of which is attached) is terminated and you have no further
obligations to the undersigned pursuant to such agreement. Notwithstanding any
previous instructions to you, you are hereby instructed to accept all future
directions with respect to the accounts listed on Schedule I to the Agreement
from either LSP Batesville Funding Corporation or LSP Batesville Limited
Partnership. This notice terminates any obligations you may have to the
undersigned with respect to such accounts under the Agreement, however nothing
contained in this notice shall alter any obligations which you may otherwise owe
to LSP Batesville Funding Corporation or LSP Energy Limited Partnership pursuant
to any other agreement.
You are instructed to deliver a copy of this notice by facsimile
transmission to both LSP Batesville Funding Corporation and LSP Energy Limited
Partnership.
Very truly yours,
The Bank of New York,
not in its individual capacity, but solely
as Collateral Agent
By: _____________________
Name:
Title:
A-1
<PAGE>
LATHAM & WATKINS
PAUL R. WATKINS (1899--1973)
DANA LATHAM (1898--1974)
CHICAGO OFFICE
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606
PHONE (312) 876-7700, FAX 993-9767
HONG KONG OFFICE
SUITE 2205A, 22ND FLOOR
NO. 9 QUEEN'S ROAD CENTRAL
HONG KONG
PHONE + 852-2522-7886, FAX 2522-7006
LONDON OFFICE
ONE ANGEL COURT
LONDON EC2R 7HJ ENGLAND
PHONE + 44-171-374 4444, FAX 374 4460
LOS ANGELES OFFICE
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071-2007
PHONE (213) 485-1234, FAX 891-8763
MOSCOW OFFICE
ULITSA GASHEKA, 7, 9th Floor
MOSCOW 123056, RUSSIA
PHONE + 7-095 785-1234, FAX 785-1235
NEW JERSEY OFFICE
ONE NEWARK CENTER, 16th FLOOR
NEWARK, NEW JERSEY 07101-3174
PHONE (973) 639-1234, FAX 639-7298
ATTORNEYS AT LAW
53rd AT THIRD, SUITE 1000
885 THIRD AVENUE
NEW YORK, NEW YORK 10022-4802
TELEPHONE (212) 906-1200
FAX (212) 751-4864
-----------------
August , 1999
ORANGE COUNTY OFFICE
650 TOWN CENTER DRIVE, SUITE 2000
COSTA MESA, CALIFORNIA 92626-1925
PHONE (714) 540-1235, FAX 755-8290
SAN DIEGO OFFICE
701 "B" STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92101-8197
PHONE (619) 236-1234, FAX 696-7419
SAN FRANCISCO OFFICE
505 MONTGOMERY STREET, SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111-2562
PHONE (415) 391-0600, FAX 395-8095
SILICON VALLEY OFFICE
135 COMMONWEALTH DRIVE
MENLO PARK, CALIFORNIA 94025
PHONE (650) 328-4600, FAX 463-2600
SINGAPORE OFFICE
20 CECIL STREET, SUITE 25-02
THE EXCHANGE, SINGAPORE 049705
PHONE + 65-536-1161, FAX 536-1171
TOKYO OFFICE
INFINI AKASAKA, 8-7-15, AKASAKA, MINATO-KU
TOKYO 107-0052, JAPAN
PHONE +813-3423-3970, FAX 3423-3971
WASHINGTON, D.C. OFFICE
I00I PENNSYLVANIA AVE., N.W., SUITE I300
WASHINGTON, D.C. 20004-2505
PHONE (202) 637-2200, FAX 637-2201
EXHIBIT 5.1
LSP Energy Limited Partnership
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
LSP Batesville Funding Corporation
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Re: Registration Statement on Form S-4;
$326,000,000 Aggregate Principal Amount
of Senior Secured Bonds
Ladies and Gentlemen:
In connection with the registration of $150,000,000 7.164% Series C Senior
Secured Bonds due January 15, 2014 (the "SERIES C BONDS") and $176,000,000
8.160% Series D Senior Secured Bonds due July 15, 2025 (the "SERIES D BONDS"
and, together with the Series C Bonds, the "SECURITIES") by LSP Energy Limited
Partnership, a Delaware limited partnership (the "PARTNERSHIP"), and LSP
Batesville Funding Corporation, a Delaware corporation (the "FUNDING
CORPORATION" and, together with the Partnership, the "COMPANIES"), under the
Securities Act of 1933, as amended (the "ACT"), on Form S-4 filed with the
Securities and Exchange Commission (the "COMMISSION") on August , 1999 (the
"REGISTRATION STATEMENT"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken by the Companies in
connection with the authorization and issuance of the Securities. In addition,
we have made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
<PAGE>
We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of New York, the General Corporation Law of the
State of Delaware and the Revised Uniform Limited Partnership Act of the State
of Delaware, including statutory and reported decisional law thereunder, and we
express no opinion with respect to the applicability thereto, or the effect
thereon, of the laws of any other jurisdiction or, in the case of Delaware, any
other laws, or as to any matters of municipal law or the laws of any local
agencies within any state.
Capitalized terms used herein without definition have the meanings ascribed
to them in the Registration Statement.
Subject to the foregoing and the other matters set forth herein, it is our
opinion that as of the date hereof:
The Securities have been duly authorized by all necessary partnership action
of the Partnership and all necessary corporate action of the Funding
Corporation, and when executed, authenticated and delivered by or on behalf of
the Companies will constitute legally valid and binding obligations of the
Companies, enforceable against the Companies in accordance with their terms.
The opinions rendered in the preceding paragraph relating to the
enforceability of the Securities are subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or law, and the discretion of the court before which any
proceeding therefor may be brought.
We have not been requested to express, and with your knowledge and consent
do not render, any opinion as to the applicability to the obligations of the
Companies under the Indenture and the Securities of Section 548 of the United
States Bankruptcy Code or applicable state law (including, without limitation,
Article 10 of the New York Debtor and Creditor Law) relating to fraudulent
transfers and obligations.
To the extent that the obligations of the Companies under the Indenture may
be dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legally valid, binding and enforceable obligation of the Trustee enforceable
against the Trustee in accordance with its terms; that the Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Validity
of the Exchange Bonds."
Very truly yours,
/s/ Latham & Watkins
2
<PAGE>
Exhibit 10.1
$326,000,000
LSP Energy Limited Partnership
LSP Batesville Funding Corporation
$150,000,000 7.164% Series A Senior Secured Bonds due January 15, 2014
$176,000,000 8.160% Series B Senior Secured Bonds due July 15, 2025
PURCHASE AGREEMENT
May 13, 1999
Credit Suisse First Boston Corporation
Scotia Capital Markets (USA) Inc.
TD Securities (USA) Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
1. Introductory. LSP Energy Limited Partnership (the "Partnership"), a
Delaware limited partnership, and LSP Batesville Funding Corporation (the
"Funding Corporation" and, together with the Partnership, the "Issuers"), a
Delaware corporation, propose, subject to the terms and conditions stated
herein, to issue and sell to Credit Suisse First Boston Corporation ("CSFBC"),
Scotia Capital Markets (USA) Inc. ("Scotia") and TD Securities (USA) Inc.
(together with CSFBC and Scotia, the initial "Purchasers") $150,000,000
principal amount of their 7.164% Series A Senior Secured Bonds due 2014 (the
"Series A Bonds") and $176,000,000 principal amount of their 8.160% Series B
Senior Secured Bonds due 2025 (the "Series B Bonds" and, together with the
Series A Bonds, the "Bonds") to be issued under a Trust Indenture (the
"Indenture") dated as of the Closing Date (as defined below) among the Issuers
and The Bank of New York, as Trustee. The United States Securities Act of 1933,
as amended, is herein referred to as the "Securities Act." Capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Preliminary Offering Circular referred to below. Any reference to any "Project
Document, " "Financing Document," or "Transaction Document" shall,
notwithstanding the definitions thereof contained in the Preliminary Offering
Circular, or
<PAGE>
anything to the contrary herein, be deemed to refer only to any such document
which is, as of the date hereof, or will, as of the Closing Date (as defined
herein) be, in effect.
The Issuers hereby agree with the Purchasers as follows:
2. Representations and Warranties of the Issuers. Each Issuer, as of the
date hereof (unless otherwise indicated), represents and warrants as to itself
to, and agrees as to itself with, the Purchasers that:
(a) A preliminary offering circular dated May 4, 1999 (as it may be
amended or supplemented, the "Preliminary Offering Circular") and an offering
circular dated May 13, 1999 (as it may be amended or supplemented, the "Final
Offering Circular" and, together with the Preliminary Offering Circular, the
"Offering Circulars") relating to the Bonds to be offered by the Purchasers have
been prepared by the Issuers. Each Offering Circular did not as of its date (and
any amendment or supplement thereto will not as of its date) include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
any statement in or omission from the Offering Circulars based upon written
information furnished to the Issuers by any Purchaser through CSFBC specifically
for use therein, it being understood and agreed that the only such information
is that described as such in Section 7(b).
(b) The Partnership has been duly formed and is an existing limited
partnership in good standing under the laws of the State of Delaware, with power
and authority to own its properties and conduct its business as described in the
Final Offering Circular; and the Partnership is duly qualified to do business as
a foreign limited partnership in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification. All of the limited partnership interests in the Partnership
are owned by LSP Batesville Holding, LLC ("Holding") and all of the general
partnership interests in the Partnership are owned by LSP Energy, Inc. ("LSP
Energy"), in each case free and clear of any claim, Lien, encumbrance or
agreement other than Liens granted under the documents listed on Schedule I
hereto and Permitted Liens. The Funding Corporation has been duly incorporated
and is an existing corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and conduct its
business as described in the Final Offering Circular; and the
2
<PAGE>
Funding Corporation is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification. All of the
issued and outstanding capital stock of the Funding Corporation is owned by
Holding, free and clear of any claim, Lien, encumbrance or agreement other than
Permitted Liens.
(c) The Partnership (i) has not conducted any business other than
the business contemplated by the Transaction Documents or described in the Final
Offering Circular and activities incidental thereto, (ii) has no Indebtedness
other than the Indebtedness under the Amended and Restated Bank Facility Credit
Agreement, dated as of December 15, 1998 (the "Credit Agreement"), among the
Partnership, the banks and other financial institutions party thereto and Credit
Suisse First Boston as agent, and Permitted Indebtedness, and (iii) is not a
party to or bound by any material contract other than the Transaction Documents
to which it is a party. The Funding Corporation (i) has not conducted any
business other than the business contemplated by the Transaction Documents or
described in the Final Offering Circular and activities incidental thereto, (ii)
has no Indebtedness or other material liabilities other than Permitted
Indebtedness, and (iii) is not a party to or bound by any material contract
other than the Transaction Documents to which it is a party. Each Issuer is
currently conducting its business as described in the Final Offering Circular
and in compliance with all Applicable Laws and Governmental Approvals, except
where non-compliance would not reasonably be expected to have a material adverse
effect on the condition (financial or other), business, properties or results of
operations of such Issuer (a "Material Adverse Effect"). For purposes of this
Agreement, (1) "Applicable Law" means any constitution, statute, law, rule,
regulation, ordinance, judgment, order, decree or Government Approval, or any
published directive, guideline, requirement or other governmental restriction
which has the force of law, or any determination by, or interpretation of any of
the foregoing by, any judicial authority, applicable to and/or binding on a
given person or the Project, as the context may require, in each case as amended
(including, without limitation, all Environmental Laws and any of the foregoing
pertaining to land use or zoning restrictions) and (2) "Governmental Approval"
means any consent, license, approval, registration, permit, sanction or other
authorization of any nature which is required to be granted by any Governmental
Authority (i) for the formation of the Partnership and the Funding Corporation,
(ii) for the enforceability of any Transaction Document and the making of any
payments contemplated thereunder, (iii) for the construction, ownership,
operation and maintenance of the Project and (iv) for all such other matters as
may be necessary in connection with the Project or the performance of any
person's obligations under any Transaction Document.
3
<PAGE>
(d) Such Issuer has no subsidiaries.
(e) Such Issuer has the power and authority necessary to execute and
deliver this Agreement and each other Transaction Document to which it is a
party and to perform its obligations hereunder and thereunder; this Agreement
and the other Transaction Documents to which such Issuer is or on the Closing
Date (as hereinafter defined) will be a party (other than the Bonds) have been
or on the Closing Date will have been duly authorized, executed and delivered by
such Issuer and constitute or on the Closing Date will constitute the legal,
valid and binding obligation of such Issuer, subject to (x) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights, (y) general
principles of equity and (z) the unenforceability in certain circumstances under
law or court decisions of provisions providing for indemnification or
contribution to a party with respect to a liability where such indemnification
or contribution is contrary to public policy; the execution, delivery and
performance by such Issuer of this Agreement and the other Transaction Documents
to which it is a party and its compliance with the provisions hereof and thereof
will not conflict with, result in the creation or imposition (except as
contemplated by the Financing Documents) of any Lien upon any asset which is
material to the business or financial condition of such Issuer pursuant to the
terms of, or constitute a breach of, or default under, the certificate of
formation and partnership agreement or charter and bylaws, as the case may be,
of such Issuer or any agreement, indenture (including, without limitation, the
Indenture) or other instrument which is material to the business or financial
condition of such Issuer or to which such Issuer is a party or by which such
Issuer is bound or to which any asset which is material to the business or
financial condition of such Issuer is subject, or any applicable law, order,
rule, regulation, judgment or decree of any court or governmental agency having
jurisdiction over such Issuer or any asset which is material to the business or
financial condition of such Issuer; and no consent, authorization or order of,
or filing or registration by or on behalf of such Issuer with, any Governmental
Authority or other third party, or any other Governmental Approval, is required
in connection with (x) the conduct by such Issuer of the business now conducted
by it, (y) the issuance of the Bonds or (z) the execution, delivery and
performance by such Issuer of this Agreement and the other Financing Documents
to which such Issuer is a party, except (i) as required by applicable state
securities laws, (ii) consents, authorizations, orders, filings, registrations
or Governmental Approvals which have been (or will be on or prior to the Closing
Date) duly obtained or made, are (or will be on or prior to the Closing Date)
validly issued and are (or will be on or prior to the Closing Date) in full
force and effect, and the terms and
4
<PAGE>
conditions of which such Issuer is (or will be on or prior to the Closing Date)
in compliance, and (iii) consents, authorizations, orders, filings or
Governmental Approvals that would not normally be obtained before the
commencement of construction or the commencement of operation, as the case may
be, or prior to the current stage of construction of the various facilities
constituting the Project. Such Issuer has not received any notice of proceedings
relating to the revocation or modification of any of the consents,
authorizations, orders, filings, registrations or Governmental Approvals
described in clause (ii) of the immediately preceding sentence.
(f) When authorized, executed, authenticated, issued and delivered
by the Issuers pursuant to this Agreement and the Indenture and paid for by the
Purchasers pursuant to this Agreement on the Closing Date (as defined below),
the Bonds will have been duly executed, authenticated, issued and delivered and
will constitute legal, valid and binding obligations of such Issuer, enforceable
against such Issuer in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights, and to general
principles of equity.
(g) Such Issuer is not in violation of its certificate of formation
and partnership agreement or charter and bylaws, as the case may be. Such Issuer
(i) is not in default, and no event has occurred which, with notice or lapse of
time or both, would constitute a default by such Issuer, in the due performance
and observance of any material term, representation, covenant or condition
contained in any lease, license, indenture, mortgage, deed of trust, note, bank
loan or other evidence of indebtedness or any other agreement, understanding or
instrument to which such Issuer or any asset of such Issuer is bound, or (ii) is
not in violation of any Applicable Law, ordinance, governmental rule or
regulation or court decree to which it may be subject, except to the extent such
default, event or violation would not reasonably be expected to have a Material
Adverse Effect.
(h) All of the Project Documents are in full force or effect. All
conditions precedent to the obligations of the Partnership under the Project
Documents have been satisfied other than any such conditions precedent that are
not required by such Project Documents to have been satisfied as of the date
hereof. To the knowledge of such Issuer, no Project Party party to any of the
Project Documents is in default, event of default or breach, and no event has
occurred which, with notice or the passage of time or both, would constitute a
default, event of default or breach, under, or in the due performance and
observance of, any material term, representation, covenant or condition
contained in
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any Project Document. All conditions precedent to the obligations of each of the
Project Parties under any of the Project Documents have been satisfied, other
than any such conditions precedent that are not required by such Project
Documents to have been satisfied as of the date hereof. Such Issuer has not
received any notice of any force majeure event under any of the Project
Documents which would reasonably be expected to have a Material Adverse Effect
and such Issuer has no knowledge of any facts or circumstances currently
existing which would enable any Project Party to declare that an event of force
majeure has occurred that would reasonably be expected to have a Material
Adverse Effect.
(i) The Independent Engineer's Report included in the Final Offering
Circular sets forth all material Governmental Approvals that are required or
will become required under applicable law for the construction or operation of
the Project. The information set forth in such Independent Engineer's Report
with respect to Governmental Approvals is true and correct in all material
respects. Except as set forth in such Independent Engineer's Report, each
material Governmental Approval that is required or will become required under
current applicable law for the ownership, construction, financing or operation
of the Project is (x) in full force and effect and is not subject to any appeals
or further proceedings or to any unsatisfied condition that may allow
modification or revocation or (y) of a type that is routinely granted on
application and would not normally be obtained before commencement of
construction or the commencement of operation, as the case may be, or prior to
the current stage of construction of the various facilities constituting the
Project. The Partnership is in compliance with all Governmental Approvals
referred to in clause (x) of the immediately preceding sentence and has no
reason to believe that any Governmental Approval of the type referred to in
clause (y) of the immediately preceding sentence will not be obtained before it
becomes necessary for the ownership, construction, financing or operation of the
Project, except where non-compliance or a failure to obtain a Governmental
Approval would not reasonably be expected to have a Material Adverse Effect.
(j) Except as disclosed in the Final Offering Circular, such Issuer
has good and marketable title to all real property and all other properties and
assets owned by it, in each case free from Liens, encumbrances and defects that
would materially affect the value thereof or materially interfere with the use
made or to be made thereof by it, other than the Liens granted under the
documents listed on Schedule I hereto and Permitted Liens; and except as
disclosed in the Final Offering Circular, such Issuer holds any real or personal
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property leased by it under valid and enforceable leases with no exceptions that
would materially interfere with the use made or to be made thereof by it.
(k) The Partnership (or its contractors or operators for the benefit
of the Partnership) has, or will have prior to the Closing Date, the benefit of
all rights necessary to construct, operate and maintain the Project in the
manner contemplated by the Transaction Documents and described in the Final
Offering Circular, other than those rights which will be provided pursuant to
the Governmental Approvals referred to in clause (y) of paragraph (i) above.
(l) No labor dispute with the employees of such Issuer, or with
respect to persons employed in connection with the construction of the Project,
exists or, to the knowledge of such Issuer, is imminent that would reasonably be
expected to have a material adverse effect on either of the Issuers or the
Project.
(m) Such Issuer possesses, can acquire on reasonable terms or has
the benefit of, adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other intellectual
property (collectively, "intellectual property rights") necessary to conduct the
business now conducted by it, and has not received any notice of infringement of
or conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to such Issuer, would individually
or in the aggregate have a material adverse effect on such Issuer.
(n) Except as disclosed in the Final Offering Circular, such Issuer
is not in violation of any Environmental Law, does not own or operate any real
property contaminated with any substance that is subject to any Environmental
Law, is not liable for any off-site disposal or contamination pursuant to any
Environmental Law, and is not subject to any Environmental Claim, which would,
individually or in the aggregate with all other such violations, contaminations,
liabilities or Environmental Claims, reasonably be expected to have a material
adverse effect on such Issuer; and such Issuer is not aware of any pending
investigation which might lead to an Environmental Claim that would reasonably
be expected to have a Material Adverse Effect. For the purposes of this
Agreement, (1) "Environmental Law" means any and all Applicable Laws (as well as
obligations, duties and requirements relating thereto under common law) relating
to: (i) noise, emissions, discharges, spills, releases or threatened releases of
pollutants, contaminants, hazardous or toxic materials or wastes, materials
containing hazardous or toxic materials or wastes into ambient air, surface
water, groudwater, watercourses,
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publicly or privately-owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land surface or subsurface strata; (ii) the use,
treatment, storage, disposal, handling, manufacture, processing, distribution,
transportation or handling of hazardous or toxic materials or wastes, materials
containing hazardous or toxic materials or wastes, (or of equipment or apparatus
containing hazardous or toxic materials or wastes); or (iii) pollution or the
protection of human health, the environment or natural resources and (2)
"Environmental Claim(s)" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law, including, without limitation, (i) by any Governmental
Authority for enforcement, cleanup, removal, response, remedial or other actions
seeking damages pursuant to any applicable Environmental Law, and (ii) by any
third party seeking damages, contribution, indemnification, cost, recovery,
compensation or injunctive relief resulting from hazardous materials or alleged
injury or threat of injury to health, safety or the environment.
(o) Except as disclosed in the Final Offering Circular, there are no
pending actions, suits or proceedings against or affecting such Issuer or any of
its properties that, if determined adversely to such Issuer, would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
or would materially and adversely affect the ability of such Issuer to perform
its obligations under this Agreement or the other Transaction Documents; and no
such actions, suits or proceedings are, to such Issuer's knowledge, threatened.
(p) The financial statements included in the Final Offering Circular
present fairly, in all material respects, the financial position of such Issuer
as of the dates shown and its results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with generally accepted accounting principles in the United States applied on a
consistent basis.
(q) Except as disclosed in the Final Offering Circular, since the
date of the latest audited financial statements included in the Final Offering
Circular there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of such Issuer, and,
except as disclosed in or contemplated by the Final Offering Circular, there has
been no dividend or distribution of any kind declared, paid or made by such
Issuer on any class of such Issuer's partnership interests or capital stock, as
the case may be.
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(r) To the knowledge of such Issuer, KPMG LLP, whose report appears
in the Final Offering Circular, is and was, during the period covered by its
report, independent with respect to such Issuer within the meaning of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
applicable rules and regulations thereunder.
(s) To the knowledge of such Issuer, R.W. Beck, Inc. (the
"Independent Engineer"), whose reports (the "Independent Engineer's Reports")
appear in the Offering Circulars and who will be required to deliver the
certificate referred to in Section 6(l) hereof was, as of the date of each of
such reports, and is, as of the date hereof, "independent." For purposes of this
Section 2(s), the Independent Engineer shall be considered independent if from
the date which was six months prior to the date of the Final Offering Circular,
neither the Independent Engineer nor any Member thereof (i) had, or was
committed to acquire, any direct financial interest or material indirect
financial interest in either of the Issuers or any affiliate thereof (other than
the purchase of any public securities acquired by the Independent Engineer or
any Member thereof) or (ii) was, or will be connected as, a promoter,
underwriter, voting trustee, director, officer or employee of either of the
Issuers or any affiliate thereof. "Member" shall mean (A) all partners,
shareholders and other principals of the Independent Engineer, (B) any
professional employee involved in providing any professional service to either
of the Issuers or any affiliate thereof and (C) any professional employee having
managerial responsibilities and located in an office of the Independent Engineer
which will participate in a significant portion of the services to be performed
thereby in connection with the Project.
(t) To the knowledge of such Issuer, C.C. Pace Consulting, L.L.C.
(the "Independent Electricity Market and Fuel Consultant"), whose reports (the
"Independent Electricity Market and Fuel Consultants Reports") appear in the
Offering Circulars and who will be required to deliver the certificate referred
to in Section 6(m) hereof was, as of the date of each of such reports, and is,
as of the date hereof, "independent." For purposes of this Section 2(t), the
Independent Electricity Market and Fuel Consultant shall be considered
independent if from the date which was six months prior to the date of the Final
Offering Circular, neither the Independent Electricity Market and Fuel
Consultant nor any Member thereof (i) had, or was committed to acquire, any
direct financial interest or material indirect financial interest in either of
the Issuers or any affiliate thereof (other than the purchase of any public
securities acquired by the Independent Electricity Market and Fuel Consultant or
any Member thereof) or (ii) was, or will be connected as, a promoter,
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<PAGE>
underwriter, voting trustee, director, officer or employee of either of the
Issuers or any affiliate thereof. "Member" shall mean (A) all partners,
shareholders and other principals of the Independent Electricity Market and Fuel
Consultant, (B) any professional employee involved in providing any professional
service to either of the Issuers or any affiliate thereof and (C) any
professional employee having managerial responsibilities and located in an
office of the Independent Electricity Market and Fuel Consultant which will
participate in a significant portion of the services to be performed thereby in
connection with the Project.
(u) The Senior Security Documents create, as security for the Senior
Secured Obligations, valid and enforceable security interests in and Liens on
all of the Collateral, in favor of the Collateral Agent, subject to no Liens
other than Permitted Liens. Upon satisfaction of the conditions precedent
described in Section 6(q), such security interests in and Liens on the
Collateral shall be superior to and prior to the rights of all third parties
(except third parties holding Permitted Liens) and no further recordings or
filings are or will be required in connection with the creation or perfection of
such security interests and Liens, other than the filing of continuation
statements in accordance with applicable law. The Deed of Trust is or, on the
Closing Date, will be in appropriate form for recording as a mortgage of real
estate and for filing as a fixture filing financing statement to protect,
preserve and perfect the Liens and security interests created or to be created
by the Deed of Trust. The UCC- 1 financing statements describing the Collateral
and naming the Collateral Agent as secured party (the "Financing Statements")
will on the Closing Date be in appropriate form for filing (including the
description of the Collateral set forth therein) in each office and in each
jurisdiction where required to perfect the Lien and security interest described
above. For purposes of this Agreement, (1) "Senior Security Documents" means,
collectively, the Deed of Trust, the security agreements to be entered into by
the Partnership and the Funding Corporation in favor of the Collateral Agent and
to be dated as of the Closing Date, the pledge agreements to be entered into by
Holding and LSP Energy for the benefit of the Collateral Agent and to be dated
as of the Closing Date, and the Securities Accounts Control Agreement, (2) "Deed
of Trust" means the Deed of Trust, Security Agreement, Assignment of Leases and
Rents and Fixture Filing to be entered into by the Partnership for the benefit
of the Collateral Agent and to be dated as of the Closing Date and (3)
"Securities Accounts Control Agreement" means the securities accounts control
agreement to be entered into by the Partnership and to be dated as of the
Closing Date.
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(v) On the Closing Date, such Issuer will own all of the Collateral
pledged by it under the Senior Security Documents free and clear of any Liens
other than Permitted Liens.
(w) The Partnership carries, or will as of the Closing Date carry,
insurance in such amounts and covering such risks as is adequate for the conduct
of its business and the value of its properties and which is consistent with the
requirements of the Transaction Documents.
(x) The factual information provided by such Issuer to the
Independent Engineer and the Independent Electricity Market and Fuel Consultant
in the preparation of their reports set forth at Annex B and Annex C,
respectively, to the Final Offering Circular (which factual information is
referenced in such reports) was provided in good faith and is accurate in all
material respects. Such Issuer believes that the financial projections included
in the Independent Engineer's Report were prepared in good faith and, taking
into account the assumptions underlying such financial projections set forth in
the Independent Engineer's Report, are reasonable and attainable.
(y) Such Issuer is not an open-end investment company, unit
investment trust or face amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act of 1940
(the "Investment Company Act"); and such Issuer is not, and after giving effect
to the offering and sale of the Bonds and the application of the proceeds
thereof as described in the Final Offering Circular will not be, an "investment
company" as defined in the Investment Company Act.
(z) The Project is an "Eligible Facility" and the Partnership is an
"Exempt Wholesale Generator," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"). The Partnership is subject to
regulation under the Federal Power Act of 1920, as amended. Such Issuer will
not, solely as a result of its participation in the transactions contemplated by
the Transaction Documents and the Partnership's ownership, use or operation of
the Project, be subject to regulation by any Governmental Authority as a "public
utility," an "electric utility," an "electric utility holding company," a
"public utility holding company," a "holding company," or an "electrical
corporation" or a subsidiary of any of the foregoing under PUHCA or under state
laws and regulations respecting the rates or the financial or organizational
regulation of electric utilities.
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(aa) (i) All tax returns, declarations of estimated tax and tax
reports (collectively, the "Tax Returns") required to be filed on or before
(after consideration of any allowable extensions of time to file) the Closing
Date with respect to all federal, state or local income, gross receipts,
severance, property, productions, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties (collectively, the "Taxes"), by such Issuer have been duly filed,
(ii) all Taxes due on the Tax Returns referred to in clause (i) immediately
above that are required to be paid or withheld by such Issuer have been paid or
withheld in full, (iii) all deficiencies asserted or assessments made against
such Issuer with respect to Tax Returns of such Issuer as a result of an
examination of such Tax Returns referred to in clause (i) above have been paid
in full, (iv) no issues that have been raised with respect to any Taxes due and
payable by such Issuer by the relevant taxing authority in connection with an
examination of Tax Returns of such Issuer are currently pending and (v) no
waivers of statutes of limitations have been given or requested by or with
respect to any Taxes due and payable by such Issuer.
(bb) Such Issuer is not a "party in interest" or a "disqualified
person" (within the meaning of Section 4975 of the Internal Revenue Code) with
respect to any "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended).
(cc) The proceeds from the sale of the Bonds will be utilized by the
Issuers as described under the section of the Offering Circular entitled "Use of
Proceeds."
(dd) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Bonds are listed on any national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.
(ee) Assuming that (i) the representations and warranties made by
the Purchasers herein are true, (ii) the Purchasers comply with their covenants
and agreements set forth herein and (iii) the Bonds are offered and sold in the
manner contemplated by the Final Offering Circular, (x) the offer and sale of
the Bonds in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof and Regulation S thereunder and (y) it is not necessary to
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<PAGE>
qualify an indenture in respect of the Bonds under the United States Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(ff) Neither of the Issuers nor any of their affiliates, nor any
person acting on any of such persons' behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United States or to any
U.S. person (as such terms are defined in Regulation S under the Securities Act)
the Bonds or any security of the same class or series as the Bonds or (ii) has
offered or will offer or sell the Bonds (A) in the United States by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act or (B) with respect to any such securities sold
in reliance on Rule 903 of Regulation S ("Regulation S") under the Securities
Act, by means of any directed selling efforts within the meaning of Rule 902(b)
of Regulation S. The Issuers, their affiliates and any person acting on any of
such persons' behalf (other than the Purchasers as to which the Issuers make no
representation) have complied and will comply with the offering restrictions
requirement of Regulation S. The Issuers have not entered and will not enter
into any contractual arrangement with respect to the distribution of the Bonds
except for this Agreement.
(gg) The proceeds to the Issuers from the offering of the Bonds will
not be used in a manner which would violate or be inconsistent with the
provisions of Regulations T, U or X of the Federal Reserve Board.
(hh) For Federal income tax purposes, the Partnership is a
partnership and not an association taxable as a corporation. Neither the
execution and delivery by the Partnership of the Transaction Documents nor the
consummation of any of the transactions contemplated thereby shall adversely
affect such status.
3. Purchase, Sale and Delivery of the Bonds. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Issuers agree to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Issuers, at a purchase price of 99.50% of the principal amount thereof
of the Series A Bonds and of 99.50% of the principal amount thereof of the
Series B Bonds, in each case plus accrued interest from May 21, 1999 to the
Closing Date (as hereinafter defined), the respective principal amounts of the
Bonds set forth opposite the names of the several Purchasers in Schedule III
hereto.
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The Issuers will deliver against payment of the purchase price the Bonds
to be purchased by the Purchasers and to be offered and sold by the Purchaser in
reliance on Regulation S (the "Regulation S Bonds") in the form of one or more
global Bonds in registered form without interest coupons (the "Regulation S
Global Bonds") which will be deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") for the respective accounts of the DTC
participants for Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System ("Euroclear"), and Cedelbank and registered in
the name of Cede & Co., as nominee for DTC. The Issuers will deliver against
payment of the purchase price the Bonds to be purchased by the Purchasers
hereunder and to be offered and sold by the Purchaser in reliance on Rule 144A
under the Securities Act (the "144A Securities") in the form of one or more
permanent global Bonds in registered form without interest coupons (the
"Restricted Global Bonds") which will be deposited with the Trustee as custodian
for DTC and registered in the name of Cede & Co., as nominee for DTC. The
Regulation S Global Bonds and the Restricted Global Bonds shall be assigned
separate CUSIP numbers. The Restricted Global Bonds shall include the legend
regarding restrictions on transfer set forth under "Transfer Restrictions" in
the Final Offering Circular. Until the termination of the restricted period (as
defined in Regulation S) with respect to the offering of the Bonds, interests in
the Regulation S Global Bonds may only be held by the DTC participants for
Euroclear and Cedelbank. Interests in any permanent global Bonds will be held
only in book-entry form through Euroclear, Cedelbank or DTC, as the case may be,
except in the limited circumstances described in the Final Offering Circular.
Payment for the Regulation S Bonds and the 144A Bonds shall be made by the
Purchasers in Federal (same day) funds by official check or checks or wire
transfer to an account at a bank acceptable to CSFBC on May 21, 1999, or at such
other time not later than seven full business days thereafter as CSFBC and the
Issuers determine, such time being herein referred to as the "Closing Date",
against delivery to the Trustee as custodian for DTC of (i) the Regulation S
Global Bonds representing all of the Regulation S Bonds for the respective
accounts of the DTC participants for Euroclear and Cedelbank and (ii) the
Restricted Global Bonds representing all of the 144A Bonds. The Regulation S
Global Bonds and the Restricted Global Bonds will be made available for checking
at the office of Skadden, Arps, Slate, Meagher & Flom LLP at 919 Third Avenue,
New York, New York 10022 at least 24 hours prior to the Closing Date.
Notwithstanding the foregoing, any Bonds sold to Institutional Accredited
Investors (as hereinafter defined) pursuant to Section 4(c) shall be issued in
definitive, fully
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registered form and shall the legend relating thereto set forth under "Transfer
Restrictions" in the Offering Circular, but shall be paid for in the same manner
as any Bonds to be purchased by the Purchaser hereunder and to be offered and
sold by it in reliance on Rule 144A under the Securities Act.
4. Representations by Purchasers; Resale by Purchasers. Each Purchaser
severally represents, warrants and agrees with the Issuers as follows:
(a) Each Purchaser severally represents and warrants to the Issuers
that it is an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) Each Purchaser severally acknowledges that the Bonds have not
been registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons except
in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser represents and
agrees that it has offered and sold the Bonds, and will offer and sell the
Bonds, (i) as part of its distribution at any time and (ii) otherwise until 40
days after the later of the commencement of the offering and the Closing Date,
only in accordance with Rule 903 of Regulation S under the Securities Act, Rule
144A under the Securities Act ("Rule 144A") or to a limited number of
Institutional Accredited Investors in accordance with subsection (c).
Accordingly, each Purchaser severally represents and agrees that, neither it nor
any of its affiliates, nor any persons acting on its or their behalf have
engaged or will engage in any directed selling efforts with respect to the
Bonds, and such Purchaser, its affiliates and all persons acting on its or their
behalf have complied and will comply with the offering restrictions requirement
of Regulation S. Each Purchaser severally agrees that, at or prior to
confirmation of sale of the Bonds, other than a sale pursuant to Rule 144A or a
sale to an Institutional Accredited Investor in accordance with subsection (c),
such Purchaser will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the Bonds from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Bonds covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the date of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or
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Rule 144A if available) under the Securities Act. Terms used above have
the meanings given to them by Regulation S."
Terms used in this subsection (b) have the meanings given to them by Regulation
S.
(c) Each Purchaser may offer and sell Bonds in definitive, fully
registered form to a limited number of institutions, each of which is reasonably
believed by such Purchaser to be an "accredited investor" within the meaning of
Rule 501(a)(1), (2) or (3) under the Securities Act or an entity in which all of
the equity owners are accredited investors within the meaning of Rule 501(a)(1),
(2) or (3) under the Securities Act (each an "Institutional Accredited
Investor"), provided that each such Institutional Accredited Investor executes
and delivers to such Purchaser and the Issuers, prior to the consummation of any
sale of Bonds to such Institutional Accredited Investor, a Purchaser's Letter in
substantially the form attached to the Offering Circular as Annex E (a
"Purchaser's Letter").
(d) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Bonds except for any such arrangements
with the other Purchasers or affiliates of the other Purchasers or with the
prior written consent of the Issuers.
(e) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Bonds in the United States by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Bonds, to deliver
either with the confirmation of such resale or otherwise prior to settlement of
such resale a notice to the effect that the resale of such Bonds has been made
in reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.
(f) Each of the Purchasers severally represents and agrees that (i)
it has not offered or sold and prior to the date six months after the date of
issue of Bonds will not offer or sell any Bonds to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments
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<PAGE>
(as principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Bonds in, from or otherwise involving the
United Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issue of the Bonds to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be issued or
passed on.
(g) Each Purchaser severally agrees that it and each of its
affiliates will not offer, sell or deliver any of the Bonds in any jurisdiction
outside the United States except under circumstances that will result in
compliance with the applicable laws thereof, and that it will take at its own
expense whatever action is required to permit its purchase and resale of the
Bonds in such jurisdictions. Each Purchaser understands that no action has been
taken to permit a public offering in any jurisdiction outside the United States
where action would be required for such purpose.
5. Certain Agreements of the Issuers. The Issuers agree, jointly and
severally, with the Purchaser that:
(a) The Issuers will advise CSFBC promptly of any proposal to amend
or supplement the Offering Circulars and will not, unless such amendment or
supplementation is necessary to comply with the following sentence, effect such
amendment or supplementation without the consent of CSFBC. If, at any time prior
to the earlier of the completion of the initial resale of the Bonds (other than
such portion of the Bonds being purchased by CSFBC for its own account which it
does not resell on the Closing Date) by the Purchasers and the registration of
the Bonds (or exchange bonds in respect thereof) with the Securities and
Exchange Commission (the "Commission"), any event occurs as a result of which
the Final Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, the Issuers promptly will notify CSFBC of
such event and promptly will prepare, at their own expense, an amendment or
supplement which will correct such misstatement or omission. Neither CSFBC's
consent to, nor any Purchaser's delivery to
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offerees or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(b) The Issuers will furnish to the Purchasers copies of the
Offering Circulars and all amendments and supplements to such documents, in each
case as soon as available and in such quantities as CSFBC requests, and the
Issuers will furnish to the Purchasers on the Closing Date a certificate of an
officer of the Partnership certifying that attached thereto is a copy of the
Final Offering Circular.
(c) The Issuers will arrange for the qualification of the Bonds for
sale and the determination of their eligibility for investment under the laws of
such jurisdictions in the United States and Canada as the Purchaser designates
and will continue such qualifications in effect so long as required for the
resale of the Bonds by the Purchaser, provided that neither of the Issuers will
be required to qualify as a foreign limited partnership or foreign corporation,
as the case may be, or to file a general consent to service of process or
subject itself to taxation in any such state.
(d) During the period of five years hereafter, the Issuers will
furnish to the Purchaser (i) as soon as practicable after the end of each fiscal
year, a copy of their annual audited financial statements, and (ii) from time to
time, such other information concerning the Issuers as the Purchaser may
reasonably request, including, without limitation, account balance statements,
construction progress reports and calculations of historical debt service
coverage ratios.
(e) During the period of two years after the Closing Date, the
Issuers will, upon request, furnish to the Purchaser and any holders of Bonds a
copy of the restrictions on transfer applicable to the Bonds.
(f) During the period of two years after the Closing Date (or such
lesser period as the Commission may specify for the unrestricted resale of Bonds
which constitute "restricted securities" under Rule 144), the Issuers will not,
and will not permit any of their affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Bonds that have been reacquired by any of
them which constitute "restricted securities" under Rule 144.
(g) During the period of two years after the Closing Date, but only
for so long as the sale of the Bonds is reliant upon the exception afforded by
Rule 144A, neither
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of the Issuers will be or become an open-end investment company, unit investment
trust or face amount certificate company that is or is required to be registered
under Section 8 of the Investment Company Act.
(h) The Issuers will pay all expenses incidental to the performance
of their obligations under this Agreement and the other Financing Documents,
including (i) the fees and expenses of the Trustee, Collateral Agent,
Administrative Agent and Intercreditor Agent and their respective professional
advisors; (ii) the reasonable fees and expenses of counsel for the Purchasers
and the fees and expenses of the Purchasers' other advisors and consultants;
(iii) all expenses in connection with the execution, issue, authentication,
packaging and initial delivery of the Bonds, the preparation and printing of
this Agreement, the Bonds, the other Financing Documents, the Offering Circulars
and amendments and supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Bonds; (iv) the cost of any
advertising approved by the Issuers in connection with the issue of the Bonds;
(v) any expenses (including reasonable fees and disbursements of counsel)
incurred in connection with qualification of the Bonds for sale under the laws
of such jurisdictions in the United States and Canada as the Purchasers
designate and the printing of memoranda relating thereto; (vi) any fees charged
by investment rating agencies for the rating of the Bonds; and (vii) expenses
incurred in distributing the Offering Circulars (including any amendments and
supplements thereto) to the Purchasers. The Issuers will also pay or reimburse
the Purchasers (to the extent incurred by them) for all travel expenses of the
Purchasers and the Issuers' officers and employees and any other expenses of the
Purchasers and the Issuers in connection with attending or hosting meetings with
prospective purchasers of the Bonds from the Purchasers.
(i) In connection with the offering, until the earlier of three
months from the date of the Final Offering Circular and such time as CSFBC shall
have notified the Issuers of the completion of the initial resale of the Bonds,
neither the Issuers nor any of their affiliates has or will, either alone or
with one or more other persons, bid for or purchase for any account in which it
or any of its affiliates has a beneficial interest any Bonds or attempt to
induce any person to purchase any Bonds; and neither of the Issuers nor any of
their affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Bonds.
(j) For a period of sixty days after the date hereof, the Issuers
will not offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any United
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States dollar-denominated debt securities issued or guaranteed by the Issuers
and having a maturity of more than one year from the date of issue. The Issuers
will not, at any time while the sale of the Bonds is reliant upon the exception
afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation
S, offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale, pledge,
contract or disposition would cause the exemption afforded by Section 4(2) of
the Securities Act or the safe harbor of Regulation S thereunder to cease to be
applicable to the offer and sale of the Bonds.
6. Conditions to the Obligation of the Purchaser. The obligation of the
Purchasers to purchase and pay for the Bonds will be subject to the following
conditions precedent, any of which may be waived by the Purchasers:
(a) The Purchaser shall have received a letter, dated the date of
this Agreement, of KPMG LLP in form and substance satisfactory to the Purchaser
concerning the financial information with respect to the Issuers set forth in
the Final Offering Circular.
(b) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred: (i) any change, or any development or event
involving a prospective change, in the condition (financial or other), business,
properties or results of operations of the Issuers which is material and adverse
and, in the judgment of CSFBC, makes it impractical or inadvisable to proceed
with completion of the offering or the sale of and payment for the Bonds; (ii)
any downgrading in the rating of any debt securities of the Issuers by any of
Moody's and S&P, or any public announcement that any such rating agency has
under surveillance or review its rating of any debt securities of the Issuers
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such exchange,
or any suspension of trading of any securities of the Issuers on any exchange or
in the over-the-counter market; (iv) any banking moratorium declared by U.S.
Federal or New York authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Purchaser, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and payment
for the Bonds.
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(c) On or prior to the Closing Date, (i) all Project Documents shall
have been fully executed and delivered in a manner satisfactory to the Purchaser
by each of the parties thereto, (ii) all Financing Documents shall have been
fully executed, delivered, recorded and filed, as appropriate, in a manner
satisfactory to the Purchaser, (iii) no provisions of the Transaction Documents
shall have been amended, waived or otherwise modified since the date hereof in a
manner that would reasonably be expected to have a Material Adverse Effect, and
(iv) each of the Project Documents and Financing Documents shall be in full
force and effect on the Closing Date. As of the Closing Date, all conditions
precedent to any party's obligations under the Project Documents shall have been
satisfied if the date by which such obligations must be satisfied shall have
occurred, no event of force majeure under any Project Document shall have
occurred which has had or would reasonably be expected to have a Material
Adverse Effect, and no default or event of default under or breach by any person
of any of its obligations under any Project Document shall have occurred which
has had or would reasonably be expected to have a Material Adverse Effect.
(d) Each of the Project Parties specified on Schedule II hereto
shall have delivered to CSFBC a consent, dated on or before the Closing Date,
consenting to the assignment to the Collateral Agent of the Partnership's rights
under the Project Documents to which such Project Party is a party, in each case
in form and substance acceptable to CSFBC.
(e) The Purchasers shall have received an opinion in form and
substance satisfactory to them and their counsel, dated the Closing Date, of
Latham & Watkins, special counsel for the Issuers.
(f) The Purchaser shall have received from Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Purchaser, such opinion or opinions, dated
the Closing Date, with respect to the validity of the Bonds, the Final Offering
Circular, the exemption from registration for the offer and sale of the Bonds by
the Issuers to the Purchaser as contemplated hereby and other related matters as
the Purchaser may require, and the Issuers shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass upon
such matters.
(g) The Purchasers shall have received an opinion, in form and
substance satisfactory to them and their counsel, dated the Closing Date, of
Butler, Snow, O'Mara, Stevens & Cannada, PLLC, special Mississippi counsel for
the Issuers.
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(h) The Purchasers shall have received an opinion, in form and
substance satisfactory to them and their counsel, dated the Closing Date, of
Phelps Dunbar L.L.P., special Mississippi counsel for the Purchaser.
(i) The Purchaser shall have received an opinion, in form and
substance satisfactory to them and their counsel, dated the Closing Date, of
Emmet, Marvin & Martin, LLP, counsel for the Trustee, the Collateral Agent, the
Administrative Agent and the Intercreditor Agent.
(j) (i) The representations and warranties of each Issuer contained
herein and in each other Transaction Document to which such Issuer is a party as
of the date hereof shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except with respect to
those representations and warranties made as of an earlier specified date, (ii)
each Issuer shall have complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder or thereunder at or prior to
the Closing Date, except any non-compliance or failure to satisfy that would not
reasonably be expected to have a Material Adverse Effect, and (iii) subsequent
to the respective dates of the most recent financial statements in the Final
Offering Circular, there shall have been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other) business, properties or results of operation of
either of the Issuers, each of the matters set forth in clauses (i) through
(iii) immediately above as evidenced by a an officer's certificate of each
Issuer, dated the Closing Date.
(k) The Purchaser shall have received (i) a certificate of formation
or certificate of incorporation, as the case may be, of each Issuer, Holding and
LSP Energy as amended, modified or supplemented to the Closing Date, certified
to be true, correct and complete by the appropriate Secretary of State as of a
date not more than five days prior to the Closing Date, together with a good
standing certificate from such Secretary of State and a good standing
certificate from the Secretary of State (or the equivalent thereof) of the State
of Mississippi, each to be dated a date not more than five days prior to the
Closing Date, and (ii) a certificate of the Secretary of each Issuer, Holding
and LSP Energy certifying (A) the names and true signatures of the incumbent
officers of such person authorized to sign the applicable Transaction Documents,
(B) the partnership agreement, bylaws or limited liability company operating
agreement, as the case may be, of
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such Issuer, Holding and LSP Energy as in effect on the Closing Date, (C) the
resolutions of such Issuer's, Holding's or LSP Energy's board of directors (or
the equivalent thereof) approving and authorizing the execution, delivery and
performance of the Transaction Documents executed by such person, and (D) that
there have been no changes in the certificate of formation or certificate of
incorporation, as the case may be, of such Issuer, Holding or LSP Energy since
the date of the most recent certification thereof by the appropriate Secretary
of State.
(l) The Independent Engineer shall have consented to the references
to it in the Offering Circulars and the use of the Independent Engineer's Report
prepared by the Independent Engineer and contained in Annex B to the Offering
Circulars; and since the date of the Independent Engineer's Report, no event
affecting the Independent Engineer's Report or the matters referred to therein
shall have occurred (A) which shall make untrue or incorrect, as of the Closing
Date, any material information or material statement contained in the
Independent Engineer's Report or in the Final Offering Circular relating to
matters referred to in the Independent Engineer's Report, or (B) which shall not
be reflected in the Independent Engineer's Report or the Final Offering Circular
but should be reflected therein in order to make the statements and information
contained in the Independent Engineer's Report, or in the Final Offering
Circular relating to matters referred to in the Independent Engineer's Report,
in light of the circumstances under which they were made, not misleading; all as
evidenced by a certificate satisfactory to the Purchaser of an authorized
officer of the Independent Engineer, dated the Closing Date.
(m) The Independent Electricity Market and Fuel Consultant shall
have consented to the references to it in the Offering Circulars and the use of
the Independent Electricity Market and Fuel Consultant's Report prepared by the
Independent Electricity Market and Fuel Consultant and contained in Annex C to
the Offering Circulars; and since the date of the Independent Electricity Market
and Fuel Consultant's Report, no event affecting the Independent Electricity
Market and Fuel Consultant's Report or the matters referred to therein shall
have occurred (A) which shall make untrue or incorrect, as of the Closing Date,
any material information or material statement contained in the Independent
Electricity Market and Fuel Consultant's Report or in the Final Offering
Circular relating to matters referred to in the Independent Electricity Market
and Fuel Consultant's Report, or (B) which shall not be reflected in the
Independent Electricity Market and Fuel Consultant's Report or the Final
Offering Circular but should be reflected therein in order to make the
statements and information contained in the Independent Electricity Market and
Fuel Consultant's Report, or in the Final Offering Circular relating to matters
referred
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to in the Independent Electricity Market and Fuel Consultant's Report, in light
of the circumstances under which they were made, not misleading; all as
evidenced by a certificate satisfactory to the Purchaser of an authorized
officer of the Independent Electricity Market and Fuel Consultant, dated the
Closing Date.
(n) The Purchaser shall have received a letter, dated the Closing
Date, of KPMG LLP which meets the requirements of subsection (a) of this
Section, except that the specified date referred to in such subsection will be a
date not more than three days prior to the Closing Date for the purposes of this
subsection.
(o) Subsequent to the execution and delivery of this Agreement, (i)
(A) S&P shall have delivered to the Issuers and the Purchasers a final rating
letter setting forth a rating with respect to the Bonds of at least "BBB-", and
(B) Moody's shall have delivered to the Issuers and the Purchasers a final
rating letter setting forth a rating with respect to the Bonds of at least
"Baa3", (ii) neither of such organizations shall have announced that it has
under surveillance or review, with possible negative implications, its rating of
the Bonds, (iii) no downgrading shall have occurred in the rating accorded the
debt securities of VEPCO or UtiliCorp by S&P or Moody's and (iv) neither S&P nor
Moody's shall have announced that it has under surveillance or review, with
possible negative implications, its rating of VEPCO or UtiliCorp.
(p) On or prior to the Closing Date, the Deed of Trust shall have
been delivered to First American Title Insurance Company (the "Title Company")
for due recordation as a mortgage of real estate, and any required filings with
respect to personal property and fixtures subject to the Liens of the Deed of
Trust shall have been delivered to the Title Company for filing, in each place
in which such recording or filing is required to protect, preserve and perfect
each of the Liens created under the Deed of Trust as a valid and enforceable
Lien on the real estate and as a valid and enforceable security interest in the
personal property and fixtures covered or purported to be covered by the Deed of
Trust, with the priority purported to be created thereby, in each case subject
only to Permitted Liens, and except for such recordation or filing no further
action shall be required to create, preserve or perfect such Liens and security
interests. The Financing Statements shall have been delivered for filing,
recordation and/or registration in each office and in each jurisdiction where
required to create and perfect a valid and enforceable first priority security
interest in the Collateral covered or purported to be covered by the Senior
Security Documents. The Securities Account Control Agreement shall have been
duly executed and delivered by each party thereto. All taxes and recording and
filing fees
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required to be paid with respect to the execution, recording or filing of the
Deed of Trust and the Financing Statements shall have been paid. All
certificates and other instruments evidencing the limited and general
partnership interests in the Partnership, the shares of capital stock of the
Funding Corporation and the shares of capital stock of LSP Energy shall have
been delivered to the Collateral Agent together with instruments of transfer
duly executed in blank. All Collateral shall be subject to no Liens other than
Permitted Liens.
(q) On or prior to the Closing Date, (i) the Bonds sold in reliance
on Regulation S shall have been accepted for settlement through the facilities
of Euroclear and Cedelbank, if applicable, and (ii) the Bonds sold in reliance
on Rule 144A shall have been accepted for settlement through the facilities of
DTC.
(r) On or prior to the Closing Date, each Issuer shall have
furnished to the Purchaser evidence satisfactory to the Purchaser of the
irrevocable appointment of CT Corporation System, with offices on the date
hereof at 1633 Broadway, New York, New York 10019, as agent for service of
process under this Agreement and the other Financing Documents.
(s) On the Closing Date, the Partnership shall furnish to the
Purchaser a certificate stating (i) that there has been no material change in
the construction budget for the Project since the date hereof and (ii) that the
information contained in the Final Offering Circular under the caption
"Estimated Sources and Uses of Funds" is true, correct and complete in all
material respects as of the Closing Date.
(t) All insurance policies required by the Transaction Documents to
be obtained by the Partnership shall have been purchased and shall be in full
force and effect, and the Partnership shall have provided to the Purchaser
evidence thereof reasonably satisfactory to the Purchasers.
(u) On or prior to the Closing Date, the Partnership shall have
delivered to the Purchasers a title policy in the aggregate amount of
$148,610,000 insuring the Deed of Trust, which title policy shall be
satisfactory in form and substance to the Purchasers and its counsel.
(v) The Purchasers shall have received an officer's certificate of
the Partnership to the effect that the summary descriptions contained in the
Final Offering
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Circular of the Bonds, the Indenture and the other Transaction Documents conform
in all material respects to such documents.
(w) The Purchasers shall have received, in form and substance
satisfactory to the Purchasers, copies of such further opinions, certificates,
letters and documents as the Purchasers reasonably request.
7. Indemnification and Contribution.
(a) The Issuers, jointly and severally, will indemnify and hold
harmless each Purchaser, its partners, directors and officers and each person,
if any, who controls such Purchaser within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities to which such
Purchaser may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any breach of any of the
representations and warranties of the Issuers contained herein or any untrue
statement or alleged untrue statement of any material fact contained in the
Preliminary Offering Circular or the Final Offering Circular, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that (i) the Issuers will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Issuers by any Purchaser
through CSFBC specifically for use therein, it being understood and agreed that
the only such information consists of the information described as such in
subsection (b) below and (ii) with respect to any untrue statement or alleged
untrue statement in or omission or alleged omission from any Preliminary
Offering Circular, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Purchaser that sold the Bonds concerned to
the person asserting any such losses, claims, damages or liabilities, to the
extent that such sale was an initial resale by such Purchaser and any such loss,
claim, damage or liability results from the fact that there was not sent or
given to such person, at or prior to the written confirmation
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of the sale of such Bonds to such person, a copy of the Final Offering Circular
if the Issuers had previously furnished copies thereof to such Purchaser.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless each Issuer, its directors and officers and each person, if any, who
controls such Issuer within the meaning of Section 15 the Securities Act,
against any losses, claims, damages or liabilities to which the Issuers may
become subject, under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Preliminary Offering Circular or
the Final Offering Circular, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuers by any Purchaser
through CSFBC specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Issuers in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by the Purchaser consists of the following information in
each Offering Circular: the third paragraph, the sixth paragraph, the second
sentence of the seventh paragraph, the ninth paragraph and the last paragraph
under the caption "PLAN OF DISTRIBUTION."
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b) above. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to
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such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent (which consent shall not be
unreasonably withheld), or by a final judgment for the plaintiff, the
indemnifying party shall indemnify the indemnified party as provided herein from
and against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action and does not include a
statement as to or an admission of fault, culpability or failure to act by or on
behalf of the any indemnified party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuers on the one hand and the Purchaser on the other from the offering of
the Bonds or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Issuers on the one hand and the Purchaser on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Purchaser on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Issuers bear to the total discounts and commissions received by the
Purchaser from the Issuers under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers or the Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
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indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), the Purchaser shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Bonds purchased by it were resold exceeds the amount of any damages which
the Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(e) The obligations of the Issuers under this Section shall be in
addition to any liability which the Issuers may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Issuers within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Purchaser under this Section shall be in addition to any
liability which the Purchaser may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Purchaser within
the meaning of the Securities Act or the Exchange Act.
8. Default by Purchasers. If any Purchaser or Purchasers default in its or
their obligations to purchase Bonds hereunder and the aggregate principal amount
of Bonds that such defaulting Purchasers agreed but failed to purchase does not
exceed 10% of the total principal amount of Bonds, CSFBC (if it is not a
defaulting Purchaser) or any remaining Purchaser (if CSFBC is a defaulting
Purchaser) may make arrangements satisfactory to the Issuers for the purchase of
such Bonds by other persons, including any of the Purchasers, but if no such
arrangements are made by the Closing Date, the non-defaulting Purchasers shall
be obligated to purchase the Bonds that such defaulting Purchaser or Purchasers
agreed but failed to purchase. If any Purchaser or Purchasers defaults in its or
their obligations to purchase the Bonds hereunder and the aggregate principal
amount of Bonds with respect to which such default occurs exceeds 10% of the
total principal amount of Bonds and arrangements satisfactory to CSFBC (if it is
not a defaulting Purchaser) or any remaining Purchaser (if CSFBC is a defaulting
Purchaser) and the Issuers for the purchase of such Bonds by other persons are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of the non-defaulting Purchasers or the Issuers,
except as provided in Section 9. As used in this Agreement, the term "Purchaser"
includes any person substituted for a Purchaser under this Section. Nothing
herein will relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuers or their officers and of the several Purchasers set forth in or made
pursuant to this Agreement
29
<PAGE>
will remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Purchaser, the
Issuers or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the Bonds. If
this Agreement is terminated pursuant to Section 8 or if for any reason the
purchase of the Bonds by the Purchasers is not consummated, the Issuers and the
Purchasers shall remain responsible for their respective obligations pursuant to
Section 7. If the purchase of the Bonds by the Purchasers is not consummated,
the Issuers will, subject to the proviso to this sentence, reimburse the
Purchasers for all of their out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Bonds; provided, however that the Issuers will not be required
to so reimburse the Purchasers if the purchase of the Bonds by the Purchasers is
not consummated because of any of the following reasons: (i) the termination of
this Agreement pursuant to Section 8; or (ii) the occurrence of any event
specified in clause (iii), (iv) or (v) of Section 6(b).
10. Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered or telegraphed and confirmed to the
Purchasers c/o CSFBC at Eleven Madison Avenue, New York, NY 10010-3629,
Attention: Investment Banking Department - Transactions Advisory Group, or, if
sent to the Issuers, will be mailed, delivered or telegraphed and confirmed to
them at c/o LS Power Management, LLC, Two Tower Center, 20th Floor, East
Brunswick, NJ 08816, Attention: General Counsel.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder.
12. Representation of Purchasers. CSFBC will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by CSFBC will be binding upon all the Purchasers.
13. Joint and Several Obligations. The obligations of the Issuers
hereunder are joint and several.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
30
<PAGE>
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws. Each Issuer hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Issuer irrevocably
appoints CT Corporation System, with offices on the date hereof at 1633
Broadway, New York, New York 10019, as its authorized agent in the Borough of
Manhattan in The City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and
written notice of said service to such Issuer, by the person serving the same to
the address provided in Section 10, shall be deemed in every respect effective
service of process upon such Issuer in any such suit or proceeding. Each Issuer
further agrees to take any and all action as may be necessary to maintain such
designation and appointment of such agent in full force and effect for a period
of seven years from the date of this Agreement.
16. Limited Recourse. No recourse shall be had for any claim based on any
obligation, covenant or agreement under this Agreement to (i) any assets or
properties of any partner, shareholder or other owner (direct or indirect) of
either Issuer (other than their respective interests in the Collateral) or (ii)
any affiliate of either Issuer (other than the Issuers themselves), or any
partner, shareholder, or other owner (direct or indirect), officer, employee, or
director, past, present or future, of any of them or of either Issuer or of any
predecessor or successor of any of them, and no judgment for any deficiency upon
the obligations of either Issuer arising from any claim based on any obligation,
covenant or agreement under this Agreement shall be obtainable by any Purchaser
against any such person or entity, provided, however, that nothing contained in
this Section 16 shall be construed to release either Issuer from any of its
obligations hereunder.
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If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Issuers and the
Purchasers in accordance with its terms.
Very truly yours,
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
-----------------------------
Name: Frank Hardenberg
Title: Senior Vice President
and Secretary
LSP BATESVILLE FUNDING CORPORATION
By: /s/ Frank Hardenbergh
-----------------------------
Name: Frank Hardenberg
Title: Senior Vice President
and Secretary
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
TD SECURITIES (USA) INC.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: _________________________
Name:
Title:
<PAGE>
SCHEDULE I
EXISTING LIEN DOCUMENTS
1. Amended and Restated Pledge and Security Agreement (LSP Energy Limited
Partnership Limited Partnership Interests), dated as of December 15, 1998,
between LSP Batesville Holding, LLC and Credit Suisse First Boston as
collateral agent.
2. Amended and Restated Pledge and Security Agreement (LSP Energy Limited
Partnership General Partnership Interests), dated as of December 15, 1998,
between LSP Energy, Inc. and Credit Suisse First Boston as collateral
agent.
3. Deed of Trust, Security Agreement, Assignment of Leases and Rents and
Fixture Filing, dated as of August 28, 1998, by the Partnership, as
Trustor, to James W. O'Mara, as Trustee, for the benefit of Credit Suisse
First Boston as administrative agent and collateral agent, as Beneficiary.
4. Amended and Restated Deed of Trust, Security Agreement, Assignment of
Leases and Rents and Fixture Filing, dated as of December 15, 1998, by the
Partnership, as Trustor, to James W. O'Mara, as Trustee, for the benefit
of Credit Suisse First Boston as administrative agent collateral agent, as
Beneficiary.
5. Amended and Restated Security Agreement, dated as of December 15, 1998,
between the Partnership and Credit Suisse First Boston as collateral
agent.
<PAGE>
SCHEDULE II
PROJECT PARTIES THAT MUST DELIVER CONSENTS
Virginia Power
Aquila
Entergy
TVA
ANR
Tennessee Gas
BVZ Power Partners - Batesville
Black & Veatch
Westinghouse
Cogentrix Batesville Operations
Robinson Mechanical Contractors, Inc.
Lauren Constructors, Inc.
North American Transformer
Siemens Power Transmission & Distribution, LLC
Big Warrior Corporation
Garney Companies, Inc.
<PAGE>
SCHEDULE III
PURCHASERS
Principal Amount of
Purchaser Series A Bonds Series B Bonds
- --------- -------------- --------------
Credit Suisse First Boston Corporation ....... $139,200,000 $163,328,000
Scotia Capital Markets (USA) Inc. ............ 5,400,000 6,336,000
TD Securities (USA) Inc. ..................... 5,400,000 6,336,000
------------ ------------
Total ............................... $150,000,000 $176,000,000
============ ============
<PAGE>
Exhibit 10.3
POWER PURCHASE AGREEMENT
Dated May 21, 1998
By and Between
LSP ENERGY LIMITED PARTNERSHIP,
as Seller
and
AQUILA POWER CORPORATION
and
UTILICORP UNITED INC.,
as Purchaser
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION I - DEFINITIONS
1.1 Defined Terms.................................................. 1
1.2 Interpretation.................................................13
1.3 Technical Meanings.............................................14
SECTION II TERM; CONDITION PRECEDENT
2.1 Initial Term...................................................14
2.2 Extension of Term..............................................14
2.3 Conditions Precedent...........................................14
SECTION III - COMMENCEMENT OF OPERATION
3.1 Delivery Start Date............................................15
3.2 Consequences of Delays.........................................15
SECTION IV - SALE AND PURCHASE OBLIGATION
4.1 Sale and Purchase of Energy and Capacity.......................16
4.2 Replacement Power..............................................16
4.3 Measurement and Quality of Electricity.........................17
SECTION V - CONSTRUCTION AND OPERATION OF THE FACILITY
5.1 Construction of the Facility...................................17
5.2 Operation and Maintenance of the Facility......................17
5.3 Relationship to Other Purchasers...............................18
5.4 Scheduled Maintenance..........................................18
5.5 Access to Facility and Facility Site...........................19
5.6 Permits; Compliance with Laws..................................19
SECTION VI - SCHEDULING, DISPATCH AND DELIVERY
6.1 Dispatchable Facility..........................................20
6.2 Dispatch; Scheduling for Delivery..............................20
6.3 Emergency Conditions...........................................22
6.4 Forced Outages.................................................22
SECTION VII - INTERCONNECTION; OTHER SERVICES
7.1 Interconnection Facilities.....................................24
7.2 Interconnection Points.........................................24
7.3 Title and Risk of Loss.........................................25
7.4 Supply of Other Services.......................................25
7.5 Interconnection Agreements.....................................25
SECTION VIII - FUEL ARRANGEMENTS
8.1 Pipeline Interconnection Facilities............................27
8.2 Fuel for Operations; Delivery and Acceptance...................28
8.3 Title and Risk of Loss.........................................29
8.4 Gas Imbalances.................................................29
8.5 Measurement and Quality of Fuel................................29
SECTION IX - METERING
9.1 Metering Devices for Electricity...............................30
<PAGE>
9.2 Metering Devices for Fuel......................................30
9.3 Inspection of Metering Devices.................................31
9.4 Adjustments for Inaccurate Measurements........................31
9.5 Remote Access to Metering Devices............................. 32
SECTION X - PAYMENTS
10.1 Reservation Payments...........................................33
10.2 Adjustment to Reservation Payment for Commercial Operation
Delay Period...................................................34
10.3 Adjustment to Reservation Payment after the Delivery Start
Date...........................................................36
10.4 Energy Payments................................................38
10.5 Replacement Power Fuel Payments................................38
10.6 Excess Start-Up Payments.......................................38
10.7 Tracking Account...............................................38
10.8 System Upgrade Credit..........................................38
SECTION XI - COMMISSIONING AND TESTING
11.1 Performance Tests..............................................39
11.2 Sale of Test Energy............................................41
SECTION XII - GUARANTEES DURING OPERATIONS
12.1 Guaranteed Heat Rate...........................................41
12.2 Guaranteed Start-Up Time.......................................42
12.3 Guaranteed Ramp Rate...........................................42
SECTION XIII - BILLING AND PAYMENT
13.1 Billing and Payment............................................42
13.2 Other Payments.................................................43
13.3 Currency and Timing of Payment.................................43
13.4 Records........................................................44
13.5 Default Interest...............................................44
13.6 Credit Support.................................................44
SECTION XIV - REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Seller.......................45
14.2 Representations and Warranties of Aquila.......................46
14.3 Representations and Warranties of UtiliCorp....................48
14.4 Certificates...................................................49
14.5 Books and Records; Information.................................49
SECTION XV - TAXES
15.1 Taxes and Fees.................................................49
15.2 General........................................................50
SECTION XVI - INSURANCE
16.1 Insurance Required.............................................50
16.2 Evidence and Scope of Insurance................................50
16.3 Term and Modification of Insurance.............................51
16.4 Application of Proceeds........................................51
SECTION XVII - FORCE MAJEURE EVENT
ii
<PAGE>
17.1 Force Majeure Event Defined....................................51
17.2 Applicability of Force Majeure Event...........................52
17.3 Other Effects of Force Majeure Events..........................53
17.4 Delivery Excuse................................................54
SECTION XVIII - TERMINATION AND DEFAULT
18.1 Event of Default...............................................55
18.2 Remedies for Default...........................................57
SECTION XIX - INDEMNIFICATION AND LIABILITY
19.1 Indemnification................................................57
19.2 Fines..........................................................57
19.3 Limitations of Liability, Remedies and Damages.................58
19.4 UCC............................................................58
SECTION XX - DISPUTE RESOLUTION
20.1 Senior Officers................................................60
20.2 Arbitration....................................................61
SECTION XXI - APPOINTMENT OF AQUILA AS AGENT
21.1 Appointment....................................................63
21.2 Presumption of Authority.......................................63
SECTION XXII - MISCELLANEOUS
22.1 Prudent Industry Practices.....................................63
22.2 Change in Prudent Industry Practices...........................63
22.3 Assignment.....................................................64
22.4 Notices........................................................64
22.5 Choice of Law..................................................65
22.6 Entire Agreement...............................................65
22.7 Further Assurances.............................................65
22.8 Waiver.........................................................66
22.9 Modification or Amendment......................................66
22.10 Severability...................................................66
22.11 Counterparts...................................................66
22.12 Confidential Information.......................................66
22.13 Independent Contractors........................................67
22.14 Third Parties..................................................67
22.15 Headings.......................................................67
APPENDIX A - TESTING PROCEDURES FOR CONTRACT CAPACITY
APPENDIX B - METERING EQUIPMENT
APPENDIX C - DESIGN LIMITS
APPENDIX D - FUEL SPECIFICATIONS
APPENDIX E - ELECTRICITY SPECIFICATION
APPENDIX F - REPLACEMENT POWER
APPENDIX G - GUARANTEED HEAT RATES
APPENDIX H - MINIMUM INSURANCE REQUIREMENTS
APPENDIX I - CRITERIA FOR ELECTRIC AND GAS INTERCONNECTION AGREEMENTS
<PAGE>
POWER PURCHASE AGREEMENT
This POWER PURCHASE AGREEMENT (this "Agreement"), dated May 21,
1998, is entered into by and between LSP Energy Limited Partnership, a Delaware
limited partnership ("Seller"), and Aquila Power Corporation, a Delaware
corporation ("Aquila"), and UtiliCorp United Inc., a Delaware corporation
("UtiliCorp") (Aquila and UtiliCorp collectively, "Purchaser") (each, a "Party"
and collectively, the "Parties").
RECITALS
A. Seller proposes to develop, finance, construct, own, operate and
maintain the Facility, located in Batesville, Mississippi.
B. Seller wishes to deliver and sell to Purchaser, and Purchaser
wishes to purchase, schedule and take from Seller, electrical capacity,
associated energy, and other services from the Facility on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged, the Parties
hereby agree as follows:
AGREEMENT
SECTION I
DEFINITIONS
Section 1.1 Defined Terms. Unless otherwise defined herein or in
any exhibit, schedule or appendix hereto, the following terms, when used herein
or in any exhibit, schedule or appendix hereto shall have the meanings set forth
below.
"AAA" means the American Arbitration Association or any successor
organization.
"Agreement" means this Power Purchase Agreement.
"Annual Availability Adjustment" has the meaning assigned to such
term in Section 10.3.
"ANR" means ANR Pipeline Company.
"ANR Pipeline" means the facilities of ANR to be used by the Parties
for the delivery of Fuel as required by this Agreement.
<PAGE>
"Appendix" means an appendix attached to this Agreement.
"Availability Adjustment Factor" or "AAF" means the actual
availability factor calculated in accordance with the provisions of Section
10.3.
"Billing Period" means each Month used for billing purposes pursuant
to Section XIII.
"Btu" means British thermal unit.
"Business Day" means any Day except Saturday, Sunday or a weekday
that is observed by the NERC as a holiday, as amended from time to time by NERC.
As of the date of this Agreement, such Days observed by NERC as holidays are New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
"Capacity Shortfall" has the meaning assigned to such term in
Section 11.1(d).
"Central Prevailing Time" means Central Daylight Saving Time when
such time is applicable and otherwise means Central Standard Time.
"Change-in-Law" means the adoption, imposition, promulgation or
modification, or change in interpretation or application of any Law or
regulation to which this Agreement or a Party is subject, after the Effective
Date.
"Change-in-Law Taxes" means any new Tax imposed by the federal
(either nationally or regionally) or state government, which is broadly
applicable to the production of energy or the provision of electric generation
capacity, imposed on or measured by the volume or amount of consumption of Fuel,
or gross revenue, gross receipts or comparable measure, and whether
characterized as a sales, gross receipts, Btu, or other similar taxes; provided,
that such Change-in-Law Taxes shall only be applicable to the purchase, sale,
delivery or receipt of energy, capacity, or Fuel under this Agreement.
Change-in-Law Taxes shall not include: (i) any increase in any Tax which exists
as of the Effective Date, (ii) any Tax on Seller's income, or (iii) any Tax on
Seller's real or personal property.
"Commercial Operation Date" means the date on which the Dedicated
Unit is certified pursuant to Section 11.1 to begin commercial operations.
"Commercial Operation Delay Period" is the period of time between
the Delivery Start Date and the Commercial Operation Date, if the Commercial
Operation Date occurs after the Delivery Start Date.
2
<PAGE>
"Commercially Reasonable Efforts" means, with respect to any
purchase or sale or other action required to be made, attempted or taken by a
Party under this Agreement, such efforts as a reasonably prudent business would
undertake for the protection of its own interest under the conditions affecting
such purchase or sale or other action, including without limitation, the amount
of notice of the need to take such action, the duration and type of the purchase
or sale or other action, the competitive environment in which such purchase or
sale or other action occurs and the risk to the Party required to take such
action.
"Common Facilities" means the equipment of the Facility (other than
the Units) necessary for the generation and transmission of Net Electrical
Output from the Dedicated Unit.
"Contest" means, with respect to any Person, a contest of (a) any
Governmental Approval, acts or omissions by Governmental Agencies or any related
matters or (b) the amount or validity of any claim pursued by such Person in
good faith and by appropriate legal, administrative or other proceedings
diligently conducted so long as: (i) adequate reserves have been established
with respect thereto in accordance with GAAP, and (ii) neither Party could
reasonably be expected to incur criminal or civil liability with respect
thereto.
"Contract Capacity" means the sum of the Standard Capacity and the
Supplemental Capacity as determined in accordance with Section 11.1. For
purposes of the Reservation Payment, Contract Capacity shall be adjusted to 95
degrees Fahrenheit and 60% relative humidity. This definition shall not restrict
Purchaser's right to take all available capacity and associated energy of the
Dedicated Unit at the ambient conditions at the time.
"Contract Interest Rate" has the meaning assigned to such term in
Section 13.5.
"Contract Year" means the twelve (12)-Month period commencing on the
Delivery Start Date and each twelve(12)-Month period thereafter; provided,
however, that the final Contract Year shall be the period from the first Day of
such Contract Year through the Term of this Agreement.
"Control Center" means the generation control centers of TVA,
Entergy or any other control center, as may be designated in writing by
Purchaser from time to time as being the primary control center for the
Dedicated Unit; provided that such designation shall be reasonably acceptable to
Seller.
"Credit Support" means any of the following in form and substance
reasonably acceptable to the Party receiving such
3
<PAGE>
document: (a) one or more letters of credit issued by one or more domestic or
foreign banks whose rating is Investment Grade or (b) a guaranty or several
guaranties issued by one or more Persons whose rating is Investment Grade.
"Day" means the 24-hour period beginning and ending at 12:00
midnight (Central Prevailing Time).
"Debt Service" means all fees (including commitment fees) of the
Financing Parties, interest (including net payments under interest rate hedging
agreements), principal and any other amounts due in connection with the
repayment, prepayment or failure to borrow, repay or prepay rate loans or the
prepayment, unwinding or breakage of interest rate hedging transactions, payable
to the Financing Parties under the Financing Documents.
"Debt Service Coverage Ratio" means for any period, (i) Operating
Cash Available For Debt Service for such period divided by (ii) Debt Service for
such period. The Parties acknowledge and agree that it is their intent that the
Debt Service Coverage Ratio calculated under this Contract be the same as the
"Debt Service Coverage Ratio" calculated under the Financing Documents and that
the definitions of Debt Service and Operating Cash Available for Debt Service
hereunder are intended to be the same as the definitions of such terms under the
Financing Documents.
"Dedicated Unit" means the designated Unit of the Facility, the
Contract Capacity and Net Electrical Output of which is dedicated to Purchaser
pursuant to this Agreement.
"Delivered Cost of Fuel" means, for the purposes of this Agreement,
the estimated price for Fuel delivered to the Dedicated Unit for the hour in
Dollars per MMBtu, based on the most recent actual delivered cost of Fuel
including variable supply costs, Fuel transportation costs, Fuel-related taxes,
and other Fuel-related charges.
"Delivery Delay Adjustment" has the meaning assigned to such term in
Section 10.2.
"Delivery Excuse" has the meaning assigned to such term in Section
17.4(b).
"Delivery Start Date" has the meaning assigned to such term in
Section 3.1.
"Diagnostic Period" has the meaning assigned to such term in Section
6.4(a).
"Design Limits" means the parameters set forth in Appendix C.
4
<PAGE>
"Dispatch" means the ability of the Purchaser to schedule and to
control the electrical output of the Dedicated Unit, through submittal of
schedules, in accordance with this Agreement.
"Dollars" or "$" means the lawful currency of the United States of
America.
"DSCR Certificates" means those certificates provided by Seller to
Purchaser pursuant to Section 13.6(a).
"Early Termination Date" has the meaning assigned to such term in
Section 18.2.
"Effective Date" means the date of execution and delivery of this
Agreement by Seller and Purchaser.
"Electricity Metering Points" has the meaning assigned to such term
in Section 9.1(a).
"Emergency Condition" means a condition or situation that presents
an imminent physical threat of danger to life, health or property, or could
reasonably be expected to cause a significant disruption on the Entergy System
or the TVA System, as applicable, which condition or situation meets the
criteria set forth in Section 6.3 herein.
"Energy Payment" means, for each Billing Period, the payment to be
made by Purchaser to Seller for the Net Electrical Output or energy supplied as
Replacement Power delivered by Seller to Purchaser in accordance with Section
10.4.
"Entergy" means the Entergy Corporation and any of its subsidiaries
including Entergy Mississippi, Inc. and Entergy Services.
"Entergy Interconnection Agreement" means the Interconnection
Agreement to be between Seller and Entergy, providing for the construction and
operation of the Interconnection Facilities between the Facility and the Entergy
System.
"Entergy System" means the transmission system of Entergy with a
substation located in Batesville, Mississippi, to be used by Purchaser for the
purpose of transmitting and distributing electricity generated by the Facility.
"Estimated Standard Capacity" has the meaning assigned to such term
in Section 11.1(d).
"Estimated Supplemental Capacity" has the meaning assigned to such
term in Section 11.1(d).
5
<PAGE>
"Excess Start-Up Payment" has the meaning assigned to such term in
Section 10.6.
"Extended Outage Period" has the meaning assigned to such term in
Section 6.4(a).
"Extended Term" has the meaning assigned to such term in Section
2.2.
"Extension Notice" has the meaning assigned to such term in Section
2.2.
"Facility" means the natural gas fueled combined cycle electrical
generation plant consisting of three (3) combined cycle Units and having a total
output of approximately 800 MW, to be located in Batesville, Mississippi,
together with any additional facilities and materials, including any additions
or replacements thereof, to be constructed, supplied and delivered at the
Facility Site.
"Facility Site" means the approximately 60 acre parcel of land upon
which the Facility is located, in the Batesville Industrial Park in Batesville,
Panola County, Mississippi.
"FERC" means the Federal Energy Regulatory Commission or subsequent
Government Agencies with regulatory jurisdiction.
"Financial Closing Date" means the date on which (a) binding
commitments to provide the financing for the estimated cost to complete
construction of the Facility are issued by the Financing Parties and are
effective, (b) conditions on initial borrowings are satisfied and (c) amounts
become available for borrowing from the Financing Parties.
"Financing Documents" means the loan agreements (including
agreements for any subordinated debt), lease agreements, notes, bonds,
indentures, security agreements, interest rate swap agreements and any other
interest rate hedging agreements and any other documents relating to the
financing or refinancing of the acquisition, construction, ownership, operation,
maintenance or leasing of the Facility.
"Financing Parties" means institutions (including any trustee or
agent on behalf of such institutions) providing financing or refinancing or any
other credit enhancement to Seller for the acquisition, construction, ownership,
operation, maintenance or leasing of the Facility.
"Force Majeure Event" means an event, condition or circumstance
described in Section 17.1.
6
<PAGE>
"Forced Outage" means a cessation of operation or reduction in
available capacity of the Dedicated Unit that is not the result of (a) a
Scheduled Maintenance Outage, (b) a Force Majeure Event, (c) a Delivery Excuse,
or (d) steady-state operation outside of the deviation band limits in accordance
with Section 6.2(d); provided that, for the purposes of this Agreement, a
period of cessation of operation or reduction in available capacity of the
Dedicated Unit shall not be deemed to be a Forced Outage to the extent Seller is
responsible for Replacement Power during such period and Seller delivers and/or
pays for such Replacement Power in accordance with this Agreement.
"Forced Outage Hours" means the actual hours of Forced Outage per
Month, prorated based on the ratio of the capacity available to the Contract
Capacity for partial outages; provided that to the extent Seller has undertaken
any Scheduled Maintenance Outage that does not conform to the requirements of
Section 5.4 but is necessary in Seller's reasonable judgment, the hours of such
Scheduled Maintenance Outage shall be counted as Forced Outage Hours except to
the extent Seller delivers and/or pays for Replacement Power in accordance with
this Agreement.
"Fuel" means natural gas, which is the fuel used by the Facility.
"Fuel Metering Points" means the delivery locations specified in
Appendix B.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"GDP-IPD Index" means the ratio of the Gross Domestic Product
Implicit Price Deflator published in the National Income and Product Account by
the U. S. Department of Commerce on the date of determination relative to the
value of 110.95 on January 1, 1997.
"Government Agency" means any federal, state, local, territorial or
municipal government, governmental department, commission, board, bureau,
agency, instrumentality, judicial or administrative body (or any agency,
instrumentality or political subdivision thereof).
"Governmental Approval" means any authorization, consent, approval,
license, lease, ruling, permit, exemption, filing, variance, order, judgment,
decree, publication, notice to, declarations of or with or regulation by or with
any Government Agency relating to the acquisition, ownership, occupation,
construction, start-up, testing, operation or maintenance of the Dedicated Unit
and Common Facilities or to the execution, delivery or performance of this
Agreement.
7
<PAGE>
"Guaranteed Heat Rate" means the Guaranteed Heat Rate as determined
in accordance with Appendix G.
"Guaranteed Ramp Rate" has the meaning assigned to such term in
Appendix C.
"Guaranteed Start-Up Time" has the meaning assigned to such term in
Appendix C.
"Heat Rate" means the number of Btu's used to produce one KWh of
energy at the Facility.
"Hour Ending" or "HE" means a consecutive sixty minute period ending
at :00. For example, HE 7 means the period from 6:01 am Central Prevailing Time
("CPT") through 7:00 am CPT.
"Incremental Replacement Power Cost" has the meaning assigned to
such term in Appendix F.
"Initial Term" has the meaning assigned to such term in Section 2.2.
"Interconnection Agreements" means the TVA Interconnection Agreement
and the Entergy Interconnection Agreement.
"Interconnection Facilities" means the interconnection facilities
that will connect the Facility with the Entergy System and the TVA System, as
more fully described in the Interconnection Agreements.
"Interconnection Points" means the physical points at which the
Facility is connected with the Entergy System and the TVA System, as more fully
described in the Interconnection Agreements and Section 7.2, or such other
points as the Parties may agree.
"Investment Grade" means, with respect to any Person, a rating of
BBB- or better by S&P and Baa3 or better by Moody's (or an equivalent rating by
another nationally recognized statistical rating organization of similar
standing if neither entity is then rating such debt of such Person) for such
Person's long-term unsecured debt obligations.
"KW" means kilowatt.
"KWh" means kilowatt-hour.
"Law" means any statute, law, rule or regulation, whether now or at
any time in the future in effect.
"Lien" means, with respect to any property of any Person, any
mortgage, lien, pledge, charge, lease, easement,
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servitude, right of others or security interest or encumbrance of any kind in
respect of such property of such Person.
"Major Inspection" means, with respect to the combustion turbine of
the Dedicated Unit, inspection of the combustor baskets, transitions, Fuel
nozzles, transition seals, removal of the turbine cover and inspection of the
turbine vanes and blades, removal of the compressor cover, inspection of the
rotor, inspection of compressor diaphragms, and other such maintenance performed
in accordance with manufacturer's recommendations.
"MMBtu" means million Btu.
"Month" means a period of Days beginning at Hour Ending 0100
(Central Prevailing Time) on the first Day of a calendar month and ending at
Hour Ending 2400 (Central Prevailing Time) on the last Day of the same calendar
month. If used in connection with a calendar year, a "Month" shall be a calendar
month.
"Monthly Availability Adjustment" has the meaning assigned to such
term in Section 10.3(a).
"Moody's" means Moody's Investors Service, Inc.
"MVAR" means megavolt-ampere reactive.
"MW" means megawatt.
"MWh" means megawatt-hour.
"Net Electrical Output" means, for any period, the net electric
energy output (measured in MWhs), and other services as described in Section
7.4, of the Dedicated Unit delivered to Purchaser at the Interconnection Points
pursuant to Purchaser's Dispatch of the Dedicated Unit.
"NERC" means the North American Electric Reliability Council or any
such succeeding entity.
"Non-Conforming Fuel" has the meaning assigned to such term in
Section 8.5(b).
"Off-Peak Hour" means any hour that is not a Peak Hour.
"Operating Cash Available For Debt Service" means, for any calendar
quarter (i) all payments from the sale of electricity (including energy and
capacity) generated or distributed by the Facility, net payments receivable by
Seller under interest rate hedging agreements, proceeds of business interruption
insurance, and investment income on amounts in reserve accounts (but only to the
extent not retained in such
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reserve accounts), minus (ii) (A) all operation and maintenance costs which
shall not include (1) major maintenance costs paid from the major maintenance
reserve account, (2) emission offset costs paid from the emission offset reserve
account, (3) depreciation, (4) payments for repair or restoration of the
Facility made from insurance proceeds and other amounts in the loss proceeds
account, (5) the subordinated portion of the fee payable to the Facility
operator, (6) any subordinated debt amounts, (7) distributions of any kind to
Seller and (8) capital expenditures other than those included in and approved as
part of Seller's annual operating budget, and (B) deposits into the major
maintenance reserve account, the emissions offsets reserve account and the
expense accrual subaccount established under the Financing Documents, all as
more particularly described in the Financing Documents.
"Part Load Adjustment Factor" has the meaning assigned to such term
in Appendix G.
"Peak Hour" means any hour from Hour Ending 7 (Central Prevailing
Time) through Hour Ending 22 (Central Prevailing Time) on any Day, unless
otherwise revised in accordance with Section 22.2.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or Government Agency.
"Pipeline Interconnection Facilities" means the pipelines to be
constructed and installed by Seller pursuant to Section 8.1 to connect the
Facility with Tennessee Gas Pipeline, ANR Pipeline and any other pipeline
interconnection facilities as the Parties may agree.
"Prudent Industry Practices" means any of the practices, methods,
standards and acts (including, but not limited to, the practices, methods and
acts engaged in or approved by a significant portion of the electric power
generation industry in the United States) that, at a particular time, in the
exercise of reasonable judgment in light of the facts known or that should
reasonably have been known at the time a decision was made, could have been
expected to accomplish the desired result consistent with good business
practices, reliability, economy, safety and expedition, and which practices,
methods, standards and acts generally conform to operation and maintenance
standards recommended by the Facility's equipment suppliers and manufacturers,
the Design Limits and applicable Governmental Approvals and Law.
"Replacement Power" means electric generation capacity and energy
provided by Seller from time to time to Purchaser from
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sources other than the Dedicated Unit pursuant to the Replacement Power
Arrangements, or provided by Purchaser with Seller compensating Purchaser for
any Incremental Replacement Power Costs each in accordance with the provisions
of this Agreement and the requirements of Appendix F.
"Replacement Power Arrangements" means any arrangement made with any
interconnecting utilities and/or any other Person for the supply, transmission
and delivery of Replacement Power that Seller is to provide and/or pay for as
delivered to the Replacement Power Delivery Point.
"Replacement Power Delivery Point" means either the Interconnection
Point or one or more points designated by Purchaser for the receipt of
Replacement Power. Designation of an alternative Replacement Power Delivery
Point by Purchaser shall be reasonably acceptable to Seller and shall become
effective on the later of (i) thirty (30) Days after notice of such change and
acceptance by seller or (ii) the expiration of any Replacement Power
Arrangements in place at the time of the notice, unless otherwise agreed by both
Parties to be effective at an earlier time. Seller may request that Purchaser
designate an alternative Replacement Power Delivery Point.
"Replacement Power Fuel Payment" has the meaning assigned to such
term in Section 10.5.
"Reservation Charge" has the meaning assigned to such term in
Section 10.2(a).
"Reservation Payment" means, for each Billing Period, the payment to
be made by Purchaser to Seller for the Contract Capacity available to Purchaser
from the Dedicated Unit or Replacement Power delivered by Seller to Purchaser
during such Billing Period, in accordance with Section 10.1(b) subject to the
other terms of this Agreement. The Reservation Payment includes all of Seller's
fixed costs associated with the Dedicated Unit and the Common Facilities,
including, but not limited to, fixed operating and maintenance costs and
property taxes.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Scheduled Maintenance Hours" or "SMH" means the actual number of
hours during which the Dedicated Unit is shut down during a Scheduled
Maintenance Outage.
"Scheduled Maintenance Outage" means a time period during which the
Dedicated Unit (or any Common Facilities affecting the output of the Dedicated
Unit) is shut down for Facility maintenance in accordance with Section 5.4 or as
otherwise agreed upon by the Parties.
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"Seasonal Standard Heat Rate" means the average Heat Rate at full
Standard Capacity as specified in Appendix G.
"Standard Capacity" means the generating capacity of the Dedicated
Unit at full combustion turbine output without duct firing or steam injection.
The Standard Capacity shall be determined in accordance with Section 11.1 and
Appendix A. The Standard Capacity shall adjust with ambient conditions in
accordance with the actual capability of the Dedicated Unit.
"Start-Up" means the successful ignition of the Dedicated Unit
pursuant to a Dispatch order from Purchaser and the operation of the Dedicated
Unit up to its minimum load in accordance with the Design Limits.
"Supplemental Capacity" means any capacity of the Dedicated Unit in
excess of the Standard Capacity. Supplemental Capacity shall be determined in
accordance with Section 11.1 and Appendix A. Supplemental Capacity shall adjust
with ambient conditions in accordance with the actual capability of the
Dedicated Unit.
"Surplus Reservation Charge" has the meaning assigned to such term
in Section 10.1(b).
"Surplus Supplemental Capacity" has the meaning assigned to such
term in Section 10.1(b).
"Taxes" means, with respect to any Person, all taxes, withholdings,
assessments, imposts, duties, governmental fees, governmental charges or levies
imposed directly or indirectly on such Person or its sales, income, profits or
property by any Government Agency.
"Tennessee Gas" means Tennessee Gas Pipeline Company.
"Tennessee Gas Pipeline" means the facilities of Tennessee Gas to be
used by the Parties for the delivery of Fuel as required by this Agreement.
"Term" means the Initial Term and any Extended Term.
"Test Energy" has the meaning assigned to such term in Section 11.2.
"Tracking Account" has the meaning assigned to such term in Section
12.1(a).
"Trunkline Gas" means Trunkline Gas Company.
"TVA" means Tennessee Valley Authority, a Federal generation and
transmission utility.
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"TVA Interconnection Agreement" means the Interconnection Agreement
to be between Seller and TVA, providing for the construction and operation of
the Interconnection Facilities between the Facility and the TVA System.
"TVA System" means the transmission system of TVA with a substation
located in Batesville, Mississippi, to be used by Purchaser for the purpose of
transmitting and distributing electricity generated by the Facility.
"UCC" has the meaning assigned to such term in Section 19.4.
"Unit" means any of the three (3) gas fueled combined cycle electric
generating trains located at the Facility.
"Unit Electricity Meter" has the meaning assigned to such term in
Appendix B.
"Unit Fuel Meter" has the meaning assigned to such term in Appendix
B.
"Utility Meters" has the meaning assigned to such term in Appendix
B.
"Value Factor" means, for any Month, the factor set forth opposite
such Month in the tables in Section 10.2.
Section 1.2 Interpretation. Unless the context otherwise requires:
(a) Words singular and plural in number will be deemed to include
the other and pronouns having masculine or feminine gender will be deemed to
include the other.
(b) Any reference in this Agreement to any Person includes its
permitted successors and assigns and, in the case of any Government Agency, any
Person succeeding to its functions and capacities.
(c) Any reference in this Agreement to any Section or Appendix means
and refers to the Section contained in or Appendix attached to this Agreement.
(d) Other grammatical forms of defined words or phrases have
corresponding meanings.
(e) A reference to writing includes typewriting, printing,
lithography, photography and any other mode of representing or reproducing
words, figures or symbols in a lasting and visible form.
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(f) A reference to a specific time for the performance of an
obligation is a reference to that time in the place where that obligation is to
be performed.
(g) A reference to Party to this Agreement includes that Party's
successors and permitted assigns.
(h) A reference to a document or agreement, including this
Agreement, includes a reference to that document or agreement as novated,
amended, supplemented or restated from time to time.
(i) If any payment, act, matter or thing hereunder would occur on a
Day that is not a Business Day or Day on which banks are closed in New York, New
York, then such payment, act, matter or thing shall, unless otherwise expressly
provided for herein, occur on the next succeeding Business Day.
Section 1.3 Technical Meanings. Words not otherwise defined herein
that have well-known and generally accepted technical or trade meanings are used
herein in accordance with such recognized meanings.
SECTION II
TERM; CONDITION PRECEDENT
Section 2.1 Initial Term. This Agreement shall become effective as
of the Effective Date and shall continue in effect for an initial period ending
on the date that is fifteen (15) years and seven (7) Months from the Delivery
Start Date (the "Initial Term"), unless otherwise extended or terminated in
accordance with the provisions of this Agreement.
Section 2.2 Extension of Term. The Term of this Agreement shall be
extended for five (5) years (or such longer period as mutually agreed by the
Parties) (the "Extended Term""), provided that Purchaser notifies Seller in
writing of an extension of this Agreement (an "Extension Notice") by the later
of July 31, 2013 or twenty-nine (29) Months prior to the expiration of the
Initial Term.
Section 2.3 Condition Precedent. The continued effectiveness of this
Agreement is contingent upon the occurrence of the Financial Closing Date by no
later than November 15, 1998, unless otherwise mutually agreed in writing.
Unless such condition is satisfied or waived by such date this Agreement shall
terminate on such date and neither Party shall have any further liability to the
other Party under this Agreement.
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SECTION III
COMMENCEMENT OF OPERATION
Section 3.1 Delivery Start Date. The Delivery Start Date shall be
June 1, 2000, or such later date that shall reflect a day-for-day extension for
each Day that the Commercial Operation Date is delayed due to (i) a Force
Majeure Event; or (ii) a Delivery Excuse.
Section 3.2 Consequences of Delays.
(a) If Seller does not reasonably expect to achieve the Commercial
Operation Date by the Delivery Start Date, Seller shall provide prompt written
notice thereof not later than ninety (90) Days prior to the Delivery Start Date,
(a "Commercial Operation Delay Notice") to Purchaser of such expectation, the
expected period of delay and the cause of the delay. Seller's estimate of the
expected period of delay shall be based on the best information obtained by
Seller, and Seller shall promptly notify Purchaser of any expected changes in
such period. Seller shall provide Purchaser with written notice not later than
eighty (80) Days prior to the Delivery Start Date as to whether Seller will
either (i) elect to be responsible for Replacement Power for the duration of the
Commercial Operation Delay Period in accordance with Section 3.2(b), or (ii)
elect to incur a Delivery Delay Adjustment for the duration of the Commercial
Operation Delay Period in accordance with Section 10.2(a).
(b) If Seller elects to be responsible for Replacement Power, then
within five (5) Business Days of the second notice given in Section 3.2(a), the
Seller shall provide written notice to Purchaser indicating whether (i) Seller
elects to provide Replacement Power, or (ii) Seller elects to have Purchaser
provide Replacement Power in which case Seller shall compensate Purchaser for
Incremental Replacement Power Costs for the duration of the Commercial Operation
Delay Period in accordance with Appendix F.
(c) If Seller has not provided the Commercial Operation Delay Notice
by the date specified in Section 3.2(a), but in any case has not provided at
least ninety (90) Days notice of any delay in the Commercial Operations Date,
then Replacement Power shall be provided by the Purchaser and Seller shall
compensate Purchaser for the Incremental Replacement Power Costs for the
duration of the Commercial Operation Delay Period in accordance with Appendix F.
(d) Notwithstanding any provision in this Agreement to the contrary,
the Seller shall not be responsible for delays and any associated requirement
for Replacement Power attributable to a Force Majeure Event or Delivery Excuse.
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(e) Notwithstanding any provision in this Agreement to the contrary,
Purchaser may terminate this Agreement if the Commercial Operation Date is not
achieved by June 1, 2001; provided that if: (i) the delay in achieving the
Commercial Operation Date is due to a Force Majeure Event or a Delivery Excuse,
and (ii) the Delivery Start Date has occurred prior to June 1, 2001, then the
Commercial Operation Date shall be extended one Day for each Day of the delay,
however such date shall be no later than June 1, 2002.
SECTION IV
SALE AND PURCHASE OBLIGATIONS
Section 4.1 Sale and Purchase of Energy and Capacity. Subject to the
terms and conditions of this Agreement, Seller shall sell, make available, and
deliver, and Purchaser shall purchase and accept, (a) on and after the later to
occur of (i) the Delivery Start Date or (ii) the Commercial Operation Date, and
for the Term of this Agreement, the Contract Capacity, Net Electrical Output,
and other services as described in Section 7.4 as Dispatched by Purchaser in
accordance with Section 6.2; and (b) on and after the Delivery Start Date,
Replacement Power provided by Seller pursuant to Section 3.2 or Section 6.4.
Section 4.2 Replacement Power. When Seller is delivering Replacement
Power to Purchaser, Seller shall be obligated to deliver the amount of capacity
and energy and other services (with other services at no cost to Seller, except
to the extent required to deliver Replacement Power to the Replacement Power
Delivery Point) scheduled by Purchaser, up to the Contract Capacity, which, for
the purposes of this Section 4.2 for the Months of June, July, August and
September, shall be no less than the Contract Capacity at 95 degrees Fahrenheit
and 60 percent relative humidity and for all other Months, no less than the
Contract Capacity at 59 degrees Fahrenheit and 60 percent relative humidity.
Seller shall make appropriate power purchase and transmission arrangements to
provide capacity and energy to Purchaser which is of the same level of firmness
(e. g. unit contingent with minimum availability of 96%) or higher level of
firmness (e.g., system firm, firm with liquidated damages, or as firm as utility
native load) as the Contract Capacity hereunder. Replacement Power procured by
Purchaser with Seller compensating Purchaser may be of a lower level of firmness
during a Diagnostic Period and Extended Outage Period.
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Section 4.3 Measurement and Quality of Electricity.
(a) All Net Electrical Output shall be measured at the Electricity
Metering Points and shall meet the specifications set forth in Appendix E.
(b) In the event that electricity delivered by Seller hereunder
fails to conform to the specifications set forth in Appendix E, Seller shall (as
soon as reasonably practicable after becoming aware thereof) notify Purchaser of
the same and of its best good faith estimate of the duration and extent of such
failure to conform, and Seller shall make Commercially Reasonable Efforts to
cure such failure as soon as reasonably practicable thereafter. If Seller is
unable to deliver electricity to Purchaser due to such failure to conform to
specifications, such inability to deliver shall be considered a Forced Outage.
SECTION V
CONSTRUCTION AND OPERATION OF THE FACILITY
Section 5.1 Construction of the Facility
(a) Prior to the Financial Closing Date, Seller shall designate to
Purchaser which Unit to be constructed at the Facility is Purchaser's Dedicated
Unit.
(b) Starting sixty (60) Days after the Effective Date, Seller shall
report to Purchaser, each Month, on the construction status and completion
schedule for the Dedicated Unit and the Common Facilities. Such report shall, at
a minimum, provide a schedule showing items completed and to be completed, the
expected Commercial Operation Date, and the estimated percent complete.
Section 5.2 Operation and Maintenance of Facility.
(a) Seller shall operate and maintain the Dedicated Unit and Common
Facilities in accordance with Prudent Industry Practices and otherwise in
accordance with this Agreement.
(b) Seller shall inform Purchaser on a daily basis of the expected
operating schedule and generation capacity of the Dedicated Unit on that Day and
any limitations, restrictions, deratings or outages affecting the Dedicated
Unit.
(c) Seller shall, during the Term, only employ appropriately
qualified (determined in Seller's reasonable opinion consistent with applicable
industry standards) personnel for the purposes of operating and maintaining the
Dedicated Unit
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and Common Facilities, and coordinating operations with the Entergy System and
the TVA System.
Section 5.3 Relationship to Other Purchasers.
(a) No other purchaser of output of any Unit other than the
Dedicated Unit shall have superior rights than Purchaser to any Common Facility.
(b) During periods where the output or capacity of Common
Facilities, including Pipeline Interconnection Facilities, is restricted, such
available output or capacity shall be apportioned to each unit on a pro-rata
basis consistent with Prudent Industry Practice, unless otherwise agreed in
writing by all affected purchasers.
Section 5.4 Scheduled Maintenance.
(a) At least thirty (30) Days prior to the Commercial Operation Date
and thereafter prior to June 1 of each subsequent calendar year, Purchaser shall
provide to Seller a non-binding proposed schedule of its projected Dispatch for,
in the case of the first such schedule, the nineteen (19)-Month period beginning
on the Commercial Operation Date, and thereafter for the twelve (12)-Month
period beginning on January 1st of the following calendar year.
Based on Purchaser's projected Dispatch schedule and subject to
Section 5.4(b), Seller shall provide Purchaser with its proposed maintenance
schedule for such twelve (12)-Month period within ten (10) Days following
receipt of Purchaser's projected Dispatch schedule. Purchaser and Seller shall
agree on the expected timing of the Scheduled Maintenance Outages for such
twelve (12)-Month period with no Scheduled Maintenance Outages to occur during
the period from June 15 to September 15. Scheduled Maintenance Outages may be
taken in any number of non-contiguous periods, provided number of Scheduled
Maintenance Hours does not exceed the amounts specified in Section 5.4(b).
Seller shall coordinate all Scheduled Maintenance Outages with Purchaser by
giving Purchaser written notice at least ten (10) Days prior to a Scheduled
Maintenance Outage such notice to include the scheduled start date, time, and
duration of such Scheduled Maintenance Outage. Unless otherwise agreed by the
Parties, acting reasonably, the start date of a Scheduled Maintenance Outage
shall occur within one (1) Day of the date the Parties agreed to schedule such
Scheduled Maintenance Outage as set forth above. To the extent the start of a
Scheduled Maintenance Outage deviates by more than one (1) Day from the schedule
that had been agreed to, such deviation shall count towards the 120 hours
available to Seller pursuant to Section 5.4(c).
(b) Scheduled Maintenance Outages shall be determined in accordance
with manufacturer's recommendations in accordance
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with formulae provided by relevant equipment manufacturers. The number of
Scheduled Maintenance Hours shall be further limited to 336 hours each calendar
year in which a minor inspection (e.g. combustion inspection) occurs, 480 hours
each calendar year in which a hot gas path inspection occurs, and 840 hours each
calendar year in which a Major Inspection occurs. Subject to Purchaser not
exceeding 200 Start-Ups per year, the Scheduled Maintenance Outage frequency
shall be no greater than annually for a minor inspection, every three (3) years
for a hot gas path inspection, and every five (5) years for a Major Inspection;
provided, however, that such maintenance frequencies shall be further subject to
changes in the manufacturer's recommendations. To the extent Purchaser exceeds
200 Start-Ups in a calendar year, and to the extent manufacturer's
recommendations require a greater frequency of maintenance than that described
herein, the frequency of such maintenance shall be adjusted in accordance with
such manufacturer's recommendations.
(c) If required in accordance with Prudent Industry Practices or
manufacturers' recommendations, Seller may utilize up to 120 Scheduled
Maintenance Hours per calendar year to perform maintenance repairs at a
different time than designated pursuant to Section 5.4(a). Seller shall provide
Purchaser with no less than two (2) Business Days prior notice of such
requirement; provided that Seller shall not be entitled to make such
re-allocation of Scheduled Maintenance Hours during the period from June 15
through September 15 without the prior consent of Purchaser. Seller shall use
its best efforts to schedule such Scheduled Maintenance Outages in a manner that
allows Scheduled Maintenance Outages of less than eight (8) contiguous hours to
occur during Off-Peak Hours.
Section 5.5 Access to Facility and Facility Site. Seller authorizes
Purchaser and its authorized agents, employees and inspectors to have access to
the Facility and the Facility Site, upon reasonable prior notice (in light of
the circumstances) and subject to the safety rules and regulations of Seller,
(i) in connection with the operation and maintenance of the Entergy System or
the TVA System (including for the purpose of conducting such operating tests and
inspections as are reasonably deemed necessary to ascertain that the intertie
equipment related to the Interconnection Facilities is functioning properly),
(ii) solely for the purpose of reading and maintaining metering equipment, or
examining, repairing or removing any of Purchaser's property, or (iii) to
witness scheduled maintenance.
Section 5.6 Permits; Compliance with Laws.
(a) Seller shall, at its expense, acquire and maintain in effect,
from any and all Governmental Agencies with jurisdiction over Seller and/or the
Facility, all Governmental Approvals, in each case necessary (i) for the
operation and
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maintenance of the Facility and (ii) for Seller to perform its obligations under
this Agreement. Notwithstanding the foregoing, Seller shall not be deemed in
default of this obligation to the extent Seller is Contesting the application,
interpretation, order, or other legal direction or Governmental Approval of any
such Governmental Agency in good faith and with due diligence through
appropriate proceedings or to the extent non-compliance does not have a material
adverse effect on Seller's performance.
(b) Seller shall, at all times, comply with all Laws and
Governmental Approvals applicable to it and/or to the Facility, including (i)
all environmental Laws in effect at any time during the Term and (ii) all such
Laws relating to Fuel security, storage or back-up or otherwise concerning any
type of facility used for the generation of electric power. Notwithstanding the
foregoing, Seller shall not be deemed in default of this obligation to the
extent Seller is Contesting the application, interpretation, order, or other
legal direction of any such Governmental Agency in good faith and with due
diligence through appropriate proceedings or to the extent non-compliance does
not have a material adverse effect on Seller's performance.
(c) Purchaser shall, at all times, comply with all Laws necessary
for Purchaser to perform its obligations under this Agreement. Notwithstanding
the foregoing, Purchaser shall not be deemed in default of this obligation to
the extent Purchaser is Contesting the application, interpretation, order, or
other legal direction or Governmental Approval of any such Governmental Agency
in good faith and with due diligence through appropriate proceedings or to the
extent non-compliance does not have a material adverse effect on Purchaser's
performance.
SECTION VI
SCHEDULING, DISPATCH AND DELIVERY
Section 6.1 Dispatchable Facility. The Facility shall be fully
dispatchable by Purchaser within the Design Limits specified in Appendix C. The
Purchaser shall have the discretion to Dispatch the Net Electrical Output from
the Dedicated Unit consistent with Prudent Industry Practices and the Design
Limits.
Section 6.2 Dispatch; Scheduling for Delivery.
(a) Purchaser may Dispatch the Dedicated Unit commencing on later to
occur of (i) the Delivery Start Date or (ii) the Commercial Operation Date.
(b) Prior to the first Day of each Month, Purchaser shall provide to
Seller good faith estimates of the amounts of
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energy to be scheduled by Purchaser from the Dedicated Unit for each hour of
such Month.
(c) Purchaser shall inform Seller on a daily basis of the projected
schedule for Dispatch for each hour of the following Day. Such daily schedule
will be provided to the Seller prior to the deadline for submission to the
applicable Control Center. Purchaser shall inform Seller of confirmation of the
schedule by the Control Center. Purchaser shall be entitled to subsequently
change such schedule subject to the Design Limits, other technical
specifications of the Facility, and the terms of this Agreement. Notification of
same-day schedule changes shall be by telephone and shall be recorded on
Purchaser's log sheets.
(d) Consistent with Prudent Industry Practices and the Design
Limits, Seller shall operate the Dedicated Unit to promptly comply with the
Dispatch by the Purchaser. Such operation shall include generating energy within
applicable deviation band limits of the schedule provided by Purchaser. The
Parties recognize that at present, TVA and Entergy do not have deviation band
limits in place for generation such as the Dedicated Unit. Until such time as
limits are specified in applicable tariffs, the Parties shall use the deviation
band limits as specified in the Energy Imbalance Service Schedules of the
Entergy and TVA open-access transmission service tariffs as in effect from time
to time (currently +/- 1.5% for Entergy with a minimum of 1 MW integrated
hourly, and +/- 1.5% for TVA with a minimum of 2 MW) for steady-state operation
(operation between 70% of Standard Capacity and the Contract Capacity). When and
to the extent Entergy and/or TVA place other limits into effect, said new limits
shall similarly apply. If the Dedicated Unit generates energy outside of such
deviation band limits during steady-state operation, Seller shall be responsible
for any energy imbalance charges or penalties imposed under such tariffs by
Entergy or TVA upon Purchaser; provided, however, if Purchaser is exercising
automatic generation control over the Dedicated Unit, then such imbalance
charges or penalties shall be the responsibility of Purchaser. If the Dedicated
Unit generates energy outside of such deviation band limits during Start-Up or
shut down, no energy imbalance charges or penalties shall be the responsibility
of Seller and any such imbalance charges or penalties shall be paid by
Purchaser. If the Dedicated Unit generates energy outside of such deviation band
limits due to a Forced Outage, Force Majeure Event, or Delivery Excuse, Seller
shall provide prompt notice to the Control Center of the revised schedule
necessary to take into account the Forced Outage, Force Majeure Event, or
Delivery Excuse. In such event, if Seller does not provide prompt notice to the
Control Center, then Seller shall be responsible for any energy imbalance
charges or penalties actually imposed under such tariffs by Entergy or TVA upon
Purchaser, otherwise, Seller shall not be responsible for any energy imbalance
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charges or penalties and any such imbalance charges or penalties shall be paid
by Purchaser. Any operation of any Dedicated Unit outside of the deviation band
limits for which Seller is responsible for a portion of any imbalance charge or
penalty imposed under a tariff by Entergy or TVA shall not count as a Forced
Outage, and Seller shall not be responsible to supply or reimburse Purchaser for
Replacement Power during such time.
Section 6.3 Emergency Conditions. The Facility may be disconnected
or curtailed from the Entergy System and/or the TVA System if:
(a) an Emergency Condition occurs on the portion of the Entergy
System or the TVA System that is interconnected with the Facility and there are
no means of delivering Net Electrical Output from the Dedicated Unit to the
Entergy System or the TVA System, as the case may be;
(b) such disconnection or curtailment is required to permit repairs
to the Entergy System and/or the TVA System or the connection of other lines,
customers, or producers of capacity and energy by TVA or Entergy;
(c) such disconnection or curtailment is required for equipment
maintenance on the Entergy System or the TVA System, as applicable, or to
facilitate restoration of line outages; or
(d) such disconnection or curtailment is necessary for the operation
of the Entergy System and/or the TVA System consistent with Prudent Industry
Practice, other than for economic reasons;
(e) any other event for disconnection or curtailment as outlined in
the Entergy Interconnection Agreement or the TVA Interconnection Agreement; and
(f) Seller has been directed by Entergy and/or TVA to disconnect or
curtail the Facility as set forth above.
Section 6.4 Forced Outages.
(a) Seller shall immediately notify Purchaser after discovering that
the Dedicated Unit is unable to deliver all or part of the Net Electrical
Output. Each such period shall be divided into two distinct, contiguous periods:
(i) the period beginning at the time of the occurrence of the outage until the
end of the hour starting at 11:00 p.m. (Central Prevailing Time) of the second
following Day (the "Diagnostic Period") and (ii) the period from the end of the
Diagnostic Period until resumption of the delivery of the full Net Electrical
Output pursuant to the Dispatch schedule provided by Purchaser (the "Extended
Outage Period").
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(b) As soon as practicable, but in any event not later than
forty-eight (48) hours after the beginning of the Diagnostic Period, Seller
shall notify Purchaser of:
(i) the cause (or if not known, Seller's best estimate) of the
Forced Outage;
(ii) the proposed corrective action;
(iii) Seller's best estimate of the expected duration of the
Diagnostic Period and Extended Outage Period;
(iv) Seller's election regarding Replacement Power in the
Diagnostic Period which may be either (1) that Seller shall
compensate Purchaser for Incremental Replacement Power Costs
in accordance with Appendix F or (2) that Seller shall not be
responsible for Replacement Power during the Diagnostic Period
with such hours included as Forced Outage Hours in any
Availability Adjustment Factor calculations; and
(v) Seller's election regarding Replacement Power in any Extended
Outage Period which may be either (1) that Seller shall supply
Replacement Power, (2) that Purchaser shall provide
Replacement Power and Seller shall compensate Purchaser for
Incremental Replacement Power Costs in accordance with
Appendix F or (3) that Seller shall not be responsible for
Replacement Power during the Extended Outage with such hours
included as Forced Outage Hours in any Availability Adjustment
Factor calculations.
(c) Seller's estimate of the duration of the outage shall be based
on the best information obtained by Seller and Seller shall promptly notify
Purchaser of any expected changes in such period. During any Extended Outage
Period in which Seller is supplying Replacement Power, Purchaser shall continue
to schedule energy as described in Section VI.
(d) Upon notice from Seller to Purchaser of the ability of
resumption of delivery of the Net Electrical Output, and expiration of any
Replacement Power Arrangements in effect, any Diagnostic Period or Extended
Outage Period then in effect shall end and Dispatch shall continue as described
in Section VI. If Seller is able to resume delivery of the Net Electrical Output
prior to the expiration of any Replacement Power Arrangements where Seller has
elected to provide Replacement Power, Seller shall resume delivery of the Net
Electrical Output and liquidate its Replacement Power Arrangements, in which
case, any gain or
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<PAGE>
loss realized by Seller shall be for the Seller's own account. If Seller is able
to resume delivery of the Net Electrical Output prior to the expiration of any
Replacement Power Arrangements where Purchaser is procuring Replacement Power,
Seller shall resume delivery of the Net Electrical Output and Purchaser shall
liquidate such Replacement Power Arrangements, in which case, any gain or loss
realized by Purchaser shall be for the Purchaser's own account.
(e) Consistent with Prudent Industry Practices, but without limiting
Purchaser's remedies available under Sections 6.4(b) or 10.3 of this Agreement,
Seller shall use Commercially Reasonable Efforts to avoid Forced Outages and to
minimize the length of any Forced Outages.
SECTION VII
INTERCONNECTION; OTHER SERVICES
Section 7.1 Interconnection Facilities. Seller shall own, operate,
maintain and control during the Term at its sole cost and expense all
Interconnection Facilities located on the Facility Site up to, but not
including, the Interconnection Points. The Parties agree that, notwithstanding
any provision of this Agreement to the contrary, the effectiveness of this
Agreement shall not be contingent upon Purchaser's ability to secure
transmission service agreements with any transmitting utilities or upon the
availability of transmission capacity at specific delivery or receipt points
selected by Purchaser downstream of the Interconnection Points.
Section 7.2 Interconnection Points. Seller shall deliver Net
Electrical Output to Purchaser to Entergy and TVA at the Interconnection Points
for receipt by Purchaser pursuant to Purchaser's transmission service agreements
and the Interconnection Agreements in accordance with the terms of Appendix I.
The interconnection voltage shall be at 161 kV for TVA and 161 kV or 230 kV for
Entergy; provided, that if the voltage of the interconnection to Entergy is 161
kV, it shall be immediately stepped up to 230 kV at no cost to Purchaser. Seller
shall pay all costs associated with interconnecting the Dedicated Unit to the
TVA System and to the Entergy System, including any facilities upgrades required
by TVA and/or Entergy. Seller shall use Commercially Reasonable Efforts to
execute the Entergy Interconnection Agreement and the TVA Interconnection
Agreement by February 28, 1999 (provided that such date shall be extended on a
Day-to-Day basis for and delay caused by a Force Majeure Event or Delivery
Excuse). Seller shall provide Purchaser with final drafts of the Entergy
Interconnection Agreement and the TVA Interconnection Agreement and any
amendments thereto for Purchaser's review. Purchaser may terminate this
Agreement with
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written notice to Seller within ten (10) Days after February 28, 1999 (or such
later date due to a Force Majeure Event or Delivery Excuse) if by such date
Seller has not executed the Entergy Interconnection Agreement and the TVA
Interconnection Agreement or other agreements or if such Interconnection
Agreements or other agreements with TVA and Entergy do not meet all of the
electric interconnection agreement criteria specified in Appendix I.
Section 7.3 Title and Risk of Loss. As between the Parties, Seller
shall be deemed to be in exclusive control (and responsible for any damages or
injury caused thereby) of the Net Electrical Output prior to and at the
Interconnection Points and Purchaser shall be deemed to be in exclusive control
(and responsible for any damages or injury caused thereby) of the Net Electrical
Output from the Interconnection Points. Title to and risk of loss related to the
Net Electrical Output shall transfer from Seller to Purchaser at the
Interconnection Points. Without limiting the foregoing, Seller shall not be
responsible for any failure of Entergy or TVA to accept delivery of Net
Electrical Output at the applicable Interconnection Point unless attributable to
a default of Seller under the Entergy Interconnection Agreement or TVA
Interconnection Agreement, as applicable. Each Party shall reimburse the other
Party from any cost of lost Net Electrical Output when title to the Net
Electrical Output is vested in such other Party.
Section 7.4 Supply of Other Services. Purchaser shall be responsible
for obtaining and paying for transmission services and any ancillary or control
area services required by FERC, Entergy, TVA, or any independent system operator
or other transmission utility with respect to the delivery and transmission of
Net Electrical Output past the Interconnection Points. Purchaser may Dispatch
the Dedicated Unit with the objective to avoid the need for energy imbalance
service from a control area service provider, and to provide reactive power,
load following (consistent with the scheduling), voltage control, and frequency
response, provided that such services do not cause the Facility or the Dedicated
Unit to operate outside of the Design Limits, and do not impose any additional
costs or liabilities on Seller, including, but not limited to the installation
of automatic generation control equipment. Seller shall provide such services,
including but not limited to automatic generation control, to the extent that
Purchaser has agreed to be responsible for any incremental costs incurred by
Seller to provide such services subject to mutual agreement of the Parties
working in good faith to arrive at an equitable arrangement.
Section 7.5 Interconnection Agreements.
(a) Purchaser may select the initial applicable control area for the
Unit and Seller shall use Purchaser's selection when
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<PAGE>
selecting the initial control area in accordance with the Interconnections
Agreements. Purchaser shall also have the right to request that the Dedicated
Unit be transferred from the Entergy or TVA control area to the other control
area, on a no more than annual frequency, provided, that such transfer shall be
at Purchaser's sole cost.
(b) Seller shall use Commercially Reasonable Efforts to define
scheduling procedures with Entergy and TVA which specify that deliveries of
energy and capacity at the Interconnection Points will be based on delivery
schedules provided by purchaser. Seller shall use its best efforts to ensure:
(i) that development of inadvertent accounting procedures with TVA and Entergy
are coordinated among all affected parties; and (ii) that the Parties, TVA and
Entergy cooperate to negotiate ramping procedures to address the physical ramp
rate capabilities of the Dedicated Unit.
(c) Seller shall use reasonable efforts to cause the Interconnection
Agreements to recognize Purchaser as a third party beneficiary of such
agreements. Purchaser agrees that any exercise of its right as a third party
beneficiary under the Interconnection Agreements, including without limitation,
any right to demand performance, initiate arbitration, judicial or
administrative action, file or settle claims or take any other action by right
of the Interconnection Agreements (collectively, any "Beneficiary Action") shall
be subject to the provisions of this Section 7.5(c). Purchaser shall not take or
request the right to take any Beneficiary Action unless (i) it reasonably
determines that its rights or benefits under this Agreement are being adversely
affected by a failure of performance by Entergy or TVA under the applicable
Interconnection Agreement, (ii) Purchaser has notified Seller of such failure
and adverse effect, and (iii) for a period of at least twenty (20) Days
following such notice, Seller has failed to act or continue to act with
reasonable diligence to enforce the terms of the applicable Interconnection
Agreement to the extent required to correct the failure of performance causing
such adverse effect on Purchaser. Notwithstanding the satisfaction of the above
conditions, prior to taking any Beneficiary Action, Purchaser shall provide
Seller with at least twenty (20) Days prior notice of the action proposed, a
reasonable explanation of the basis for the action, an agreement, in form and
substance reasonably satisfactory to Seller, indemnifying and holder Seller and
any third party purchasing power from the Facility harmless from any adverse
effects arising out of Purchaser's Beneficiary Actions. Purchaser shall
cooperate reasonably with Seller in any Beneficiary Action and agrees that
Seller and any third party purchasing power from the Facility shall have the
right to join or intervene in any litigation, arbitration or administrative
proceeding related to such Beneficiary Action.
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SECTION VIII
FUEL ARRANGEMENTS
Section 8.1 Pipeline Interconnection Facilities.
(a) Seller shall be responsible for constructing, operating and
maintaining the Pipeline Interconnection Facilities (including obtaining all
Governmental Approvals) at no cost to Purchaser; provided that the Pipeline
Interconnection Facilities may be owned and/or operated by a third party, in
which case Seller shall be responsible for securing and paying for all rights
necessary to allow Seller and Purchaser to use such facilities as provided in
this Agreement. Seller shall also be responsible for the cost of any
interconnects with ANR Pipeline and Tennessee Gas Pipeline; provided, however,
that Seller shall not be required to pay for any upgrades or expansions of such
pipeline companies' facilities upstream of their interconnects with the Pipeline
Interconnect Facilities, and provided, further, Seller shall have the right to
negotiate with such pipelines to have them pay for their interconnect facilities
with the Pipeline Interconnection Facilities as long as such arrangements do not
require Purchaser to flow a minimum quantity of Fuel through such pipeline(s),
and do not increase the costs of transportation for Purchaser on such
pipeline(s). To the extent such arrangements increases Purchaser's costs of Fuel
transportation, Seller shall reimburse Purchaser for such increased costs.
Purchaser shall have the right to review all of Seller's agreements for the
construction, operation and maintenance of the Pipeline Interconnection
Facilities, and any interconnection agreements with the pipelines prior to the
execution of such agreements. Purchaser may terminate this Agreement with
written notice within ten (10) Days after January 1, 1999 (or such later date
due to a Force Majeure Event or Delivery Excuse) if, by such date, Seller has
not executed agreements for the construction of the Pipeline Interconnection
Facilities, or if such agreements do not contain all of the provisions which
meet the criteria for gas interconnection agreements specified in Appendix I.
Seller shall provide access to transportation through Trunkline Gas provided
such arrangements do not impose any costs on Seller and do not adversely affect
Seller's schedule for the Facility.
(b) Seller shall cause each pipeline connection to the Pipeline
Interconnection Facilities to have available sufficient capacity to deliver
sufficient Fuel at sufficient delivery pressure to operate the entire Facility
at full load, with no Person having a right to use such Pipeline Interconnection
Facilities superior to the Purchaser for the delivery of Fuel pursuant to this
Agreement.
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<PAGE>
(c) The Parties shall cooperate to (i) facilitate the timely
construction and installation of the Pipeline Interconnection Facilities and
(ii) facilitate an arrangement whereby one or more of such interstate pipeline
companies or other third parties shall operate and maintain the Pipeline
Interconnection Facilities.
(d) Seller shall use reasonable efforts to cause the gas
interconnection agreements to recognize Purchaser as a third party beneficiary
of such agreements. Purchaser agrees that any exercise of the right as a third
party beneficiary under the gas interconnection agreements (including any action
comparable to the definition of a Beneficiary Action under Section 7.5(c)) shall
be subject to the same conditions and restrictions as applicable to the taking
of a Beneficiary Action with respect to the Interconnection Agreements under
Section 7.5(c).
Section 8.2 Fuel for Operations; Delivery and Acceptance.
(a) On and after the Commercial Operation Date, Purchaser shall at
all times arrange, procure, supply, nominate, balance, transport and deliver to
the Fuel Metering Points, all Fuel necessary for the Dedicated Unit to generate
the Net Electrical Output as dispatched pursuant to Section 6.2.
(b) All Fuel required to be delivered under this Agreement shall be
delivered by Purchaser to the Fuel Metering Points. Subject to Section 8.1,
Purchaser shall have the right to supply Fuel utilizing any or all of the
interstate pipelines connected to the Pipeline Interconnection Facilities, and
shall have the right to change the quantities nominated and received from each
pipeline on a daily basis, or more frequently, to the extent permitted by ANR
Pipeline, Tennessee Gas Pipeline or Trunkline Gas.
(c) Subject to Section 8.5(c), on and after the Commercial Operation
Date, Seller shall accept all Fuel delivered by Purchaser pursuant to the terms
of this Agreement.
(d) After the later of the Commercial Operation Date or the Delivery
Start Date, and subject to Section 8.4, Purchaser shall be responsible for the
cost of Fuel and all other costs associated with the supply and transportation
of all Fuel necessary to generate the Net Electrical Output as Dispatched
pursuant to Section 6.2; provided, however, Purchaser shall not be responsible
for any transportation costs or other costs associated with the Pipeline
Interconnection Facilities or the interconnects with the interstate pipelines.
(e) Purchaser shall pay for Fuel required during Start-Up to reach
the minimum load of each Unit; provided that
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<PAGE>
energy produced during Start-Up shall be delivered to Purchaser at the
Interconnection Points.
Section 8.3 Title and Risk of Loss. As between the Parties,
Purchaser shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the Fuel prior to the Fuel Metering Points
and Seller shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the Fuel at and after the Fuel Metering
Points. Title to and risk of loss related to the Fuel shall transfer from
Purchaser to Seller at the Fuel Metering Points. Each Party shall reimburse the
other Party for the cost of lost Fuel when title to the Fuel is vested in such
other Party.
Section 8.4 Gas Imbalances. Imbalances associated with Fuel
transportation and any balancing penalties or costs resulting from failure to
timely communicate nominations or to make delivery or accept delivery of the
confirmed quantity of Fuel shall be the responsibility of the Purchaser or other
persons utilizing the Pipeline Interconnection Facilities, unless such penalty
or cost is attributable to a Forced Outage (or Seller's failure to comply with
Dispatch) of the Dedicated Unit in which case such penalties or costs shall be
the responsibility of Seller. Such imbalances shall be allocated first to the
responsible party, then on a pro-rated basis among all parties utilizing the
Pipeline Interconnection Facilities in accordance with their utilization if no
party is responsible. Without limiting the responsibility and liability imposed
by this Section 8.4, however, both Parties shall use Commercially Reasonable
Efforts to avoid imbalances and to correct any imbalances which may occur.
Payment for any balancing penalties or costs shall be in accordance with the
procedures set forth in Section XIII. If a Fuel imbalance is the responsibility
of either Party, the responsible Party shall be liable to the other Party for
direct actual damages incurred by such Party as a result thereof.
Section 8.5 Measurement and Quality of Fuel.
(a) All Fuel to be supplied by Purchaser pursuant to the terms of
this Agreement shall be measured at the Fuel Metering Points and shall meet the
quality specifications of ANR, Tennessee Gas or Trunkline Gas, as the case may
be and the minimum pressure specified in the Pipeline Interconnection
Agreements.
(b) In the event that Fuel delivered by Purchaser hereunder fails to
conform to the quality and pressure requirements of ANR, Tennessee Gas or other
pipeline, as the case may be ("Non-Conforming Fuel"), Purchaser shall use
Commercially Reasonable Efforts to cure such failure as soon as reasonably
practicable after learning of such non-conformity.
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<PAGE>
(c) If Fuel made available by Purchaser to Seller under this
Agreement is Non-Conforming Fuel, then Seller may refuse to accept delivery of
such Non-Conforming Fuel and such Non-Conforming Fuel shall, for purposes of
this Agreement, be deemed not to have been provided by Purchaser. Purchaser
shall be liable for all reasonable costs and expenses for which Seller is
directly liable in respect of cleaning or clearing the Facility or any Dedicated
Unit or in respect of measures which may be taken by Seller which are reasonably
required to rectify the consequences of such failure and Seller shall be
relieved and held harmless from any liability for failure of the Dedicated Unit
to (i) achieve the Guaranteed Heat Rates or Contract Capacity (ii) perform in
accordance with the Design Limits which is caused as a direct result of the
delivery of Non-Conforming Fuel by Purchaser. Seller shall exercise Commercially
Reasonable Efforts to mitigate the effects of using Non-Conforming Fuel.
SECTION IX
METERING
Section 9.1 Metering Devices for Electricity.
(a) The Net Electrical Output shall be measured by Seller's
electricity metering devices located at the Dedicated Unit on Seller's side of
the Interconnection Points ("Electricity Metering Points"). Seller shall own,
operate, maintain and control all of Seller's electricity metering equipment at
its sole cost and expense.
(b) The number, type and general location of Seller's electricity
metering devices shall be as set forth in Appendix B. All of Seller's
electricity metering devices shall be sealed and the seal shall be broken only
when representatives of both Parties are present for the purpose of inspecting,
testing and adjusting such electricity metering devices in accordance with
Sections 9.3 and 9.4.
(c) Subject to the requirements set forth in Appendix B, Purchaser
may install and maintain, at its own cost and expense, as part of the Facility,
Purchaser's electricity metering devices, using the same current and potential
transformers as those used for Seller's electricity metering devices.
Section 9.2 Metering Devices for Fuel.
(a) The Fuel delivered by Purchaser in accordance with the terms of
this Agreement shall be measured by the Seller's metering devices at the Fuel
Metering Points. Seller shall be
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responsible for, operate, maintain and control all of Seller's Fuel metering
equipment at its sole cost and expense.
(b) The number, type and general location of Seller's Fuel metering
devices shall be as set forth in Appendix B. All of Seller's Fuel metering
devices shall be sealed, and the seal shall be broken only when representatives
of both Parties are present for the purpose of inspecting, testing and adjusting
such metering devices.
Section 9.3 Inspection of Metering Devices.
(a) Seller shall inspect, test and adjust all of Seller's metering
devices at its own expense on an at least an annual basis at a time mutually
convenient to Purchaser and Seller. Seller shall provide Purchaser with
reasonable advance notice of, and permit a representative of Purchaser to
witness and verify, such inspections, tests and adjustments, and shall test any
adjustments to be made thereto in accordance with Sections 9.3(c) and 9.4.
(b) In addition to the other inspections and tests required under
Section 9.3(a), upon two (2) weeks' prior written notice by Purchaser, Seller
shall perform additional inspections or tests of any of Seller's metering
devices. Seller and Purchaser shall agree on a mutually convenient time for such
inspections or tests, and Seller shall permit a qualified representative of
Purchaser to inspect or witness such testing of any of Seller's metering
devices. The actual expense of any such requested additional inspection or
testing shall be borne by Purchaser unless, upon such inspection or testing,
Seller's metering devices are found to register inaccurately by more than +/-
0.5% in the case of electricity meters and +/- 2.0% in the case of Fuel meters,
in which event the expense of the requested additional inspection or testing
shall be borne by Seller.
(c) If any of Seller's metering devices are found to be defective or
inaccurate by more than +/- 0.5% in the case of electricity meters and +/- 2.0%
in the case of Fuel meters, it shall be adjusted, repaired, replaced and/or
re-calibrated to bring the metering device to within the specifications provided
for herein. If any of Seller's metering devices are not found to be defective or
inaccurate by more than the variances stated herein, then such meters shall not
be re-calibrated unless the Parties otherwise agree.
Section 9.4 Adjustments for Inaccurate Measurements. If any of
Seller's metering devices fail to register, or if the measurements made by any
of such metering devices are found upon testing to be inaccurate by more than
+/- 0.5% in the case of electricity meters and +/- 2.0% in the case of Fuel
meters, an adjustment shall be made correcting all measurements by the
inaccurate or defective metering device for billing purposes, for
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both the amount of the inaccuracy and the period of the inaccuracy, in the
following manner:
(a) In the event that the Parties cannot agree on the amount of the
adjustment necessary to correct the measurements made by any of Seller's
metering devices which are inaccurate or defective, the Parties shall use
Purchaser's metering devices (if installed) to determine the amount of such
inaccuracy, provided that in the event that Purchaser's metering devices are
also found, upon testing, to be inaccurate by more than the allowable limits
applicable to Seller's metering devices under this Section 9.4, and the Parties
cannot agree on the amount of the adjustment necessary to correct the
measurements made by such inaccurate or defective Purchaser's metering devices,
the Parties shall, as soon as practicable and on the basis of procedures to be
mutually agreed by the Parties, estimate the amount of the necessary adjustment
on the basis of deliveries of the Net Electrical Output to the Entergy System
and the TVA System during periods of similar operating conditions (e.g., based
on the Facility's Fuel use records) when Seller's metering devices were
registering accurately;
(b) In the event that the Parties cannot agree on the actual period
during which the inaccurate measurements were made, the period during which the
measurements are to be adjusted shall be the shorter of (i) one half of the
period from the last test of the relevant metering devices or (ii) the 180 Days
immediately preceding the test that found the relevant metering devices to be
defective or inaccurate; and
(c) To the extent that the adjustment period covers a period of
deliveries for which payment has already been made by Purchaser, Seller shall
use the corrected measurements as determined in accordance with this Section 9.4
to re-compute the amount due for the period of the inaccuracy and shall subtract
the previous payments by Purchaser for such period from such re-computed amount.
If the difference is a positive number, such difference shall be paid by
Purchaser to Seller and if the difference is a negative number, such difference
shall be paid by Seller to Purchaser. Payment of such difference shall be made
by means of a credit or an additional charge on the next statement rendered
pursuant to Section 13.1(a).
Section 9.5 Remote Access to Metering Devices. Purchaser desires to
have remote access to devices wired to Seller's Distributed Control System
("DCS") related to the Dedicated Unit. Seller shall provide a communications
port from the DCS in order for Purchaser to have remote (read-only) access to
these DCS data points. Any costs for remote access shall be at Purchaser's
expense.
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SECTION X
PAYMENTS
Section 10.1 Reservation Payments.
(a) Except as otherwise expressly provided herein, for each Billing
Period commencing on the Delivery Start Date, Purchaser shall pay Seller a
Reservation Payment for the Contract Capacity made available to Purchaser from
the Dedicated Unit, or for Replacement Power made available to Purchaser by
Seller pursuant to Section 3.2 or 6.4 or procured by Purchaser with Seller
compensating Purchaser in accordance with Appendix F, during such Billing
Period.
(b) The Reservation Payment for each Billing Period shall be
calculated in accordance with the following formula:
RP = CC x RC + SSC x SRC
Where:
RP = the Reservation Payment expressed in Dollars for such
Billing Period
CC = the Contract Capacity, expressed in KW, rounded down
to the nearest whole MW, up to 267 MW, adjusted to a dry
bulb temperature of 95 degrees Fahrenheit and a relative
humidity of 60%.
RC = the Reservation Charge expressed in Dollars per KW per
Month. The Reservation Charge during the Initial Term
shall be: (i) $4.90 per KW per Month for the first sixty
(60) Months following the Delivery Start Date, and (ii)
$5.00 per KW per Month for the remainder of the Initial
Term. The Reservation Charge for the Extended Term shall
be $5.00 per KW per Month.
SSC = the Surplus Supplemental Capacity, defined as the
amount of Supplemental Capacity greater than the
difference of 267 MW minus the amount of Standard
Capacity, all adjusted to a dry bulb temperature of 95
degrees Fahrenheit and a relative humidity of 60%.
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SRC = the Surplus Reservation Charge expressed in Dollars
per KW per Month. The Surplus Reservation Charge shall
be $2.50 per KW per Month.
Section 10.2 Adjustment to Reservation Payment for Commercial
Operation Delay Period.
(a) In accordance with Section 3.2(a), the Reservation Payment for
each Month during any Commercial Operation Delay Period may be reduced pro rata
based on a Delivery Delay Adjustment. Any Delivery Delay Adjustment shall be
credited to the Reservation Payment and any remaining amounts of a Delivery
Delay Adjustment owing from Seller to Purchaser shall be credited against future
Reservation Payments. The "Delivery Delay Adjustment" shall be calculated as:
DDA = CC x RCA
where DDA is the Delivery Delay Adjustment in Dollars for such
Billing Period;
CC is the Contract Capacity, expressed in kW, adjusted to a
dry bulb temperature of 95 degrees Fahrenheit
(95(Degree)F) and a relative humidity of 60%. For the
purpose of this Section 10.2(a), the Contract Capacity
shall be deemed to be 267 MW; and
RCA is the Reservation Charge adjustment equal to RC x MO x
VF x DD / DMO;
where RC is the Reservation Charge in Dollars per
kW-Month;
MO is seven (7) Months during the year
2000 or twelve (12) Months during the
year 2001, as applicable;
VF is the Value Factor for the Month
(expressed as a decimal);
DD is the number of Days of delay in
the Month of determination; and
DMO is the number of Days in the Month.
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================================================================================
Month during the Year 2000 Value Factor
================================================================================
June 14.4%
- --------------------------------------------------------------------------------
July 26.3%
- --------------------------------------------------------------------------------
August 24.2%
- --------------------------------------------------------------------------------
September 10.2%
- --------------------------------------------------------------------------------
October 9.4%
- --------------------------------------------------------------------------------
November 7.7%
- --------------------------------------------------------------------------------
December 7.8%
- --------------------------------------------------------------------------------
================================================================================
Month during Years after 2000 Value Factor
================================================================================
January 8.3%
- --------------------------------------------------------------------------------
February 7.1%
- --------------------------------------------------------------------------------
March 4.5%
- --------------------------------------------------------------------------------
April 3.9%
- --------------------------------------------------------------------------------
May 6.2%
- --------------------------------------------------------------------------------
June 10.0%
- --------------------------------------------------------------------------------
July 18.3%
- --------------------------------------------------------------------------------
August 17.2%
- --------------------------------------------------------------------------------
September 7.3%
- --------------------------------------------------------------------------------
October 6.1%
- --------------------------------------------------------------------------------
November 5.6%
- --------------------------------------------------------------------------------
December 5.5%
- --------------------------------------------------------------------------------
================================================================================
Month during Last Partial Year Value Factor
================================================================================
January 27.8%
- --------------------------------------------------------------------------------
February 23.6%
- --------------------------------------------------------------------------------
March 14.9%
- --------------------------------------------------------------------------------
April 13.1%
- --------------------------------------------------------------------------------
May 20.6%
- --------------------------------------------------------------------------------
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10.3 Adjustment to Reservation Payment After Delivery Start Date.
The Reservation Payment each Month after the Delivery Start Date
shall be credited based on a Monthly Availability Adjustment which shall be
calculated in Section 10.3(a) below and an Annual Availability Adjustment for
each Contract Year which shall be calculated in Section 10.3(b) below. For each
Contract Year, the larger of the sum of the credits calculated under Sections
10.3(a) for all the Months in said year, or the credit calculated in Section
10.3(b), shall apply. Any amounts owing from Seller to Purchaser shall accrue to
future Months to be credited against future Reservation Payments.
(a) The Monthly Availability Adjustment for each Month shall be:
(SIGMA)RPm x VFm x (1 - AAFm)
where (SIGMA)RPm is the sum of the unadjusted Reservation Payments
for each Month of the Calendar Year in which the Monthly
Availability Adjustment is being computed (June through
December of 2000, January through December of 2001 through
2014 (or 2019 if the Term is extended in accordance with
Section 2.2, and January through the last Month during the
last Calendar Year that this Agreement is in effect (2015 or
2020 or otherwise));
VFm is the Value Factor for each Month as shown in the tables in
Section 10.2 above (expressed as a decimal); and
AAFm is the lesser of the Availability Adjustment Factor for the
Month, as computed below, or 1.00.
AAF = (EAF + PMAF)/ 0.96
where EAF is the equivalent availability factor computed as:
EAF=(AH - (EUDH + EPDH))/PH
where: AH is the number of available hours during the period
(the total number of hours the Unit was
electrically connected to the transmission system
and reserve shutdown hours, excluding Scheduled
Maintenance Hours as defined below);
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EUDH is the number of equivalent unplanned derate hours
calculated as the sum, for each unplanned derate,
of the product of the number of hours of full or
partial derate hours times the size of the
reduction divided by the Contract Capacity for the
period. For the purposes of this calculation, an
unplanned derate includes Forced Outages, forced
derates, shortages relative to the Guaranteed
Start-Up Time, shortages relative to the
Guaranteed Ramp Rates, and other times when the
Net Electrical Output of the Dedicated Unit is
less than the amount of energy Dispatched by
Purchaser, excluding hours when Seller is
responsible for Replacement Power, and excluding
unavailability due to Force Majeure Events and
Delivery Excuse;
EPDH is the number of equivalent planned derate hours,
excluding SMH (Scheduled Maintenance Hours) as
defined below, calculated as the sum, for each
planned derate, of the product of the number hours
of full or partial derate hours times the size of
the reduction, divided by the available capacity
for the period. For the purposes of this
calculation, a planned derate excludes hours when
Seller is responsible for Replacement Power, and
excluding unavailability due to Force Majeure
Events and Delivery Excuse;
PH is the number of period hours excluding hours of
Force Majeure Events and Delivery Excuse;
PMAF is the planned maintenance adjustment factor computed as:
PMAF = SMH / PH
where SMH is the number of Scheduled Maintenance Hours
during the period.
(b) Within fifteen (15) Days of the end of a calendar year, an
Annual Availability Adjustment Factor for the calendar year shall be calculated.
The Annual Availability Adjustment shall be calculated as follows:
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(SIGMA)RPm x 1.00 x (1 - AAFa)
where: (SIGMA)RPm is computed as provided in Section 10.3(a) above,
AAFa is the lesser of the Availability Adjustment Factor for
the year, as computed below, or 1.00.
AAFa = (EAF + PMAF)/ 0.97
The Annual Availability Adjustment shall be calculated using a
single period for each calendar year, based on the actual
number of hours in the calendar year. Each parameter in the
AAF formulas shall use a single period (as described in the
preceding sentence) to compute the Annual Availability
Adjustment.
Section 10.4 Energy Payments. Except as expressly provided herein,
for each Billing Period commencing on June 1, 2000, Purchaser shall pay to
Seller an Energy Payment for Net Electrical Output and for energy supplied as
Replacement Power delivered by Seller to Purchaser, in an amount equal to
$1.00/MWh times the GDP-IPD Index.
Section 10.5 Replacement Power Fuel Payment. Purchaser shall pay to
Seller a Replacement Power Fuel Payment for energy supplied as Replacement Power
delivered by Seller to Purchaser in an amount per MWh equal to the product of
the Delivered Cost of Fuel in Dollars per MMBtu times the Guaranteed Heat Rate
in MMBtu/MWh.
Section 10.6 Excess Start-Up Payments. In the event the number of
Start-Ups for the Dedicated Unit exceeds 200 per Contract Year, Purchaser shall
pay Seller a payment equal to $5,000 per Start-Up for the Dedicated Unit,
multiplied by the number of Start-Ups for the Dedicated Unit over 200 ("Excess
Start-Up Payment"). Any Excess Start-Up Payments shall be made by Purchaser on a
Monthly basis for all such additional Start-Ups occurring in a Billing Period.
Section 10.7 Tracking Account. Except as expressly provided herein,
for each Monthly Billing Period commencing on June 1, 2000, Seller or Purchaser,
as applicable, shall make to the other Party a payment in an amount equal to the
balance of the Tracking Account, as set out in Section 12.1.
Section 10.8 System Upgrade Credit. For each Billing Period,
commencing on the Commercial Operations Date, Purchaser shall pay Seller a
System Upgrade Credit, determined as provided in this Section 10.8. The System
Upgrade Credit for any period
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shall be equal to the amount of payment, credit, or discount received by
Purchaser under its transmission service agreements with Entergy and TVA (or
their successors), to the extent attributable to Seller's payment for system
upgrades under its Entergy Interconnection Agreement or TVA Interconnection
Agreement, as applicable. The Parties shall cooperate to insure that the
payment, credit, or discount for Seller's system upgrade payment is separately
stated in any invoice or statement provided Purchaser under its applicable
transmission service agreements with Entergy and TVA. If not separately stated
in Purchaser's transmission service invoice or statement, no credit or discount
will be deemed attributable to Seller's system upgrades.
SECTION XI
COMMISSIONING AND TESTING
Section 11.1 Performance Tests.
(a) Prior to or on the Commercial Operation Date, Seller shall
establish the Contract Capacity in accordance with the procedures set forth in
Appendix A. The Dedicated Unit shall thereafter be tested during each Contract
Year in accordance with the procedures set forth in Appendix A to demonstrate
the Contract Capacity. Seller shall provide Purchaser with reasonable notice of,
and opportunity to, attend each test of Contract Capacity. Seller shall bear the
costs and expenses of such annual tests, provided that Purchaser shall be
responsible for any of its own costs or expenses incurred by it in connection
with monitoring or witnessing such tests.
(b) Seller shall have the right to re-determine the Contract
Capacity (including Standard Capacity and Supplemental Capacity) at any time
upon forty-eight (48) hours' prior written notice to Purchaser. The Contract
Capacity re-determined in the manner set forth in Appendix A shall automatically
and immediately become the new Contract Capacity following such testing. Seller
shall bear the costs and expenses of any test required under this Section
11.1(b), provided that Purchaser shall be responsible for any of its own costs
and expenses incurred by it in connection with monitoring or witnessing such
test.
(c) Purchaser shall have the right to re-determine the Contract
Capacity (including Standard Capacity and Supplemental Capacity) at any time
upon five (5) Days' prior written notice to Seller if Purchaser believes that
the actual Contract Capacity has been greater than ten (10) MW different than
the results of the most recent tests for a period of longer than ninety (90)
Days. The Contract Capacity re-determined in the manner set
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forth in Appendix A will automatically and immediately become the new Contract
Capacity following such testing. Purchaser shall bear the costs and expenses of
any test required under this Section 11.1(c), provided that Seller shall be
responsible for any of its own costs and expenses incurred by it in connection
with monitoring or witnessing such test.
(d)(i) Within sixty (60) Days of the Effective Date, Seller shall
provide Purchaser with the Estimated Standard Capacity of the Dedicated Unit at
95 degrees Fahrenheit and 60 percent relative humidity and the Estimated
Supplemental Capacity of the Dedicated Unit at 95 degrees Fahrenheit and 60
percent relative humidity. The Estimated Standard Capacity at 95 degrees
Fahrenheit and 60 percent relative humidity shall be no less than 235 MW and no
greater than 260 MW. The Estimated Supplemental Capacity at 95 degrees
Fahrenheit and 60 percent relative humidity shall be no less than 20 MW and no
greater than 30 MW. The Parties agree that the actual Standard Capacity at 95
degrees Fahrenheit and 60 percent relative humidity shall be no less than 235 MW
and no greater than 260 MW, and that the actual Supplemental Capacity at 95
degrees Fahrenheit and 60 percent relative humidity shall be no less than 20 MW
and no greater than 30 MW. The Contract Capacity shall be measured in increments
of 1 MW, rounded down to the nearest MW. Subject to Section 11.1(d)(ii),
Purchaser's sole remedy in the event the Contract Capacity is less than 235 MW
at 95 degrees Fahrenheit and 60% relative humidity but greater than 210 MW at 95
degrees Fahrenheit and 60% relative humidity shall be a reduction in the
Contract Capacity and a corresponding reduction in the Reservation Payment.
(ii) In the event the Contract Capacity determined pursuant to
Section 11.1 is less than or equal to 210 MW at 95 degrees Fahrenheit and 60%
relative humidity, subject to Section XVII (a "Capacity Shortfall"), Seller
shall have thirty (30) Days from the date of such test to remedy the Capacity
Shortfall. Seller shall have additional time beyond such thirty (30) Day period
to remedy such Capacity Shortfall in accordance with the procedures set forth
below. Within fifteen (15) Days of a Capacity Shortfall, Seller shall provide
Purchaser notice of its election that (1) Seller shall supply Replacement Power
beginning thirty (30) Days after the Capacity Shortfall for the duration of the
Capacity Shortfall or (2) that Purchaser shall procure Replacement Power and
Seller shall compensate Purchaser for Incremental Replacement Power Costs in
accordance with Appendix F beginning thirty (30) Days after the Capacity
Shortfall for the duration of the Capacity Shortfall. Provided that Seller is
responsible for providing or for paying for Replacement Power for the amount of
the Capacity Shortfall, Seller shall have an additional one hundred fifty (150)
Days to remedy the Capacity Shortfall and the Contract Capacity, for the
purposes of payments under Section X, shall be equal to 210 MW. If at the end
such one hundred fifty (150) Day period, the Capacity Shortfall has
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not been remedied, Purchaser may declare that Seller is in default of the
Agreement. If Seller remedies such Capacity Shortfall prior to the end of sixty
(60) Days following Purchaser's notice of default, and Seller has provided or
paid for Replacement Power for the amount of the Capacity Shortfall for the
period between Purchaser's notice of default and the date on which the Capacity
Shortfall was remedied, such notice of default shall be void; otherwise,
Purchaser may pursue remedies available under Section 18.2 of this Agreement.
Section 11.2 Sale of Test Energy. Seller shall have the option to
require Purchaser to act as Seller's agent for the purpose of marketing and
selling energy which may be produced as a result of the initial commissioning of
the Dedicated Unit or re-commissioning of any Dedicated Unit after a Scheduled
Maintenance Outage or during performance testing in accordance with Section 11.1
("Test Energy"). Should Seller require Purchaser to market and sell Test Energy,
Purchaser shall (i) provide Fuel to generate such Test Energy; provided that
Seller shall reimburse Purchaser for such Fuel at Purchaser's actual cost, plus
$0.03 per MMBtu and (ii) pay Seller any amount received by Purchaser from its
sale of Test Energy, net of any costs (as applicable) for transmission service,
transmission losses, scheduling fees, Independent System Operator fees,
ancillary services charges and a marketing fee of $0.25/MWh of Test Energy sold.
SECTION XII
GUARANTEES DURING OPERATIONS
Section 12.1 Guaranteed Heat Rate Tracking Account.
(a) A tracking account (the "Tracking Account") shall be maintained
by Seller to track, for each hour: (i) the actual amount of Fuel required to
produce the Net Electrical Output delivered by Seller for that hour and (ii) the
amount of Fuel required to produce the Net Electrical Output delivered by Seller
for that hour based on the Guaranteed Heat Rate. If the actual amount of Fuel
required to produce the Net Electrical Output for such hour varies from the
amount of Fuel which would be required to produce such Net Electrical Output
based on the Guaranteed Heat Rate, then a balance shall accrue in the Tracking
Account for such hour in the following manner:
(1) If the actual amount of Fuel required to produce such
Net Electrical Output on such hour is greater than the
amount which would be required based on the Guaranteed
Heat Rate then a positive amount equal to the
differential Fuel (expressed in MMBtu),
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multiplied by the Delivered Cost of Fuel (expressed in
$/MMBtu), for such hour shall accrue to the Tracking
Account for such hour.
(2) If the actual amount of Fuel required to produce such
Net Electrical Output on such hour is less than the
amount which would be required based on the Guaranteed
Heat Rate, then a negative amount equal to the
differential Fuel (expressed in MMBtu) multiplied by the
Delivered Cost of Fuel (expressed in $/MMBtu) for such
hour shall accrue to the Tracking Account for such hour.
(b) At the end of each Month, the Tracking Account shall be cleared
and (i) if the Tracking Account balance is positive, Seller shall pay Purchaser
such amount, whereas (ii) if the Tracking Account balance is negative, Purchaser
shall pay Seller such amount.
Section 12.2 Guaranteed Start-Up Time. Seller shall notify Purchaser
as soon as practicable after discovering that the Guaranteed Start-Up Time has
not been satisfied and whether Seller elects to be responsible for Incremental
Replacement Power Costs in accordance with Appendix F. If Seller does not elect
to be responsible for Incremental Replacement Power Costs, such unplanned derate
hours shall be included in any Availability Adjustment Factor calculation.
Section 12.3 Guaranteed Ramp Rate. Seller shall notify Purchaser as
soon as practicable after discovering that the Guaranteed Ramp Rate has not been
satisfied and whether Seller elects to be responsible for Incremental
Replacement Power Costs in accordance with Appendix F. If Seller does not elect
to be responsible for Incremental Replacement Power Costs, such unplanned derate
hours will be included in any Availability Adjustment Factor calculation.
SECTION XIII
BILLING AND PAYMENT
Section 13.1 Billing and Payment.
(a) Seller shall read the Seller's metering equipment at the
Dedicated Unit at midnight (24:00 hours) Central Prevailing Time on the last Day
of each Month, unless otherwise mutually agreed by the Parties. Seller shall
prepare and render to Purchaser within five (5) Business Days after the end of
each Billing Period a statement detailing the meter reading and Seller's
calculation of the payments due to Seller for such
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Billing Period; provided that Purchaser, at its own cost and expense, shall have
the right to monitor and witness such readings.
(b) Payment for the Reservation Payment, Energy Payment, Replacement
Power Fuel Payment, Start-Up Payment and any Tracking Account balance or any
other amount owed by Purchaser for each Billing Period shall be made by wire
transfer of funds immediately available in an account of Seller designated in
accordance with Section 22.4 on or before the later of the fifteenth (15th) Day
following receipt by Purchaser of Seller's invoice or the first Business Day
following the nineteenth (19th) Day of the Month. Payment for any Tracking
Account Balance or any other amount owed by Seller to Purchaser for each Billing
Period shall be made by wire transfer of funds immediately available in an
account of Purchaser designated in accordance with Section 22.4 on or before the
later of the fifteenth (15th) Day following receipt by Purchaser of Seller's
invoice or the first Business Day following the nineteenth (19th) Day of the
Month.
(c) If either Party in good faith disputes the accuracy of a bill,
the Parties shall use their best efforts to resolve the dispute in accordance
with Section 20.1. Any adjustments which the Parties may subsequently agree to
make with respect to any such billing dispute shall be made by a credit or
additional charge on the next bill rendered. If the Parties are unable to
resolve the dispute in this manner, any amounts disputed on subsequent bills for
the same reason may thereafter be withheld pending final resolution of the
dispute in accordance with Section 20.2, provided that any undisputed amount
shall be promptly paid. In the event the disputed amount is in excess of
$500,000, the Party owing such amount shall (i) provide for the benefit of the
other Party Credit Support with terms reasonably satisfactory to the other Party
in the amount of such disputed payment or (ii) deposit the full amount of such
disputed payment in an escrow account on terms acceptable to such other Party.
Upon resolution of the dispute in accordance with this Agreement, any amounts
held in escrow shall be paid to the Party in whose favor the dispute was
resolved.
Section 13.2 Other Payments. Any amounts, other than those specified
in Sections 13.1, due to either Party under this Agreement shall be paid or
objected to in good faith within fifteen (15) Days following receipt by the
other Party of an itemized invoice from the Party to whom such amounts are due
setting forth, in reasonable detail, the basis for such payment.
Section 13.3 Currency and Timing of Payment. Notwithstanding
anything contained in this Agreement, (i) all payments to be made by either
Party under this Agreement shall be made in Dollars by wire transfer of funds
immediately available in an account of the Party making such payment and (ii)
any
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payment that becomes due and payable on a Day that is other than a Business Day
or Day on which banks are closed in New York, New York shall be paid on the next
succeeding Business Day.
Section 13.4 Records. Either Party shall have the right, upon
reasonable prior written notice to the other Party, to examine and/or make
copies of the records and data of the other Party relating to this Agreement
(including all records and data relating to or substantiating any charges paid
by or to Seller) at any time during normal business hours during the period such
records and data are required to be maintained. All such records and data shall
be maintained for a maximum of three (3) years after the creation of such record
or data and for any additional time period required under applicable Law or by
Governmental Agencies having jurisdiction over the Parties.
Section 13.5 Default Interest. If any payment due from either Party
under this Agreement shall not be paid when due (including any undisputed
payments or disputed payment withheld and found to be due the Party from whom
payment was withheld under Section 13.2), there shall be due and payable to the
other Party compensation thereon, calculated at a rate equal to two percent (2%)
over the prime rate published in the "Money Rates" section of the Wall Street
Journal, as of the Day payment became overdue (the "Contract Interest Rate"),
from the date on which such payment became overdue to and until such payment is
paid in full.
Section 13.6 Credit Support.
(a) Within thirty (30) Days of the end of each calendar quarter
during the Term of this Agreement, Seller shall provide Purchaser with
certificates or other documents ("DCSR Certificates") showing the calculation of
the Debt Service Coverage Ratio provided by Seller to the Financing Parties
pursuant to the Financing Documents. If, as of the end of any calendar quarter,
the Debt Service Coverage Ratio for each of the previous four (4) consecutive
calendar quarters is less than 1.25 to 1.00, Seller shall provide to Purchaser
upon Purchaser's request, reasonable security for its obligations hereunder, in
the form of cash, a surety bond, or Credit Support. The type of security to be
provided shall be determined by Seller, but the form and substance of any surety
bond, or Credit Support shall be reasonably acceptable to Purchaser. Such
security shall be in an amount equal to $5.00 per kW of Contract Capacity.
Seller shall maintain such security in full force and effect until the earlier
of (x) ten (10) Days after delivery by Seller to Purchaser of certificates or
other documents showing that Seller has achieved a Debt Service Coverage Ratio
for four (4) consecutive quarters of 1.25 to 1.00 or greater as of the end of a
calendar quarter, or (y) the termination of this Agreement; provided, however,
that if this Agreement is terminated, Seller shall maintain such security in
place until all amounts owed by Seller to Purchaser
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under this Agreement arising prior to such termination have been paid in full.
Purchaser shall cancel or return to Seller, as Seller may direct, any such
security provided by Seller within ten (10) Days after Seller is no longer
required hereunder to provide or maintain such security.
(b) Any cancellation or return of the security provided by Seller
pursuant to Section 13.6(a) shall not preclude Purchaser from subsequently again
demanding security for Seller's performance, subject to the same parameters set
forth in Section 13.6(a).
(c) In the event Seller has not provided security to Purchaser in
accordance with Section 13.6(a), Purchaser may, at its discretion, offset any
amounts owed by Seller to Purchaser under this Agreement including the amount of
the security not provided by Seller against amounts owing from Purchaser to
Seller. Purchaser's ability to request security in accordance with Section
13.6(a) and to offset against amounts otherwise due hereunder shall be without
prejudice to Purchaser's right to exercise any other remedy available to
Purchaser to collect any amounts due Purchaser under this Agreement.
SECTION XIV
REPRESENTATIONS AND WARRANTIES
Section 14.1 Representations and Warranties of Seller. Seller
represents and warrants to Purchaser as of the Effective Date as follows:
(a) Seller is a limited partnership duly organized, validly existing
and in good standing under the Laws of the state of Delaware and is qualified
and in good standing in each other jurisdiction where the failure so to qualify
would have a material adverse effect upon the business or financial condition of
Seller or the Facility and Seller has all requisite power and authority to
conduct its business, to own its properties and to execute, deliver and perform
its obligations under this Agreement.
(b) The execution, delivery, and performance of its obligations
under this Agreement by Seller have been duly authorized by all necessary
partnership action, and do not and will not:
(i) as to execution and delivery, require any consent or
approval of Seller's partners which has not been obtained and each such consent
and approval that has been obtained is in full force and effect,
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(ii) violate any provision of any Law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award having
applicability to Seller or any provision of the partnership documents of Seller,
the violation of which could reasonably be expected to have a material adverse
effect on the ability of Seller to perform its obligations under this Agreement;
(iii) result in a breach of or constitute a default under any
provision of the partnership documents of Seller,
(iv) result in a breach of or constitute a default under any
agreement relating to the management or affairs of Seller or any indenture or
loan or credit agreement or any other agreement, lease, or instrument to which
Seller is a party or by which Seller or its properties or assets may be bound or
affected, the breach or default of which could reasonably be expected to have a
material adverse effect on the ability of Seller to perform its obligations
under this Agreement, or
(v) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, Lien, security interest, or other charge or
encumbrance of any nature (other than as may be contemplated by this Agreement)
upon or with respect to any of the assets or properties of Seller now owned or
hereafter acquired, the creation or imposition of which could reasonably be
expected to have a material adverse effect on the ability of Seller to perform
its obligations under this Agreement.
(c) This Agreement constitutes a legal, valid and binding obligation
of Seller and is enforceable against Seller in accordance with its terms.
(d) There is no pending or, to the best of Seller's knowledge,
threatened action or proceeding affecting Seller before any court, Governmental
Agency or arbitrator that could reasonably be expected to materially and
adversely affect the financial condition or operations of Seller or the ability
of Seller to perform its obligations hereunder, or that purports to affect the
legality, validity or enforceability of this Agreement.
Section 14.2 Representations and Warranties of Aquila. Aquila
represents and warrants to Seller as of the Effective Date as follows:
(a) Aquila is a corporation duly organized and validly existing
under the Laws of Delaware and has the full legal right, power and authority to
conduct its business, to own its properties and to execute, deliver and perform
its obligations under this Agreement.
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(b) The execution, delivery, and performance of its obligations
under this Agreement by Aquila have been duly authorized by all necessary
corporate action, and do not and will not:
(i) as to execution and delivery, require any consent or
approval of Aquila's board of directors which has not been obtained and each
such consent and approval that has been obtained is in full force and effect,
(ii) violate any provision of any Law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award having
applicability to Aquila, the violation of which could reasonably be expected to
have a material adverse effect on the ability of Aquila to perform its
obligations under this Agreement,
(iii) result in a breach of or constitute a default under any
provision of the articles of incorporation or by-laws of Aquila,
(iv) result in a breach of or constitute a default under any
agreement relating to the management or affairs of Aquila or any indenture or
loan or credit agreement or any other agreement, lease, or instrument to which
Aquila is a party or by which Aquila or its properties or assets may be bound or
affected, the breach or default of which could reasonably be expected to have a
material adverse effect on the ability of Aquila to perform its obligations
under this Agreement, or
(v) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, Lien, security interest, or other charge or
encumbrance of any nature (other than as may be contemplated by this Agreement)
upon or with respect to any of the assets or properties of Aquila now owned or
hereafter acquired, the creation or imposition of which could reasonably be
expected to have a material adverse effect on the ability of Aquila to perform
its obligations under this Agreement.
(c) This Agreement constitutes a legal, valid and binding obligation
of Aquila and is enforceable against Aquila in accordance with its terms.
(d) There is no pending or, to the best of Aquila's knowledge,
threatened action or proceeding affecting Aquila before any court, Governmental
Agency or arbitrator that could reasonably be expected to materially and
adversely affect the financial condition or operations of Aquila or the ability
of Aquila to perform its obligations hereunder, or that purports to affect the
legality, validity or enforceability of this
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Agreement.
Section 14.3 Representations and Warranties of UtiliCorp. UtiliCorp
represents and warrants to Seller as of the Effective Date as follows:
(a) UtiliCorp is a corporation duly organized and validly existing
under the Laws of Delaware and has the full legal right, power and authority to
conduct its business, to own its properties and to execute, deliver and perform
its obligations under this Agreement.
(b) The execution, delivery, and performance of its obligations
under this Agreement by UtiliCorp have been duly authorized by all necessary
corporate action, and do not and will not:
(i) as to execution and delivery, require any consent or
approval of UtiliCorp's board of directors which has not been obtained and each
such consent and approval that has been obtained is in full force and effect,
(ii) violate any provision of any Law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award having
applicability to UtiliCorp, the violation of which could reasonably be expected
to have a material adverse effect on the ability of UtiliCorp to perform its
obligations under this Agreement,
(iii) result in a breach of or constitute a default under any
provision of the articles of incorporation or by-laws of UtiliCorp,
(iv) result in a breach of or constitute a default under any
agreement relating to the management or affairs of UtiliCorp or any indenture or
loan or credit agreement or any other agreement, lease, or instrument to which
UtiliCorp is a party or by which UtiliCorp or its properties or assets may be
bound or affected, the breach or default of which could reasonably be expected
to have a material adverse effect on the ability of UtiliCorp to perform its
obligations under this Agreement, or
(v) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, Lien, security interest, or other charge or
encumbrance of any nature (other than as may be contemplated by this Agreement)
upon or with respect to any of the assets or properties of UtiliCorp now owned
or hereafter acquired, the creation or imposition of which could reasonably be
expected to have a material adverse effect on the ability of UtiliCorp to
perform its obligations under this Agreement.
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(c) This Agreement constitutes a legal, valid and binding obligation
of Aquila and is enforceable against UtiliCorp in accordance with its terms.
(d) There is no pending or, to the best of UtiliCorp's knowledge,
threatened action or proceeding affecting UtiliCorp before any court,
Governmental Agency or arbitrator that could reasonably be expected to
materially and adversely affect the financial condition or operations of
UtiliCorp or the ability of UtiliCorp to perform its obligations hereunder, or
that purports to affect the legality, validity or enforceability of this
Agreement.
Section 14.4 Certificates. Each of Purchaser and Seller shall, upon
the request of the other Party, deliver or cause to be delivered from time to
time to the other Party certifications of its officers, accountants, engineers
or agents as to such matters as either Party may reasonably request in
connection with such Parties' obligations under this Agreement.
Section 14.5 Books and Records; Information. Each of Purchaser and
Seller shall keep proper books of record and account, in which full and correct
entries shall be made of all dealings or transactions of or in relation to its
business and affairs in accordance with GAAP.
SECTION XV
TAXES
Section 15.1 Taxes and Fees.
(a) Seller shall be responsible for the payment of, and the
Reservation Payments, Energy Payments and other amounts payable by Purchaser to
Seller hereunder shall not be subject to adjustment for, Taxes imposed on Seller
and Seller's property. Purchaser shall be responsible for the payment of, and no
amount payable by Seller to Purchaser shall be subject to adjustment for, Taxes
imposed on Purchaser and its property.
(b) The Reservation Payment or Energy Payment under this Agreement
shall be adjusted prospectively by any Change-in-Law Taxes. Seller shall provide
Purchaser with written notice of any Change-in-Law Taxes imposed on Seller.
Seller shall use Commercially Reasonable Efforts to Contest the imposition of
any Change-in-Law Taxes and Purchaser shall have the right to Contest the
imposition of any Change-in-Law Taxes provided that such Contest does not result
in any material imposition on or cost to Seller, and Purchaser shall make any
payments to Seller in respect of such Change-in-Law Taxes when required under
this Agreement, but subject to refund in the event that Purchaser
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prevails in such Contest. Seller shall determine for any Billing Period the
adjustment to the Reservation Payment or Energy Payment resulting from the
application of a Change-in-Law Tax for such period, and shall provide to
Purchase a certificate setting forth in reasonable detail the basis and
calculation of such adjustment.
(c) Each Party shall provide the other Party upon written request a
certificate of exemption or other reasonably satisfactory evidence of exemption
if any exemption from or reduction of any Tax is applicable. Each Party shall
exercise Commercially Reasonable Efforts to obtain and to cooperate in obtaining
any exemption from or reduction of any Tax. Each Party shall notify the other
Party in a timely manner of any proposal to implement a Change-in-Law Tax.
Section 15.2 General. Each Party shall each use reasonable efforts
to implement the provisions of, and to administer, this Agreement in accordance
with their intent to minimize taxes, so long as neither Party is materially
adversely affected by such efforts. Either Party, upon written request of the
other Party, shall provide a certificate of exemption or other reasonably
satisfactory evidence of exemption if either Party is exempt from taxes, and
shall use reasonable efforts to obtain and cooperate with obtaining any
exemption from or reduction of tax. Either Party with knowledge of a Tax on the
purchase or sale of energy, that may be applicable to the Fuel provided or
energy sold hereunder shall notify the other Party, in advance, of the
applicability of such Tax and shall also notify the other Party of any proposal
to implement a new Tax or apply an existing Tax to the purchase, sale, delivery,
or receipt of Fuel or energy hereunder.
SECTION XVI
INSURANCE
Section 16.1 Insurance Required. Seller shall carry and maintain or
cause to be carried and maintained no less than the insurance coverages listed
in Appendix H, applicable to all operations undertaken by Seller and Seller's
personnel in the minimum amounts (limits) indicated in Appendix H. Such minimum
limits may be satisfied either by primary insurance or by any combination of
primary and excess/umbrella insurance. Except as provided in Appendix H, the
required insurance coverages shall be in effect on or prior to the commencement
of construction of the Facility and shall be maintained in effect throughout the
Term of this Agreement.
Section 16.2 Evidence and Scope of Insurance. Seller shall annually
cause each insurer or authorized agent to provide
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Purchaser with two (2) original copies of insurance certificates reasonably
acceptable to Purchaser evidencing the effectiveness of the insurance coverages
required to be maintained. A complete copy of each policy shall be provided to
Purchaser upon request.
Section 16.3 Term and Modification of Insurance.
(a) In the event that any insurance as required in this Agreement is
on a "claims made" basis and not on an occurrence basis, such insurance shall
provide for a retroactive date and continuing "tail" coverage not later than the
Effective Date and such insurance shall be maintained by Seller, with a
retroactive date not later than the retroactive date required above, for a
minimum of five (5) years after the Term.
(b) If the designated coverage, or relatively comparable coverage,
are unavailable on reasonable commercial terms, Seller shall provide to
Purchaser detailed information as to the maximum amount of available coverage
that it is able to purchase and shall be required to obtain Purchaser's consent
as to the adequacy of said coverage under the circumstances prevailing at the
time, which consent Purchaser shall not unreasonably withhold or delay.
(c) With Purchaser's approval, not to be unreasonably withheld, if
Seller has sufficient net worth to self-insure for purposes of this Section XVI,
Seller shall have the right to self-insure or provide reserves or other security
reasonably acceptable to Purchaser for all or any portion of the foregoing
coverages so long as, in the case of self-insurance, there is no material
decrease in Seller's net worth or means that renders the same insufficient for
purposes of self-insurance, and in the case of provision of reserves or
security, the reserves and security shall be available and used only for the
payment of obligations that otherwise would be covered by insurance policies
required under this Section XVI and Appendix H and for no other purpose.
Section 16.4 Application of Proceeds. For the Term of this
Agreement, and subject to the requirements of the Financing Documents and the
rights or remedies of the Financing Parties thereunder, Seller shall apply the
proceeds of any such insurance policies received for damages to the Facility to
the repair of the Facility.
SECTION XVII
FORCE MAJEURE EVENT
Section 17.1 Force Majeure Event Defined.
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(a) As used in this Agreement, "Force Majeure Event" shall mean
causes or events beyond the reasonable control of, and without the fault or
negligence of, the Party claiming such Force Majeure Event, including, without
limitation, acts of God; unusually severe actions of the elements such as
floods, hurricanes, or tornadoes; sabotage; terrorism; war; riots or public
disorders; fire; and actions or failures to act of any Governmental Agency
(including expropriation, requisition, Change-in-Law or change in any
Governmental Approval or environmental constraints lawfully imposed by any
Governmental Agency) preventing, delaying, or otherwise adversely affecting
performance of a Party hereto.
(b) Force Majeure Event shall not include (i) changes in market
conditions that affect the cost or availability of supply of goods or services
(ii) any failure of, or delay in performance, or any full or partial curtailment
in the electric output of the Facility that is caused by, or arises from any
labor dispute or strike by Seller's employees or the employees of any contractor
or subcontractor employed at the Facility (except to the extent arising out of a
strike or labor action by employees or labor organizational members not employed
at the Facility), (iii) the unavailability of equipment, except to the extent
directly caused by an event fitting the definition of Force Majeure Event set
forth above, which could reasonably have been avoided by compliance with Prudent
Industry Practices, (iv) changes in market conditions that affect the price of
energy or capacity, (v) the failure to timely apply for or to obtain
Governmental Approvals required on the Effective Date for the construction or
operation of the Facility, and (vi) any Delivery Excuse.
Section 17.2 Applicability of Force Majeure Event. Neither Party
shall be responsible or liable for any delay or failure in its performance under
this Agreement if such delay or failure is due to a Force Majeure Event,
provided that:
(a) the non-performing Party shall give the other Party prompt,
written notice of such Force Majeure Event as soon as practicable after
discovery of such event, but in any event, no later than forty-eight (48) hours
following discovery of such event, with details to be supplied within five (5)
Days further describing the particulars of the occurrence of the Force Majeure
Event;
(b) the suspension of performance shall be of no greater scope and
of no longer duration than is directly caused by the Force Majeure Event;
(c) the non-performing Party shall proceed with Commercially
Reasonable Efforts to remedy its inability to perform and shall provide progress
reports to the other Party as
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requested but at least weekly, describing actions taken to remedy the
consequences of the Force Majeure Event; and
(d) when the non-performing Party is able to resume performance of
its obligations under this Agreement, that Party shall give the other Party
prompt, written notice to that effect.
Section 17.3 Other Effects of Force Majeure Events.
(a) Subject to Section 3.2, If Seller shall suspend performance
prior to the Delivery Start Date as a result of a Force Majeure Event then the
Delivery Start Date shall be extended by the period of the Force Majeure Event.
If Seller shall suspend performance as a result of a Force Majeure Event and
Purchaser suspends payment of the Reservation payment pursuant to Section
17.3(c), then the Initial Term and the Extended Term shall be extended, in each
case, by the period of the Force Majeure Event.
(b) If any Force Majeure Event shall be claimed by a Party and shall
suspend performance by such Party for more than eighteen (18) Months from the
date of notice provided by such Party in Section 17.2(a), then the performing
Party may, at any time following the end of such eighteen (18)-Month period but
for only so long as such Force Majeure Event is still claimed, terminate this
Agreement upon written notice to the affected Party, without further obligation
by the terminating Party, except as to payment of any costs and liabilities
incurred prior to the Effective Date of such termination. The non-affected Party
may, but shall not be obligated to, extend such period for such additional time
as it deems appropriate in its sole discretion, if the affected Party is
exercising due diligence in its efforts to cure the Force Majeure Event.
(c) If Seller is unable to achieve the Commercial Operation Date by
the Delivery Start Date or after the Commercial Operation Date is unable to
deliver the Contract Capacity or the Net Electrical Output as a result of a
Force Majeure Event affecting Seller, Purchaser shall pay the Reservation
Payments, Energy Payments, and Replacement Power Fuel Payments commencing on the
Delivery Start Date to the extent that Seller is providing Replacement Power to
Purchaser in accordance with Section 3.2 or Section 6.4 until termination of
this Agreement, but otherwise shall be relieved of the obligation to pay the
Reservation Payment, Energy Payment or the Replacement Power Fuel Payment, as
appropriate. If Purchaser shall be unable to accept the Contract Capacity or the
Net Electrical Output as a result of a Force Majeure Event affecting Purchaser,
Purchaser shall remain obligated to pay the Reservation Payment to Seller
pursuant to Section 10.1 for the period of such Force Majeure Event until
termination of this Agreement except to the extent that during the period of
such Force Majeure Event, Seller is prevented or is
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unable to deliver the Contract Capacity or Net Electrical Output by reason of a
Force Majeure Event affecting Seller.
(d) In the event a Force Majeure Event is claimed by Seller as a
result of the negligence of either TVA or Entergy or the default of TVA under
the TVA Interconnection Agreement or by Entergy under the Entergy
Interconnection Agreement, and Seller receives any compensation from TVA or
Entergy by virtue of such negligence or default, Seller shall pay Purchaser a
pro-rata amount of such compensation based on the Contract Capacity of the
Dedicated Unit compared to all Units, up to the amount of any losses incurred by
Purchaser as a result of such Force Majeure Event.
Section 17.4 Delivery Excuse.
(a) In no event shall Seller be responsible or liable for or deemed
in breach of this Agreement for any delay or failure of performance of its
obligations under this Agreement to the extent such delay or failure of
performance is directly caused by a condition of Delivery Excuse.
(b) As used in this Agreement, "Delivery Excuse" shall mean: (i) any
Event of Default of Purchaser under this Agreement; (ii) the unreasonable delay
or failure by Purchaser in giving an approval within the times required under
this Agreement; (iii) the delay or failure by Purchaser in performing amaterial
obligation under this Agreement; (iv) the delay or failure of Purchaser to
deliver Fuel or to accept Contract Capacity or Net Electrical Output as required
under this Agreement, which failure does not arise in each case as a result of
Seller's non-performance under this Agreement; or (v) any event described in
Section 6.3.
(c) If Seller determines that its performance is or has been
affected by a condition of Delivery Excuse:
(i) Seller shall give Purchaser prompt, written notice of the
event which caused such Delivery Excuse as soon as practicable after discovery
of such event, but in any event, no later than forty-eight (48) hours after
discovery of such event, with details to be supplied within five (5) Days
further describing the particulars of the occurrence;
(ii) the suspension of performance shall be of no greater
scope or longer duration than is attributable to the condition of Delivery
Excuse; and
(iii) Seller shall promptly notify Purchaser when the effects
of the condition of Delivery Excuse have been removed and Seller is able to
resume its performance.
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(d) If Seller is unable to achieve the Commercial Operation Date by
the Delivery Start Date or, after the Commercial Operation Date, is unable to
deliver Contract Capacity or Net Electrical Output as a result of a Delivery
Excuse, Seller shall have no obligation to provide Replacement Power to
Purchaser with respect to such failure of delivery, and Purchaser shall remain
obligated to pay the Reservation Payment pursuant to Section 10.1 during the
period of such Delivery Excuse.
SECTION XVIII
TERMINATION AND DEFAULT
Section 18.1 Event of Default.
(a) The occurrence of any one of the following shall constitute an
Event of Default with respect to Seller:
(i) Seller shall fail to make payments for undisputed amounts
due under this Agreement to Purchaser within thirty (30) Days after notice from
Purchaser that such payment is due;
(ii) Seller shall fail to comply with any material provision
of this Agreement (other than the obligation to pay money when due), and such
failure shall continue uncured for thirty (30) Days after notice thereof by
Purchaser, provided that if such failure is not capable of being cured within
such period of thirty (30) Days with the exercise of reasonable diligence, then
such cure period shall be extended for an additional reasonable period of time
(not to exceed ninety (90) Days) so long as Seller is exercising Commercially
Reasonable Efforts to cure such failure;
(iii) Seller shall: (a) admit in writing its inability to pay
its debts as such debts become due; (b) make a general assignment or an
arrangement or composition with or for the benefit of its creditors; (c) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against such Party under any bankruptcy or similar Law; (d) take
any action for the purpose of effecting any of the foregoing, and shall fail to
cure any of the actions or failures within sixty (60) Days;
(iv) A proceeding or case shall be commenced, without the
application or consent of Seller, in any court of competent jurisdiction,
seeking: (a) its liquidation, reorganization of its debts, dissolution or
winding-up, or the composition or readjustment of its debts; (b) the appointment
of a receiver, custodian, liquidator or the like of Seller or of all or any
substantial part of its assets; or (c) similar relief in
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respect of Seller under any Law relating to bankruptcy, insolvency,
reorganization of its debts, winding-up, composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of ninety (90) Days;
(v) Seller shall assign this Agreement or any of its rights
hereunder other than in compliance with Section 22.3, and such failure shall not
be cured within thirty (30) Days after notice thereof by Purchaser;
(vi) Any representation made by Seller under Section XIV shall
be false in any material respect and such failure shall not be cured within
thirty (30) Days after notice thereof by Purchaser; or
(vii) Seller's failure to remedy a Capacity Shortfall in
accordance with Section 11.1(d)
(b) The occurrence of any one of the following shall constitute an
Event of Default with respect to Purchaser:
(i) Purchaser shall fail to make payments for undisputed
amounts due under this Agreement to Seller within thirty (30) Days after notice
from Seller that such payment is due;
(ii) Purchaser shall fail to comply with any material
provision of this Agreement (other than the obligation to pay money when due),
and such failure shall continue uncured for thirty (30) Days after notice
thereof by Seller, provided that if such failure is not capable of being cured
within such period of thirty (30) Days with the exercise of reasonable
diligence, then such cure period shall be extended for an additional reasonable
period of time (not to exceed ninety (90) Days) so long as Purchaser is
exercising Commercially Reasonable Efforts to cure such failure;
(iii) Purchaser shall: (a) admit in writing its inability to
pay its debts as such debts become due; (b) make a general assignment or an
arrangement or composition with or for the benefit of its creditors; (c) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against such Party under any bankruptcy or similar Law; (d) take
any action for the purpose of effecting any of the foregoing, and shall fail to
cure any of the actions or failures within sixty (60) Days;
(iv) A proceeding or case shall be commenced, without the
application or consent of Purchaser, in any court of competent jurisdiction,
seeking: (a) its liquidation, reorganization of its debts, dissolution or
winding-up, or the
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composition or readjustment of its debts; (b) the appointment of a receiver,
custodian, liquidator or the like of Purchaser or of all or any substantial part
of its assets; or (c) similar relief in respect of Purchaser under any Law
relating to bankruptcy, insolvency, reorganization of its debts, winding-up,
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
ninety (90) Days;
(v) Purchaser shall assign this Agreement or any of its rights
hereunder other than in compliance with Section 22.3 and such failure shall not
be cured within thirty (30) Days after notice thereof by Seller; or
(vi) Any representation made by Purchaser under Section XIV
shall be false in any material respect and such failure shall not be cured
within thirty (30) Days after notice thereof by Seller.
Section 18.2 Remedies for Default. If an Event of Default occurs
with respect to a defaulting Party at any time during the Term, the
non-defaulting Party may, for so long as the Event of Default is continuing, (i)
establish a date (which date shall be thirty (30) Days after the Non-Defaulting
Party delivers notice) (the "Early Termination Date") on which this Agreement
shall terminate, (ii) withhold any payments due in respect of this Agreement and
(iii) pursue any other remedies available at Law or in equity, except to the
extent such remedies are expressly limited by this Agreement.
SECTION XIX
INDEMNIFICATION AND LIABILITY
Section 19.1 Indemnification.
(a) Except as otherwise specifically provided in this Agreement, or
unless the damage or injury arises out of, results from, or is caused by, the
breach of this Agreement by a Party or by the negligence or misconduct of a
Party's own officers, directors, employees, agents, contractors or
subcontractors, neither Party shall be liable to the other for any claims,
judgments, liabilities, losses, costs, expenses or damages of any kind or
character (including loss of use of property) in connection with damages or
destruction of property or personal injury (including death) arising out of the
performance of this Agreement, including the design, construction, maintenance
or operation of property, facilities or equipment owned or used by the other
Party, or the use of, misuse of or contact with the electrical energy delivered
hereunder.
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(b) Each Party shall indemnify and hold the other Party, and its
officers, directors, affiliates, agents, employees, contractors and
subcontractors, harmless from and against any and all claims, judgments, losses,
liabilities, costs, expenses (including reasonable attorneys' fees) and damages
of any nature whatsoever for personal injury, death or property damage (except
workers' compensation claims) caused by any act or omission of the indemnifying
Party or the indemnifying Party's own officers, directors, affiliates, agents,
employees, contractors or subcontractors that arises out of or are in any manner
connected with the performance of this Agreement, except to the extent such
injury, death or damage is attributable to the negligence or misconduct of, or
breach of this Agreement by, the Party seeking indemnification hereunder.
Section 19.2 Fines.
(a) Any fines, penalties or other costs incurred by either Party or
such Party's agents, employees or subcontractors for non-compliance by such
Party, its agents, employees or subcontractors with the requirements of any Laws
or Governmental Approvals shall not be reimbursed by the other Party but shall
be the sole responsibility of such non-complying Party.
(b) If such fines, penalties or other costs are assessed against
Purchaser by any Governmental Agency or court of competent jurisdiction due to
the non-compliance by Seller with any Laws or Governmental Approvals, Seller
shall indemnify and hold harmless Purchaser against any and all losses,
liabilities, damages and claims suffered or incurred because of the failure of
Seller to comply therewith. Seller shall also reimburse Purchaser for any and
all legal or other expenses (including attorneys' fees) reasonably incurred by
Purchaser in connection with such losses, liabilities, damages and claims.
(c) If such fines, penalties or other costs are assessed against
Seller by any Governmental Agency or court of competent jurisdiction due to the
non-compliance by Purchaser with any Laws or Governmental Approvals, Purchaser
shall indemnify and hold harmless Seller against any and all losses,
liabilities, damages and claims suffered or incurred because of the failure of
Purchaser to comply therewith. Purchaser shall also reimburse Seller for any and
all legal or other expenses (including attorneys' fees) reasonably incurred by
Seller in connection with such losses, liabilities, damages and claims.
Section 19.3 Limitations of Liability, Remedies and Damages.
(a) Each Party acknowledges and agrees that in no event shall any
partner, shareholder, owner, officer, director, employee, or affiliate of either
Party or an affiliate thereof
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(other than LSP-Energy, Inc. in its capacity as a general partner of Seller) be
personally liable to the other Party for any payments, obligations, or
performance due under this Agreement or any breach or failure of performance of
either Party and the sole recourse for payment or performance of the obligations
under this Agreement shall be against Seller or Purchaser and each of their
respective assets and not against any other Person, except for such liability as
expressly assumed by an assignee pursuant to an assignment of this Agreement in
accordance with the terms hereof.
(b) Notwithstanding any provision of this Agreement to the contrary,
prior to the Commercial Operation Date, the liability of Seller to Purchaser
pursuant to this Agreement (other than pursuant to Sections 19.1 and 19.2) shall
be limited to the amount of Incremental Replacement Power Costs through the
termination date of this Agreement.
(c) Notwithstanding any provision of this Agreement to the contrary,
after the Commercial Operation Date, Seller shall have no obligation to deliver
Replacement Power to Purchaser and Seller shall not be liable for, and shall be
held harmless against, any claims, damages or liabilities of any kind resulting
from a Forced Outage or other failure to deliver Contract Capacity or Net
Electrical Output to Purchaser other than as reflected in the calculation of
Availability Adjustment Factor or pursuant to Section 10.3 or remedies available
under clauses (i) and (ii) of Section 18.2.
(d) Notwithstanding any provision of this Agreement to the contrary,
after the Commercial Operation Date, Purchaser shall not be obligated to
purchase and receive any minimum quantity of Net Electrical Output from the
Dedicated Unit, or make any payments with respect thereto other than as set
forth in Section X. Any liability of Purchaser to Seller pursuant to this
Agreement (other than pursuant to Sections 19.1 and 19.2) shall be limited to
the amount of the Reservation Payment through the Term of this Agreement.
(e) THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF
DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR
BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS
HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY. EACH PARTY'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH
PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF
NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, EACH PARTY'S
LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES
AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY
OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
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STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS
THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY
DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE
THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING
AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED DAMAGES CONSTITUTE A
REASONABLE APPROXIMATION OF THE HARM OR LOSS.
Section 19.4 UCC. Except as otherwise provided for in this
Agreement, the provisions of the Uniform Commercial Code (the "UCC") of the
state whose Laws shall govern this Agreement shall be deemed to apply to this
Agreement and energy shall be deemed to be a "good" for purposes of the UCC.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE SELLING PARTY EXPRESSLY NEGATES ANY
OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO
CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE.
SECTION XX
DISPUTE RESOLUTION
Section 20.1 Senior Officers.
(a) Each of Seller and Purchaser shall designate in writing to the
other Party a representative who shall be authorized to resolve any dispute
arising under this Agreement in an equitable manner and, unless otherwise
expressly provided herein, to exercise the authority of such Party to make
decisions by mutual agreement.
(b) If such designated representatives are unable to resolve a
dispute under this Agreement, such dispute shall be referred by each Party's
representatives, respectively, to a senior officer designated by Seller and a
senior officer designated by Purchaser for resolution upon five (5) Days'
written notice from either Party. Any dispute that may arise in connection with
this Agreement which can not be resolved within thirty (30) Days following
submission to senior officers shall be settled by arbitration in accordance with
Section 20.2.
(c) The Parties hereto agree (i) to attempt to resolve all disputes
arising hereunder promptly, equitably and in a good faith manner; and (ii) to
provide each other with reasonable access during normal business hours to any
and all non-privileged records, information and data pertaining to any such
dispute.
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Section 20.2 Arbitration.
(a) After the expiration of the thirty (30) Day period described in
Section 20.1 (b), either Party may submit any matter in dispute concerning the
provisions of this Agreement to arbitration by providing the other Party a
written notice of arbitration, specifying the matter to be arbitrated.
(b) Within twenty (20) Days of the notice given in Section 20.2 (a),
the Parties shall select three (3) AAA approved commercial arbitrators, unless
the Parties otherwise agree in writing to select the arbitrators from another
source. To select these arbitrators, the Parties shall alternately strike names
from a list of commercial arbitrators knowledgeable or experienced in the
industry with no financial interest in any Party or any affiliate of any Party
obtained from the AAA or other agreed upon source, with the Party furnishing the
Notice of Arbitration striking first, until three (3) Persons' names remain on
such list. Such Persons shall become the arbitrators of the matter. In the event
any Person selected to be an arbitrator is unable or unwilling to serve, the
process shall be repeated until three (3) arbitrators have been selected and
have agreed to hear and resolve the dispute.
(c) The arbitrators shall permit each Party to conduct reasonable
discovery as promptly and expeditiously as possible (and both Parties shall
cooperate to this end). Discovery shall be limited to requests for the
production of documents and examination upon deposition. Each Party's requests
for, and responses to discovery including examination upon deposition shall be
completed within sixty (60) Days of the arbitrators' selection. The Parties may
modify the period for discovery by mutual agreement. The arbitrators shall
resolve any discovery disputes between the Parties that, after using their best
efforts, the Parties cannot resolve themselves.
(d) The hearing shall be initiated as promptly and expeditiously as
possible (and the Parties shall cooperate to this end) and, in no event more
than thirty (30) Days after the conclusion of the discovery period. The rules of
evidence of AAA shall apply to the presentation of evidence. Each Party shall
file written direct testimony with the arbitrators and serve a copy on the other
Party. The written testimony must be received by the arbitrators and the other
Party no later than ten (10) Days prior to the commencement of the hearing. Each
Party shall be permitted to make opening statements with the Party demanding
arbitration presenting its opening statement first. Immediately after opening
statements, the Party demanding arbitration shall then present evidence in
support of its position. The other Party then shall present evidence in support
of its position. All witnesses must testify under oath, and a stenographic
record and transcript of the hearing shall be made. Each Party shall
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have an opportunity to cross-examine the other Party's witnesses, including the
witnesses that file written direct testimony. The Parties shall be permitted to
make closing statements. The Party demanding arbitration shall present its
statement first. The arbitrators shall conclude the hearing within thirty (30)
calendar days of its commencement. The period for concluding the hearing may be
modified by mutual agreement of the Parties.
(e) The Parties shall submit briefs and/or proposed orders following
the completion of the hearing unless otherwise agreed by the Parties and
approved by the arbitrators. Initial briefs or proposed orders shall be served
on other Parties. The initial briefs or proposed orders must be received by the
arbitrators and the other Party no later than fifteen (15) Days after completion
of the hearing. Reply briefs shall be submitted to the arbitrators and served on
the other Party within ten (10) Days of receipt by the arbitrators and the other
Party of the initial briefs or proposed orders. The briefing schedule provided
herein may be modified by mutual agreement of the Parties with the approval of
the arbitrators.
(f) The determination and/or award of the arbitrators, whichever is
appropriate, shall be made no later than thirty (30) Days from the date of the
completion of the hearing or, if applicable, the date the last required briefs
and/or proposed orders were received by the arbitrators and the Parties. Such
determination and/or award shall be conclusive, final, and binding, subject only
to the outcome of confirmation or vacation proceedings, if any, under applicable
Law. To the extent that an award includes an amount of money, such award shall
include interest at the Contract Interest Rate, and such interest shall accrue
from the date(s) on which such money should have been paid to the prevailing
Party or was incorrectly paid by that Party.
(g) Unless the Parties otherwise agree in writing, arbitration under
this Agreement shall be conducted in Chicago, Illinois.
(h) Arbitration under this Agreement shall be governed by the AAA
Commercial Arbitration Rules (or any successor thereto) in effect at the time of
arbitration, unless the Parties mutually agree to another set of rules or body
of Law, provided that if any specific provision of this Section conflicts with
the then effective AAA Commercial Arbitration Rules, or other set of rules or
body of Law mutually agreed to by the parties, then the provisions of this
Section shall govern.
(i) The costs of the arbitration proceedings, other than the
Parties' own expenses, shall be shared equally by the Parties.
(j) The arbitrators shall have no power to amend or add to this
Agreement, but shall have the authority to interpret
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the language of such agreements and make findings of fact, order specific
performance and provide injunctive relief as if the arbitrators were a court.
Subject to such limitation, the decision of the arbitrators shall be final and
binding. Judgment on an award may be enforced in any court of competent
jurisdiction. Upon request of either Party, the arbitrators may issue such
orders for interim relief as may be deemed necessary to safeguard the property
that is the subject of arbitration or otherwise avoid irreparable harm to a
Party, without prejudice to the rights of the Parties to the final determination
of the dispute. Either Party may, without inconsistency with this Agreement,
seek from any court of competent jurisdiction any interim or provisional relief
that may be necessary to protect the rights or property of that Party, pending
the establishment of the arbitration tribunal.
SECTION XXI
APPOINTMENT OF AQUILA AS AGENT
Section 21.1 Appointment. UtiliCorp hereby appoints Aquila as its
true and lawful agent and attorney-in-fact, with full power and authority in its
name and on its behalf, to execute, acknowledge and deliver such documents and
instruments as may be necessary or appropriate to carry out the provisions of
this Agreement, including, without limitation, any notices, consents, elections,
waivers, correspondence, agreements, instruments or claims which Aquila deems
appropriate; provided, however, that Aquila may not agree to amend this
Agreement on behalf of UtiliCorp. UtiliCorp may terminate this appointment upon
written notice to Seller.
Section 21.2 Presumption of Authority. Seller may conclusively
presume and rely upon the fact that to the extent specified in Section 21.1, any
instrument executed by Aquila acting as Purchaser or agent or attorney-in-fact
for UtiliCorp is authorized, regular, and binding upon UtiliCorp, without
further need for inquiry.
SECTION XXII
MISCELLANEOUS
Section 22.1 Prudent Industry Practices. All actions required or
taken by either Party under this Agreement shall be consistent with Prudent
Industry Practices.
Section 22.2 Change in Prudent Industry Practices. The Parties
recognize that this Agreement was prepared based on
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use of Prudent Industry Practices commonly used in the electric power and
natural gas industries. To the extent such practices change over time (i.e.,
change in scheduling practices), the Parties agree to negotiate in good faith to
incorporate such changes into implementation of this Agreement.
Section 22.3 Assignment.
(a) Subject to Section 22.3(b) and 22.3(c), neither this Agreement,
nor any of the rights or obligations hereunder, may be assigned, transferred or
delegated by either Party without the express prior written consent of the other
Party, which consent shall not be unreasonably withheld. It shall not be
reasonable to withhold consent of assignment to an entity of equal or better
credit rating.
(b) Purchaser agrees that (i) Seller may assign, mortgage,
hypothecate, pledge or otherwise encumber all or any portion of Seller's
interest in and to this Agreement in favor of any Financing Party and its
successors and assigns and (ii) any such Financing Party may assign such
interest in and to this Agreement to any subsequent assignee in connection with
the sale, transfer or exchange of its rights under this Agreement or for the
purpose of operating the Facility pursuant to such assignment upon and after the
exercise of its rights and enforcement of its remedies against the Facility
under any deed of trust or other security instrument creating a Lien in its
favor. Each of the Parties agrees to execute such documents as reasonably may be
requested by any such Financing Party or subsequent assignee to evidence and
acknowledge its consent and the effectiveness of any such assignment or Lien;
provided, however, that at the request of Purchaser, such consent shall contain
a provision whereby the Financing Party agrees to assume all of the Seller's
obligations under this Agreement in connection with any exercise of remedies
pursuant to which the Financing Party or its designee succeeds to all of the
Seller's rights in the Facility where such exercise of remedies arises due to
the default by any purchaser of the output of any Unit other than the Dedicated
Unit.
(c) Aquila may assign its rights and responsibilities under this
Agreement to any affiliate of UtiliCorp without the express prior written
consent of Seller, provided that UtiliCorp shall remain a party to this
Agreement and remain jointly and severally liable for Purchaser's obligations
hereunder.
Section 22.4 Notices. Except as otherwise specified in this
Agreement, any notice, demand for information or documents required or
authorized by this Agreement to be given to a Party shall be given in writing
and shall be sufficiently given if delivered by registered mail, courier or hand
delivered against written receipt, or if transmitted and received by facsimile
transmission addressed as set forth below, or if sent to such Party by
registered mail, courier or hand delivery to
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such other address as such Party may designate for itself by notice given in
accordance with this Section 22.4. Any such notice shall be effective only upon
actual delivery or receipt thereof. All notices given by telex or facsimile
shall be confirmed in writing, delivered or sent as aforesaid, but the failure
to so confirm shall not vitiate the original notice. The address for the
delivery of notices and bills to each Party and the respective telephone and
facsimile numbers, unless revised by either Party, are as follows:
(a) For Seller:
LSP Energy Limited Partnership
655 Craig Road, Suite 336
St. Louis, MO 63141
Attention: Clarence Heller
Telephone: 314-993-2700
Facsimile: 314-993-2790
And
LSP Energy Limited Partnership
2 Tower Center, 10th Floor
East Brunswick, NJ 08816
Attention: General Counsel
Telephone: 732-249-6750
Facsimile: 732-249-7290
Wire Transfer: To be provided.
(b) For Purchaser:
Aquila Power Corporation
10750 East 350 Highway
Kansas City, Missouri 64138
Attention: Vice President
Telephone: 816-936-8700
Facsimile: 816-936-8775
Wire Transfer: To be provided.
Section 22.5 Choice of Law. This Agreement shall be governed by, and
construed in accordance with, the Law of the State of New York, exclusive of
conflicts of Laws provisions.
Section 22.6 Entire Agreement. This Agreement constitutes the entire
understanding between the Parties and supersedes any and all previous
understandings between the Parties with respect to the subject matter hereof.
This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and assigns.
Section 22.7 Further Assurances. If either Party determines in its
reasonable discretion that any further instruments, assurances or other things
are necessary or
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desirable to carry out the terms of this Agreement, the other Party shall
execute and deliver all such instruments and assurances and do all things
reasonably necessary or desirable to carry out the terms of this Agreement.
Section 22.8 Waiver. Any term or condition of this Agreement may be
waived at any time by the Party hereto that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the Party waiving such term or condition. The
failure or delay of either Party to require performance by the other Party of
any provision of this Agreement shall not affect its right to require
performance of such provision unless and until such performance has been waived
by such Party in writing in accordance with the terms hereof. No waiver by
either Party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion.
Section 22.9 Modification or Amendment. No modification, amendment
or waiver of any provision of this Agreement shall be valid unless it is in
writing and signed by both Parties.
Section 22.10 Severability. If any term or provision of this
Agreement or the application thereof to any Person or circumstance is held to be
illegal, invalid or unenforceable under any present or future Law or by any
Governmental Agency, (a) such term or provision shall be fully severable, (b)
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom.
Section 22.11 Counterparts. This Agreement may be executed in
counterparts, all of which shall constitute one agreement binding on both
Parties hereto and shall have the same force and effect as an original
instrument, notwithstanding that both Parties may not be signatories to the same
original or the same counterpart.
Section 22.12 Confidential Information. Any information provided by
either Party to the other Party pursuant to this Agreement or which is otherwise
derived as a result of a Party's performance under this Agreement shall be
utilized by the receiving Party solely in connection with the purposes of this
Agreement and shall not be disclosed by the receiving Party to any third party,
except with the providing Party's written consent, and upon request of the
providing Party shall be returned thereto or destroyed. Notwithstanding the
above, the
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<PAGE>
Parties acknowledge and agree that such information may be disclosed to actual
and prospective Financing Parties, suppliers and potential suppliers of major
equipment to the Facility and other third parties as may be reasonably necessary
for Purchaser and Seller to perform their obligations under this Agreement and
the Financing Documents. To the extent that such disclosures are necessary, the
Parties also agree that they shall endeavor in disclosing such information to
seek to preserve the confidentiality of such disclosures. This provision shall
not prevent either Party from providing any confidential information received
from the other Party to any court or Governmental Agency as may be required by
such court or Governmental Agency, provided that, if feasible, the disclosing
Party shall have given prior notice to the other Party of such required
disclosure and, if so requested by such other Party, shall have used all
reasonable efforts to oppose the requested disclosure, as appropriate under the
circumstances, or to otherwise make such disclosure pursuant to a protective
order or other similar arrangement for confidentiality. The timing and content
of any press releases associated with this Agreement shall be agreed to by the
Parties prior to any public distribution.
Section 22.13 Independent Contractors. The Parties are independent
contractors. Nothing contained herein shall be deemed to create an association,
joint venture, partnership or principal/agent relationship between the Parties
hereto or to impose any partnership obligation or liability on either Party.
Neither Party shall have any right, power or authority to enter into any
agreement or commitment, act on behalf of, or otherwise bind the other Party in
any way.
Section 22.14 Third Parties. This Agreement is intended solely for
the benefit of the Parties. Nothing in this Agreement shall be construed to
create any duty or liability to, or standard of care with reference to, any
other Person.
Section 22.15 Headings. The headings contained in this Agreement are
solely for the convenience of the Parties and should not be used or relied upon
in any manner in the construction or interpretation of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOW.]
67
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
LSP ENERGY LIMITED PARTNERSHIP
By: /s/ LSP Energy, Inc.
---------------------------
General Partner
By: /s/ Clarence J. Heller
---------------------------
Name: Clarence J. Heller
Title: Executive Vice President
AQUILA POWER CORPORATION
By: /s/ Harvey J. Padewer
---------------------------
Name: Harvey J. Padewer
Title: President
UTILICORP UNITED INC.
By: /s/ Robert Green
---------------------------
Name: Robert K. Green
Title: President & COO
68
<PAGE>
Appendix A
Testing Procedures for Contract Capacity
This Appendix A defines the method for determining Contract Capacity at
reference conditions of 95 degrees Fahrenheit and sixty percent (60%) relative
humidity (summer conditions) and 59 degrees Fahrenheit and sixty percent (60%)
relative humidity (winter conditions) tendered to the Purchaser pursuant to the
terms of this Agreement.
A. Requirement for Capability Test Procedure
A test shall be conducted prior to commercial operation to determine the
Contract Capacity. The test shall be conducted in accordance with a test
procedure to be developed by the Facility contractor, which shall incorporate
all of the test criteria and requirements specified in this Appendix A. This
test procedure shall be used as the basis for conducting all subsequent tests to
determine the Contract Capacity, subject to the provisions of Section 22.2.
B. Development of Test Procedure
This procedure shall include, but not be limited to, the following
subjects: arrangement and form of the test, log sheets, duration, readings to be
taken, instrumentation, and method of data recording. Development of the test
procedure shall generally follow the guidelines contained in ASME PTC 46,
"Overall Plant Performance". The annual Capability Test is to be conducted at an
ambient temperature within 10 degrees Fahrenheit of rating dry-bulb temperature.
Retests shall be conducted at ambient conditions as close to rating conditions
as practicable.
The following general guidelines shall be included in the development of
the test procedure for the Dedicated Unit:
(a) The combustion turbine shall be subjected to a full compressor
and/or turbine cleaning prior to conducting the test.
(b) All appropriate auxiliary equipment associated with the Dedicated
Unit shall be in service.
(c) Test data shall be collected with plant instruments, except that
Seller shall be allowed to substitute test instrumentation for plant
instrumentation, provided that the test instrumentation is of
greater accuracy. Determination of Net Electrical Output shall be
with the metering devices located at the
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<PAGE>
Electricity Metering Points indicated in Appendix B. Ambient
conditions at the time of running capability tests shall be recorded
so that appropriate adjustments can be made when establishing
seasonal capabilities. Conditions to be recorded are: dry-bulb
temperature, wet-bulb temperature, barometric pressure, and
condenser cooling water inlet temperature.
(d) For determination of Standard Capacity, duct firing shall not be in
service and the combustion turbine shall be operated at its base
load rating, without steam injection.
(e) For determination of Supplemental Capacity, duct firing shall be in
service and the combustion turbine shall be operated at its base
load rating, with steam injection.
(f) For determination of both Standard Capacity and Supplemental
Capacity, the combustion turbine evaporative cooler shall be in
service.
(g) The results of the tests shall be adjusted to the Standard Capacity
and Supplemental Capacity reference conditions of 95 degrees
Fahrenheit and sixty percent (60%) relative humidity.
(h) Once steady state conditions have been established, a two (2) hour
performance test shall be conducted divided into four (4) one-half
hour test periods, with the test results being the average of the
four test periods.
(i) Parameters affecting performance should be held at steady state
conditions during each of the test periods.
(j) When the total output of the Facilities is reduced due to
restrictions placed upon the output of individual Units through the
operation of the Clean Air Act or similar legislation, then the
total of the individual Unit ratings shall not exceed the modified
Facilities capacity.
(k) The Fuel used during testing shall be the general type expected to
be used during peak load conditions.
(l) The Contract Capacity, Standard Capacity and Supplemental Capacity
shall each be determined separately for each Unit at the Facility,
except
2
<PAGE>
that in the event multiple Unit capability at the Facility is
limited by Fuel limitations, transmission limitations or other
auxiliary devices or equipment that is considered a Common Facility,
each Unit shall be tested simultaneously and shall equally share in
the limitation.
3
<PAGE>
Appendix B
Metering Equipment
A. ELECTRICITY METERING
(a) Location of Meters. The Net Electrical Output for each Unit shall be
measured by Seller's electricity metering devices located at the Electricity
Metering Points ("Unit Electricity Meter"). The general location of the
Electricity Metering Points is shown on Figure B-1. The Unit Electricity Meter
shall be owned and operated in accordance with the Agreement.
Metering devices shall also be located on Entergy's and TVA's side of the
Interconnection Points in the approximate location shown on Figure B-1 to
measure energy delivered by Seller at the Interconnection Points ("Utility
Meters"). The Utility Meters will be owned and operated by Entergy and TVA.
(b) Description of Meters. All electricity metering devices shall be
designed in accordance with Prudent Industry Practices and shall consist of
meters, metering current and voltage transformers and associated equipment
required to determine the amounts and time of delivery of energy by Seller to
Purchaser.
(c) Meter Outputs/Data Recording/Telemetering. The Unit Electricity Meter
shall be capable of measuring MWs, MVARs and MWhs of each Dedicated Unit in
accordance with appropriate NERC criteria and Prudent Industry Practices, and
shall have the capability to totalize such data hourly. The output of the meters
shall be recorded in electronic format and stored on-site. The necessary
telemetering equipment and associated facilities shall be installed on-site to
facilitate transmittal of the instantaneous MW and MVAR information to Purchaser
and the Control Center.
(d) Reconciliation of Meters. The sum of the Net Electrical Output
measured by the Unit Electricity Meter shall equal the sum of the measured
values from the Utility Meters within the range of applicable meter accuracy
tolerances. In the event this is not the case, any such discrepancies shall be
treated in accordance with this Appendix B, Section 9.4 of the Agreement and
other applicable terms of the Agreement. Seller shall facilitate determination
of which metering devices caused such inaccuracy and shall allocate any such
inaccuracy appropriately among the Units.
B. FUEL METERING
<PAGE>
(a) Location of Meters. Purchaser shall deliver Fuel to the Fuel Metering
Points in accordance with the terms of the Agreement. The Fuel metering devices
shall be located at the Fuel Metering Points as shown on Figure B-2.
Fuel metering devices shall also be located at each Unit at the
approximate location shown on Figure B-2 to measure the Fuel used by each Unit
to produce the Net Electrical Output ("Unit Fuel Meter"). All Fuel metering
devices shall be owned and operated in accordance with the terms of the
Agreement.
(b) Description of Meters. All Fuel Metering Devices shall be designed in
accordance with Prudent Industry Practices and shall consist of meters and
associated equipment required to determine the amounts and time of delivery of
Fuel by Purchaser to Seller, and shall have the capability to totalize such data
hourly.
(c) Meter Outputs/Data Recording/Telemetering. The Fuel metering devices
shall measure Fuel in units of MMBtu in accordance with Prudent Industry
Practices and the tariffs of the interstate pipelines. The output of the meters
shall be recorded in electronic format and stored on-site. The necessary
telemetering equipment and associated facilities shall be installed to
facilitate transmittal of the real time Fuel flow information from the Unit Fuel
Meter to Purchaser.
(d) Reconciliation of Meters. The sum of the Fuel measured by the Unit
Fuel Meters shall equal the sum of the measured values from the meters located
at the Fuel Metering Points minus any Fuel not used at the Facility, all within
the range of applicable meter accuracy tolerances. In the event this is not the
case, any such discrepancies shall be treated in accordance with this Appendix
B, and other applicable terms of the Agreement. Seller shall facilitate
determination of which metering devices caused such inaccuracy and shall
allocate any such inaccuracy appropriately among the Units.
2
<PAGE>
Appendix C
Design Limits
The Design Limits for the Dedicated Unit shall be the following:
(a) The maximum load for the Dedicated Unit shall be equal to the
maximum Net Electrical Output allowed pursuant to
manufacturers' warranties and recommendations and the
Governmental Approvals relating to the Facility;
(b) The minimum load for the Dedicated Unit shall be equal to
seventy percent (70%) of Standard Capacity;
(c) The capacity to ramp in the range of operations from minimum
load to the maximum Standard Capacity at an average rate shall
be equal to no less than five (5) MW per minute ("Guaranteed
Ramp Rate");
(d) There shall be no more than one Start-Up per Day, unless
otherwise agreed by Seller;
(e) There shall be a minimum run time of eight (8) consecutive
hours;
(f) The maximum time from Purchaser's notice of Start-Up to
minimum load shall be as follows ("Guaranteed Start-Up Time"):
(i) If a Dedicated Unit has been out of operation for less
than forty-eight (48) hours, it shall achieve minimum
load within one hundred and thirty (130) minutes
following Purchaser's notice of Start-Up; and
(ii) If a Dedicated Unit has been out of operation for more
than forty-eight (48) hours, it shall achieve minimum
load within two hundred and ten (210) minutes following
Purchaser's notice of Start-Up; and
(g) The power factor of Net Electrical Output from the Dedicated
Unit shall be in the range from 0.90 lagging to 0.95 leading.
<PAGE>
Appendix D
Fuel Specifications
All Fuel delivered to the Facility by Purchaser shall meet the following
minimum requirements for receipt on each of the following applicable pipelines:
ANR Pipeline Company, FERC Gas Tariff, Second Revised Volume No. 1,
Section 13 - Quality and subsections 13.1 through 13.4 (sheets 129 through
132), as amended.
Trunkline Gas Company, FERC Gas Tariff, First Revised Volume No. 1,
Section 13 - Quality and subsections 13.1 through 13.6 (Sub First Revised
Sheet No. 204 and First Revised Sheet No. 205), as amended
Tennessee Gas Pipeline FERC Gas Tariff, Article II - Quality, Sections 1
through 9 (Fourth Revised Sheet No. 305, Second Revised Sheet No. 306,
Original Sheet No. 307 and Second Revised Sheet No. 308), as amended.
<PAGE>
Appendix E
Electricity Specifications
Electricity generated by the Dedicated Unit and delivered to Purchaser shall be
three (3) phase, 60 cycle, shall be at 161 kV when delivered to Seller's
interconnection with the TVA System and shall be at 161 kV or 230 kV when
delivered to the Entergy System as appropriate, and shall be in accordance with
the Entergy Interconnection Agreement and the TVA Interconnection Agreement,
unless otherwise agreed by the Parties.
<PAGE>
Appendix F
Replacement Power
When Seller elects or is otherwise obligated to obtain Replacement Power
delivered to Purchaser, pursuant to this Agreement, and chooses to have
Purchaser obtain such Replacement Power, Seller shall reimburse Purchaser for
the Incremental Replacement Power Cost ("IRPC") incurred by Purchaser. IRPC
shall be defined as follows, with all parameters described below denominated in
Dollars:
IRPC = RPC - EP + ETS + GTS + FR + FM
Where;
RPC = the actual cost at which Purchaser obtains Replacement Power from
a third party or parties, using Commercially Reasonable Efforts,
EP = the Energy Payment that would otherwise have been paid by
Purchaser to Seller for the quantities of energy which Seller failed
to deliver, plus Purchaser's cost of gas delivered to the Dedicated
Unit that would otherwise have been incurred, calculated as the
product of the Replacement Energy provided times the Delivered Cost
of Fuel times the Guaranteed Heat Rate,
ETS = all incremental power and energy transmission service costs
incurred through Commercially Reasonable Efforts to the Entergy/TVA
border, including, but not limited to, any incremental transmission
and ancillary services charges incurred in obtaining Replacement
Power and any applicable charges for reserved and
unutilized\transmission service, and less revenues received from
remarketing such transmission service,
GTS = all incremental transportation costs incurred through Commercially
Reasonable Efforts in remarketing the Fuel, including but not
limited to, any incremental Fuel transmission charges incurred.
FR = $0.03 per MMBtu Fuel remarketing fee for all Fuel obtained by
Purchaser for use in the Dedicated Unit and which had to be
remarketed.
FM = The difference between Purchaser's cost of gas delivered to the
Dedicated Unit that would
<PAGE>
otherwise have been incurred and the actual Fuel resale price.
When Purchaser is purchasing Replacement Power pursuant to this Agreement or
remarketing Fuel which was not used in generating electricity for delivery by
Seller to Purchaser, Purchaser shall use Commercially Reasonable Efforts to
mitigate the Incremental Replacement Power Cost. The provisions of Section 13.4
of this Agreement shall apply to Incremental Replacement Power Costs.
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Appendix G
Guaranteed Heat Rates
A. The average Guaranteed Heat Rate during any hour in which the Energy
dispatched is less than or equal to the Standard Capacity shall be the product
of the Seasonal Standard Heat Rate and the Part Load Adjustment Factor. The Part
Load Adjustment Factor shall be read from Column B of Table 1 based on the
energy dispatched from the Dedicated Unit during the hour divided by the
Standard Capacity.
Table 1 - Part Load Adjustment Factor
----------------------------------------------------------
Column B
Column A Part Load
Energy Dispatched as a Percent of Adjustment
Standard Capacity Factor
----------------------------------------------------------
70% 1.11
----------------------------------------------------------
71% 1.10
----------------------------------------------------------
72% 1.10
----------------------------------------------------------
73% 1.09
----------------------------------------------------------
74% 1.09
----------------------------------------------------------
75% 1.08
----------------------------------------------------------
76% 1.08
----------------------------------------------------------
77% 1.08
----------------------------------------------------------
78% 1.07
----------------------------------------------------------
79% 1.07
----------------------------------------------------------
80% 1.07
----------------------------------------------------------
81% 1.06
----------------------------------------------------------
82% 1.06
----------------------------------------------------------
83% 1.06
----------------------------------------------------------
84% 1.05
----------------------------------------------------------
85% 1.05
----------------------------------------------------------
86% 1.05
----------------------------------------------------------
87% 1.04
----------------------------------------------------------
88% 1.04
----------------------------------------------------------
89% 1.04
----------------------------------------------------------
90% 1.03
----------------------------------------------------------
91% 1.03
----------------------------------------------------------
92% 1.03
----------------------------------------------------------
93% 1.03
----------------------------------------------------------
94% 1.02
----------------------------------------------------------
<PAGE>
Table 1 - Part Load Adjustment Factor
----------------------------------------------------------
Column B
Column A Part Load
Energy Dispatched as a Percent of Adjustment
Standard Capacity Factor
----------------------------------------------------------
95% 1.02
----------------------------------------------------------
96% 1.02
----------------------------------------------------------
97% 1.01
----------------------------------------------------------
98% 1.01
----------------------------------------------------------
99% 1.01
----------------------------------------------------------
100% 1.00
----------------------------------------------------------
B. The average Guaranteed Heat Rate during any hour in which the energy
dispatched is greater than the Standard Capacity shall be determined from the
following formula:
Guaranteed Heat Rate = (ESC*SSHR + ESU*9.500 MMBtu/MWh) / (ESC + ESU)
where: ESC is the amount of energy in MWh dispatched up to the Standard
Capacity during the hour;
SSHR is the Seasonal Standard Heat Rate at Standard Capacity, which
shall be 7.000 MMBtu/MWh (higher heating value) for the Months
of June, July, August, and September and 6.900 MMBtu/MWh
(higher heating value) for all other Months; and
ESU is the amount of energy in MWh dispatched above the Standard
Capacity during such hour.
C. If the Dedicated Unit trips or is otherwise taken off line during an hour,
the Part Load Adjustment Factor shall be determined for that hour based on the
Energy dispatched and the time the Dedicated Unit was on line during that hour
(for example, if the Dedicated was on line at 80% of Standard Capacity for 30
minutes and tripped off line, the Part Load Adjustment Factor would be 1.07.)
2
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Appendix H
Minimum Insurance Requirements
The Seller shall at all times carry and maintain or cause to be carried
and maintained at its expense such insurance as is customarily maintained by
owners and operators of generating facilities and in all events shall carry and
maintain at least the minimum insurance coverage set forth in this section as
commercially available placed with brokers, insurers, and reinsursers of
recognized responsibility.
A. All Risk Builders Risk. Through the Commercial Operations Date, Seller shall
maintain all risk builders risk covering the Facility against physical loss or
damage to property of every kind and description to be used in the fabrication,
assembly, installation, erection or alteration of the contract works, including
boiler and machinery and testing coverage. Deductibles shall not exceed
$1,000,000.00 for a combustion turbine, $750,000.00 for a steam turbine,
generator, or heat recovery steam generator, and $250,000.00 for all other
losses. As an extension of all risk builders risk coverage, Seller shall
maintain delay in start-up insurance in an amount equal to six (6) Months
projected non-operating cash flow requirements. Such extension may be subject to
deductibles not to exceed sixty (60) Days.
B. All Risk Property Insurance. Commencing on the Commercial Operations Date,
Seller shall maintain all risk property insurance covering the Facility against
physical loss or damage, including, comprehensive boiler and machinery coverage
(including electrical malfunction and mechanical breakdown). Deductibles shall
not exceed $1,000,000.00 for a combustion turbine, $750,000.00 for a steam
turbine, generator, or heat recovery steam generator, and $250,000,00 for all
other losses. As an extension of all risk coverage Seller shall maintain
business interruption insurance in an amount equal to six (6) Months projected
non-operating cash flow requirements. Such extension may be subject to
deductibles not to exceed sixty (60) Days.
C. Commercial or Comprehensive General Liability. Seller shall maintain third
party liability insurance written on an occurrence basis (claims made if covered
by Aegis) with a limit not less than $1,000,000.00. Deductibles shall not exceed
$50,000.00 per occurrence.
D. Workers' Compensation/Employer's Liability. Seller shall maintain workers'
compensation insurance and employer's liability insurance which comply with
statutory Laws of Mississippi.
<PAGE>
E. Automobile Liability. Seller shall maintain automobile liability insurance
with a limit of not less than $1,000,000.00, including coverage for owned,
not-owned and hired automobiles for both bodily injury (including death) and
property damage, uninsured/underinsured motorist protection endorsements.
F. Excess/Umbrella Liability. Seller shall maintain excess/umbrella liability
insurance written on an occurrence basis (claims made if covered by Aegis) and
providing coverage limits in excess of the primary limits. The limit of such
excess/umbrella coverage shall not be less than $10,000,000.00 on a follow form
basis.
2
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Appendix I
Criteria for Electric and Gas Interconnection Agreements
This Appendix I defines the approval criteria for the Entergy
Interconnection Agreement and the TVA Interconnection Agreement and the pipeline
interconnection agreements, in accordance with the provisions of Sections 7.2
and 8.1.
A. Electric Interconnection Agreements
1. No charges to Purchaser for delivering power and energy from the Dedicated
Unit to the Facility interconnections with TVA and/or Entergy shall apply
under the Interconnection Agreements.
2. Seller shall have the right to select the initial applicable control area
for the Dedicated Unit under the Interconnection Agreements.
3. Seller shall have the right to transfer the Dedicated Unit from the
Entergy or TVA control area to the other control area, on a no more than
annual frequency.
4. The Interconnection Agreements shall not provide for parallel flow
compensation for deliveries of power and energy to TVA and/or to Entergy
from the Dedicated Unit, absent filing(s) by TVA or Entergy with the
applicable regulator.
5. The Interconnection Agreements shall require TVA and Entergy to complete
any facilities upgrades required by Entergy and/or TVA using due diligence
in accordance with Section 7.2 by June 1, 2000 subject to force majeure in
accordance with this Agreement.
6. The transmission system upgrades identified by TVA and Entergy shall be
adequate (using the same standard for upgrades that the relevant utility
would apply to any comparable generation unit interconnected to its
system) to receive the entire output of the Facility for delivery into TVA
or Entergy as applicable for delivery and receipt pursuant to such
utility's transmission tariffs. This standard means that (i) if, subject
to the terms and conditions of the applicable Interconnection Agreement,
Net Electrical Output from the Facility is delivered to the applicable
Interconnection Point and Purchaser has arranged or caused to be arranged
transmission service for the Net Electrical Output with the applicable
utility designating the Interconnection Point as a transmission point of
<PAGE>
receipt, the Net Electrical Output will be delivered to the transmission
point of delivery pursuant to the terms of the applicable transmission
service agreement, and (ii) the applicable Interconnection Point is
available as a transmission point of receipt pursuant to the terms of the
applicable utilities transmission tariff.
7. The Interconnection Agreements shall have no obligation for Purchaser to
provide reactive power or other ancillary services to Entergy and/or TVA
without agreement by Purchaser with each applicable utility on acceptable
compensation.
8. Seller shall have the right to metering data at the Interconnection Points
to the extent necessary to determine imbalances to the extent necessary to
determine imbalances.
9. The term of the TVA Interconnection Agreement and the Entergy
Interconnection Agreement shall equal or exceed the Term of this
Agreement.
10. Emergency conditions as used in the Interconnection Agreement shall be
defined in accordance with Good Utility Practice in a manner not
inconsistent with FERC's open access transmission policy.
12. Purchaser shall have the right to witness all metering testing by the
Seller and (for the Interconnection Points) TVA or Entergy.
B. Pipeline Interconnection Agreements
1. The maximum flow capacities of the Pipeline Interconnection Facilities
shall match the absolute maximum flow requirements of the Facility plus
any third party supply requirements (e.g., Batesville, MS).
2. The pipeline interconnection agreements shall not contain any commitment
for Purchaser to purchase or transport any minimum flow of Fuel.
3. Seller shall at all times have full metering capability with respect to
receipts and deliveries of Fuel.
4. The contractual equivalent of a direct Trunkline interconnection via ANR
shall be available in accordance with Section 8.1(a) of this Agreement.
5. The Pipeline Interconnection Agreements shall not contain limits on gas
transportation routes.
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6. Purchaser shall have the right to witness all metering testing by both the
Seller and the pipelines of the meters located at the Fuel Metering
Points.
7. The Pipelines shall provide Fuel at a pressure no lower than that required
to operate all the Units in accordance with this Agreement and other
agreements by Seller with other Purchasers.
8. Purchaser shall be a third party beneficiary under the interconnection
agreements, provided such third-party beneficiary status is subordinate to
the rights of the Financing Parties.
3
<PAGE>
LS POWER, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
(314) 993-2700 o Fax: (314) 993-2790
Clarence J. Heller
Executive Vice President
July 16, 1998
By Fax and U.S. Mail
Mr. Max Sherman
Aquila Power Corporation
10750 East 350 Highway
Kansas City, MO 64138
Dear Mr. Sherman:
Reference is made to the Power Purchase Agreement between LSP Energy
Limited Partnership and Aquila Power Corporation ("Aquila") and Utilicorp
United Inc. dated as of May 21, 1998 (the "PPA"). Pursuant to Section
11.1(d)(i), Seller hereby provides that the Estimated Standard Capacity of
the Dedicated Unit at 95 degrees Fahrenheit and 60 percent relative
humidity is 243 MW and that the Estimated Supplemental Capacity is 36 MW.
Notwithstanding Section 11.1(d)(i), Seller requests that Purchaser
acknowledge that Supplemental Capacity greater that 30 MW up to 36 MW
shall be purchased under the terms of the PPA at the Surplus Reservation
Charge.
Sincerely,
/s/ Clarence Heller
Clarence Heller
Agreed to and accepted:
Aquila Power Corporation
By: /s/ V.J. Horgan
------------------------
Name: VJ Horgan
Title: GM and SVP Power Marketing & Sales
cc: Vice President, Aquila Power Corporation
<PAGE>
July 14, 1998
Mr. Lawrence J. Willick, Project Manager
LS Power, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
Dear Lawrence:
This letter responds to certain items concerning the Power Purchase Agreement
dated May 21, 1998 ("PPA") between Aquila Power and LSP Energy Limited
Partnership for the LSP generating project in Batesville, Mississippi:
1) POWER FACTOR. Appendix C, Item (g) specifies the power factor range for
the Net Electrical Output. In Section 1.1, Net Electric Output is defined
with respect to the Interconnection Points. Per your request, please be
advised that measurement of power factor for the Dedicated Unit at the
generator terminals of said unit is acceptable to Aquila.
2) ENTERGY INTERCONNECTION AGREEMENT. This letter will document that the
Entergy Interconnection Agreement, transmitted to us by fax dated May 19,
1998, is consistent with the requirements of the PPA with the following
exceptions:
a) The Entergy Interconnection Agreement does not contain the third party
beneficiary requirement in Section 7.5(c). In connection with this
requirement, please provide Aquila with a description of the efforts
made by LSP with Entergy to have such language included in the Entergy
Interconnection Agreement.
b) The Entergy Interconnection Agreement appears to comply with
requirement A.S. of Appendix I to the PPA, PROVIDED, that LSP meets all
of the applicable deadlines as set forth in Section 3.2(d) of the
Entergy Interconnection Agreement.
Should you have any questions, please do not hesitate to call.
Very truly yours,
/s/ MAX SHERMAN
- ------------------
Max Sherman
<PAGE>
Mr. Lawrence J. Willick, Project Manager
July 14, 1998
Page 2
cc: David Stevenson
Joe Gocke
Jerry Coffey
<PAGE>
August 27, 1998
Mr. Lawrence J. Willick
Project Manager
LS Power, LLC
655 Craig Road, Suite 336
St. Louis, MO 63141
Dear Lawrence:
UtiliCorp United Inc. ("UtiliCorp"), as Purchaser under the Power Purchase
Agreement date May 21, 1998 between LSP Energy Limited Partnership, as Seller,
and Aquila Power Corporation ("Aquila") and UtiliCorp, as Purchaser,
acknowledges that it has reviewed the Letter Agreements dated July 14, 1998 and
July 16, 1998 between Aquila and Seller and accepts the terms thereof as if
UtiliCorp were a signatory thereto.
Sincerely,
/s/ Harvey J. Padewer /s/ V.J. Horgan
Harvey J. Padewer V.J. Horgan
Senior Vice President Senior Vice President
and General Manager and General Manager
UtiliCorp Energy Group Aquila Power
cc: Joe Gocke
File
<PAGE>
Exhibit 10.4
98PAP-236148
INTERCONNECTION AGREEMENT
BETWEEN
TENNESSEE VALLEY AUTHORITY
AND
LSP ENERGY LIMITED PARTNERSHIP
THIS AGREEMENT, made and entered into as of the 22nd day of July, 1998,
by and between Tennessee Valley Authority ("TVA"), a corporation created by
and existing under and by virtue of the Tennessee Valley Authority Act of
1933, as amended, and LSP Energy Limited Partnership ("LSP"), a limited
partnership organized under the laws of the State of Delaware. TVA and LSP
are also hereinafter sometimes referred to individually as "Party" and
collectively as "Parties."
RECITALS
WHEREAS, LSP intends to construct, own, and operate a facility for the
generation and sale of electric energy, which facility is located in the City of
Batesville, Panola County, Mississippi ("Facility"); and
WHEREAS, the Facility is to be located near the transmission facilities of
TVA; and
WHEREAS, LSP has requested and TVA has agreed to enter into an
Interconnection Agreement with LSP in order for LSP to be able to transmit
energy from the Facility to and across TVA's transmission system; and
WHEREAS, as a result of the Facility being located near the transmission
facilities of Entergy Mississippi, Inc. ("EMI"), LSP and EMI have entered into
an Interconnection and Operating Agreement, dated May 18, 1998, which provides
for the Facility being interconnected with the EMI system;
WHEREAS, since the Facility will be interconnected with the systems of TVA
and EMI, joint operating arrangements among TVA, Entergy Services, Inc.
("Entergy"), acting as agent for EMI, and LSP will be required;
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants herein set forth, TVA and LSP agree as follows:
<PAGE>
ARTICLE 0
DEFINITIONS
Whenever the following terms appear in this Agreement, including without
limitation any Exhibits thereto, whether in the singular or in the plural,
present or past tense, they shall have the meaning set forth in this Article.
0.1 Definitions.
"Authorization Date" shall mean the date on which TVA receives notice, in
writing, from LSP to proceed with the detailed design and construction of the
TVA Interconnection Facilities and the Upgraded Facilities in accordance with
Section 6.1 of this Agreement.
"Billed Party" shall have the meaning set forth in Article 9 of this
Agreement.
"Billing Party" shall have the meaning set forth in Article 9 of this
Agreement.
"Business Day" shall mean any Day except Saturday, Sunday, or a weekday
that is observed by TVA as a Federal holiday (Federal holidays currently include
New Year's Day, Martin Luther King's Birthday, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day, and
Christmas Day).
"Central Time" shall mean Central Standard Time or Central Daylight
Savings Time, whichever is then prevailing.
"Commercially Reasonable" shall mean, with respect to any action required
to be made, attempted or taken by a Party under this Agreement, such efforts as
a reasonably prudent business would undertake for the protection of its own
interest under the conditions affecting such action, including without
limitation, the amount of notice of the need to take such action, the duration
and type of such action, the competitive environment in which such action occurs
and the risk to the Party required to take such action.
"Control Area" - An electric power system or combination of electric power
systems to which a common automatic generation control scheme is applied in
accordance with Good Utility Practice in order to:
(a) match, at all times, the power output of the generators within the
electric power system(s) and capacity and energy purchased from
entities outside the electric power system(s), with the load within
the electric power system(s);
(b) maintain scheduled interchange with other Control Areas;
(c) maintain the frequency of the electric power system(s) within
reasonable limits; and
(d) provide sufficient generating capacity to maintain operating
reserves.
"Day or Calendar Day" - The 24-hour period beginning at 00:00 and ending
at 12:00 midnight Central Time. The terms Day and Calendar Day may be used
interchangeably and shall have the same definition.
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"Delivery Point" shall have the meaning set forth in Section 8.4 of this
Agreement.
"Exhibit A" shall mean Exhibit A, INTERCONNECTION CRITERIA, to this
Agreement as the same may be amended, supplemented, revised, altered, or changed
by TVA from time to time in its sole reasonable discretion to deal with matters
involving reliability of the TVA system, system emergencies, and safety matters,
provided, however, that any amendments, supplements, revisions, alterations, or
changes to the INTERCONNECTION CRITERIA shall be consistent with Good Utility
Practice and with applicable laws and regulations. To the extent required by
applicable laws and regulations, the requirements set forth in the
INTERCONNECTION CRITERIA, including any amendments, supplements, revisions,
alterations, or changes to the INTERCONNECTION CRITERIA as provided for above,
shall be consistent with the requirements applied by TVA to similar power
production facilities located in the TVA Control Area in comparable
circumstances, including without limitation size, age, location, and operating
characteristics, whether owned by TVA or third parties.
"Exhibit B" shall mean Exhibit B, INTERCONNECTION FACILITIES, to this
Agreement which sets forth an electrical equipment diagram of the
Interconnection Facilities.
"Exhibit C" shall mean Exhibit C, COMMUNICATION FACILITIES, to this
Agreement which sets forth the communication specification diagrams of the
Interconnection Facilities.
"Facilities Study" shall have the meaning set forth in Article 5 of this
Agreement. The project scoping workshop is considered a part of the Facilities
Study.
"Facility Electrical Output" shall mean the actual amount of net
electrical energy generated by the Facility up to a nominal amount of 800 MW in
the summer and up to a nominal amount of 900 MW in the winter, but in no event
shall such amount exceed 840 MW in the summer and 945 MW in the winter.
"FERC" shall mean the Federal Energy Regulatory Commission or any such
successor regulatory agency.
"Force Majeure" shall have the meaning set forth in Article 11 of this
Agreement.
"Good Utility Practice" shall mean any of the practices, methods, and acts
engaged in or approved by a significant portion of the electric utility industry
during the relevant time period, or practices, methods, and acts which, in the
exercise of reasonable judgment in light of the facts known at the time the
decision was made, could have been expected to accomplish the desired result at
a reasonable cost consistent with good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be limited to any
particular set of optimum practices, methods, or acts to the exclusion of all
others, but rather is intended to include a spectrum of acceptable practices,
methods, or acts.
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"Guidelines" shall mean TVA's Transmission Service Guidelines, as such
Guidelines now exist or may hereafter be modified, or any replacement providing
for transmission service over the TVA system.
"Initial Synchronization Date" - The first date upon which energy is
generated by the Facility as provided in Section 6.6 of this Agreement.
"Interconnection Criteria" means TVA's criteria for interconnecting the
LSP Interconnection Facilities to the TVA electrical system, as described in
Exhibit A.
"Interconnection Facilities" - All facilities presently in place or
presently proposed to be installed, as delineated on Exhibits B and C, or
required to be installed in the future in order to interconnect and deliver
Facility Electrical Output from the Facility to TVA's system, including, but not
limited to, TVA Interconnection Facilities, LSP Interconnection Facilities,
Upgraded Facilities, and metering, communication, relaying, protection, and
safety equipment. Interconnection Facilities shall include any additions and/or
reinforcements to TVA's system that TVA, in the exercise of its sole judgment,
deems necessary, provided, however, that any additions and/or reinforcements
deemed necessary by TVA shall be consistent with Good Utility Practice and with
applicable laws and regulations.
"LSP Interconnection Facilities" shall mean all Interconnection Facilities
to be installed and thereafter owned, operated and maintained by LSP on LSP's
side of the Point of Interconnection, and which facilities are more fully
described, and are subject to, the provisions of Article 3 of this Agreement.
"Month or Calendar Month" - The period beginning at 00:00 hours on the
first Day of the current calendar month and ending at 12:00 midnight on the last
Day of the current calendar month. The terms "Month" and "Calendar Month" may be
used interchangeably and shall have the same definition.
"Operation Date" shall mean the day commencing at 00:00 hours, following
the day during which the Interconnection Facilities have been completed to TVA's
and LSP's mutual satisfaction and energized in parallel operation of TVA's and
LSP's systems as confirmed in writing.
"Parties" - TVA and LSP, except in Section 6.4 only where "Parties" shall
refer to TVA, LSP, and Entergy.
"Party" - TVA or LSP as the sections of this Agreement so require, except
in Section 6.4 only where "Party" shall refer to TVA, LSP, or Entergy.
"Point of Interconnection" - The point, shown in Exhibit B, where the TVA
Interconnection Facilities connect to the LSP Interconnection Facilities.
"Scheduled Completion Date" shall mean the estimated date, as determined
by TVA following the completion of the Facilities Study, by which TVA
anticipates completing the
4
<PAGE>
design, construction, and installation of the TVA Interconnection
Facilities and the Upgraded Facilities. The Scheduled Completion Date may be
revised by TVA in accordance with the provisions of Section 6.1.
"Site" means the real property on which the Facility is located.
"System Protection Facilities" shall mean the equipment, including, but
not limited to relays and their associated settings, monitoring and control
equipment, and power circuit breakers, installed and maintained by LSP, at its
expense, on the LSP side of the Point of Interconnection required to protect (1)
TVA's system and its customers from faults occurring at LSP's facilities, and
(2) LSP facilities from faults occurring on TVA's system or the system of others
to which TVA's system is directly or indirectly connected.
"Transferable LSP Interconnection Facilities" shall mean those certain LSP
Interconnection Facilities, including any easements and rights-of-way, that may
be transferred from LSP to TVA or to a third party pursuant to Section 3.11 of
this Agreement. LSP's three (3) step-up transformers and 161-kV power circuit
breaker installations C, E, G, H, I, J, and K, including without limitation
switches, foundations, busses, and associated equipment, are not included in the
Transferable LSP Interconnection Facilities.
"TVA Act" shall mean the Tennessee Valley Authority Act of 1933, as
amended (16 U.S.C. ss.831-831dd (1994)).
"TVA Interconnection Facilities" shall mean those certain Interconnection
Facilities presently in place, presently proposed to be installed or required to
be installed in the future, which facilities were installed or shall be
installed and thereafter owned, operated, and maintained by TVA, but at LSP's
expense, and which facilities are more fully described, and are subject to, the
provisions of Article 2 of this Agreement. The communication equipment provided
by TVA under Section 2.2(e) and the metering and data equipment provided by TVA
under Section 2.3 of this Agreement are included in this definition.
"Upgraded Facilities" shall mean those certain Interconnection Facilities
to be installed by TVA, but at LSP's expense, which are more fully described,
and are subject to, the provisions of Article 4 of this Agreement.
5
<PAGE>
ARTICLE 1
TERM OF AGREEMENT
1.1 Term of Agreement. Except as provided in Section 1.2, this Agreement
shall become effective as of the date first above written and shall continue in
effect for a term ending thirty-five (35) years from the Operation Date;
provided, however, TVA may, at the end of an initial period ending five (5)
years from the Operation Date or from time to time during the remaining thirty
(30) year period of this Agreement, offer to LSP one or more amendments to this
Agreement which shall make the terms and conditions of this Agreement consistent
with those then currently being offered by TVA under interconnection agreements
with companies with generating facilities similar to the Facility; provided,
however, no such amendment shall reduce the thirty-five (35) year term or the
notice period, period of negotiation, and requirement of one (1) year prior
written notice for termination provided for in the next sentence. If, despite
the Parties' good faith negotiation, any such amendment has not been executed by
LSP within six (6) months after TVA offers to LSP a signature copy of the
amendment, then, after the expiration of said six (6) month period, TVA may
terminate this Agreement upon one (1) year's prior written notice to LSP.
1.2 Default. In addition to its termination rights specified in Section
1.1, TVA shall have the right to terminate this Agreement, (except as provided
in Section 1.2(ii) below) upon sixty (60) Days' written notice ("Notice
Period"), without any liability or responsibility hereunder, under the following
conditions:
(i) in the event LSP:
(A) becomes bankrupt or insolvent (however evidenced) or otherwise
makes an assignment or any general arrangements for the benefit of
creditors,
(B) files a petition or otherwise commences, authorizes, or
acquiesces in the commencement of a proceeding or case under any
bankruptcy or similar law for the protection of creditors, or such a
petition is filed against it and such proceeding remains undismissed
for sixty (60) Days, or
(C) is unable to pay its debts as they fall due;
provided that, there shall be no termination of this Agreement for any of the
foregoing in this paragraph (i) if LSP cures such default within the Notice
Period or continues to perform its obligations pursuant to this Agreement and
pursuant to applicable law and with any required court approval, a process to
cause this Agreement to be assumed by a trustee is commenced within the Notice
Period and completed within one hundred eighty (180) Days of such event or such
additional period of time as is reasonable and LSP is diligently pursuing
efforts to complete the process within such period of time; provided such
assumption provides for payment in full of all sums due and owing TVA, payable
consistent with applicable law, and for the cure of all LSP material defaults;
and provided further that TVA receives reasonable written assurance of LSP's
continued performance of its material obligations hereunder within the Notice
Period;
6
<PAGE>
(ii) in the event LSP fails to pay TVA any amount due under this Agreement
and such failure is not cured within the Notice Period, which in this case shall
be thirty (30) Days;
(iii) in the event LSP refuses to comply with the provisions of Section
8.1 of this Agreement regarding the balancing on an hourly basis of Facility
Electrical Output and the scheduling of energy to third parties; provided that,
there shall be no termination of this Agreement if, during the Notice Period,
LSP takes all actions that are within its reasonable capability and within the
reasonable capabilities of the Facility to comply with the provisions of Section
8.1; or
(iv) in the event LSP, or the Facility, is not in compliance with any of
the terms of this Agreement (or the Operating Procedures developed pursuant to
Section 6.4(d)), except for any noncompliance covered by items (i) through (iii)
above, and such default is not cured within the Notice Period. If the default is
not reasonably capable of being cured within the Notice Period, then the default
shall be deemed cured if LSP commences and diligently pursues action to remedy
the default within the Notice Period and thereafter remedies such default within
a reasonable period of time after receipt of such notice.
1.3 Survival of Obligations. Termination of this Agreement shall not
relieve the Parties of obligations that by their nature should survive such
termination, including without limitation, final billing, billing adjustment and
payments, warranties, remedies, promises of indemnity and confidentiality.
7
<PAGE>
ARTICLE 2
TVA INTERCONNECTION FACILITIES
2.1 Interconnection Point. Upon completion, testing, and acceptance of the
Interconnection Facilities pursuant to this Agreement and subject to the other
terms and conditions of this Article 2, TVA shall operate and maintain the TVA
Interconnection Facilities as necessary to accept electrical energy from the
Facility at the Point of Interconnection. Upon its completion as hereinafter
provided, a 161-kV interconnection point shall be established between TVA and
LSP at the Point of Interconnection of the TVA and LSP Interconnection
Facilities at the dead-end structure located outside of the fence at TVA's
Batesville 161-kV Substation. The Point of Interconnection shall be established
and maintained by TVA and LSP in accordance with Articles 2 and 3 of this
Agreement.
2.2 TVA Interconnection Facilities. (a) TVA shall, at LSP's expense,
install or cause to be installed and thereafter own, operate, and maintain in
the TVA's Batesville 161-kV Substation the facilities necessary to connect LSP's
two 161-kV transmission lines referred to in Article 3 at the Point of
Interconnection and two (2) new 161-kV power circuit breaker installations,
including without limitation switches, foundations, structures, busses, and
associated equipment.
(b) TVA shall, at LSP's expense, install or cause to be installed and
thereafter own, operate, and maintain the communication facilities specified in
Exhibit C. LSP shall also pay to TVA all actual costs, including applicable
overheads, incurred by TVA in removing and disposing of any existing
communication facilities to be retired as specified on Exhibit C, and the
undepreciated portion of the cost of installing the communication facilities
specified for retirement on Exhibit C. The cost of installing said communication
facilities specified for retirement shall be deemed to be the actual total
installed cost, including applicable overheads, less salvage received for
reusable materials and equipment.
(c) LSP shall grant to TVA such land rights including easements and
rights-of-way and rights of ingress and egress in, on, over, and across property
owned or controlled by LSP and/or its affiliates, as may be necessary during the
term of this Agreement to permit TVA to design, construct, maintain, operate,
alter, repair, replace, and remove the TVA Interconnection Facilities. For the
purposes set forth in this Agreement, TVA shall have free access to the TVA
Interconnection Facilities located on LSP's premises at all reasonable times.
All such access rights shall be at locations mutually satisfactorily to TVA and
LSP.
2.3 Metering and Data Equipment. (a) TVA, at LSP's expense, shall be
responsible for the purchase, installation, operation, maintenance, repair, and
replacement of all data acquisition equipment (including meters, remote terminal
units (RTUs), related protection equipment, and any other associated equipment
and software) necessary for the establishment of the Point of Interconnection at
the location shown in Exhibit B. LSP, at its expense, shall be responsible for
the purchase, installation, operation, maintenance, repair, and replacement of
all data acquisition equipment (including meters, remote terminal units (RTUs),
related protection equipment, and any other associated equipment and software)
necessary to measure the Facility Electrical Output at the locations shown in
Exhibit B in
8
<PAGE>
LSP's 161-kV Substation. All such equipment of TVA and LSP shall conform to Good
Utility Practice and the standards and practices of TVA's Control Area. LSP and
TVA shall review the metering and other equipment prior to its installation to
ensure conformance with such standards or practices.
Real-time telemetry is to be used to provide data to be received by TVA
from the data acquisition equipment provided by TVA and LSP referred to above.
TVA shall, at LSP's expense, install and maintain any equipment and software
necessary for providing the telemetry signals to TVA. LSP shall also be
responsible for the cost of making any computer modifications or changes
required to TVA's computer system(s) as necessary to implement this Section 2.3.
(b) Each Party shall, at LSP's expense, test its respective metering
equipment provided under this Section 2.3, including but not limited to meters
and RTUs, at least biennially. Representatives of TVA, LSP, and Entergy shall be
afforded an opportunity to witness such tests.
(c) Either Party shall, upon request of the other Party, make additional
tests of any of the metering equipment provided under this Section 2.3. The cost
of making such additional tests shall be paid by the requesting Party if such
additional tests show that the measurements made with this metering equipment
are accurate within one (1) percent (positive or negative).
(d) In the event any metering equipment used in the measurement of
capacity and energy fails to register or is found to be inaccurate, appropriate
billing adjustments shall be made based on the best information available. If
testing shows that the measurements made with any metering equipment are
accurate within one (1) percent (positive or negative), there shall be no
correction of billing. If testing shows that the measurements made with any
metering equipment are not accurate within one (1) percent (positive or
negative), any necessary adjustments, repairs, or replacements shall be made to
the metering equipment at LSP's expense as soon as practicable. Measurements
previously taken shall be corrected for accounting and billing purposes
according to the percentage of inaccuracy so found for any known or agreed upon
period of inaccuracy; in the absence of any such knowledge or agreement, the
adjustment shall be limited to one-half the period of the time from the date of
the last previous test of the meter and the most recent test but in no event
shall the period covered by the correction exceed one hundred eighty (180) Days.
(e) Either Party, at its expense, shall have the right to install and
maintain suitable metering equipment at the metering points specified in Section
2.3(a) for the purpose of checking the metering equipment installed by the other
Party hereunder.
(f) LSP shall provide, or at TVA's option TVA shall provide at LSP's
expense, the telecommunication circuits necessary to provide the telemetered
load signals to TVA's Control Center.
9
<PAGE>
(g) TVA shall provide LSP with access to the output information from the
meter installed by TVA at its Batesville 161-kV Substation pursuant to this
Section 2.3(a) only when necessary for billing purposes under this Agreement.
2.4 Reimbursement by LSP. LSP shall pay TVA for all actual costs,
including applicable overheads, incurred by TVA in connection with all phases of
TVA's design, construction, installation, and modification of the facilities
provided by TVA under Articles 2 and 4, including the acquisition of all
necessary land rights including easements and rights of way and rights of
ingress and egress in, on, over, and across property owned or controlled by LSP
and/or its affiliates as well as any necessary environmental reviews. Upon
completion of the Facilities Study, TVA shall develop a detailed cost estimate,
including any applicable retirement costs ("Estimated Cost"), associated with
the TVA Interconnection Facilities and the Upgraded Facilities. As soon as
practicable following the Authorization Date, TVA shall invoice LSP for an
amount equal to the Estimated Cost divided by 6.5 ("Quarterly Payment").
Thereafter, every ninety (90) Days TVA will issue an additional invoice for the
Quarterly Payment until a total of seven (7) invoices have been issued by TVA to
LSP; provided, however, that the last Quarterly Payment shall be reduced by
one-half (1/2). (For example, if the Estimated Cost was $13 million, TVA would
invoice LSP for six (6) consecutive Quarterly Payments of $2 million followed by
a seventh (7th) Quarterly Payment of $1 million). Upon completion of
construction of the TVA Interconnection Facilities and the Upgraded Facilities,
the Parties agree to make a final adjustment to correct for any overpayment or
underpayment resulting from any difference between the Estimated Cost and the
actual cost, including applicable overheads, incurred by TVA associated with the
TVA Interconnection Facilities and the Upgraded Facilities. At LSP's request,
TVA shall provide LSP with a cost accounting setting forth in reasonable detail
the expenditures for all necessary equipment and materials comprising the TVA
Interconnection Facilities and the Upgraded Facilities. The provisions of
Articles 9 and 14 shall apply to invoices issued by TVA under this Section 2.4.
2.5 Operation and Maintenance of TVA Interconnection Facilities. TVA
shall, at LSP's expense, operate, maintain, and repair the TVA Interconnection
Facilities. LSP shall reimburse TVA for TVA's actual costs, including applicable
overheads, incurred in operating, maintaining, and repairing the TVA
Interconnection Facilities. TVA shall invoice LSP on a monthly basis for the
actual costs, including applicable overheads, incurred by TVA under this Section
2.5. The provisions of Articles 9 and 14 shall apply to invoices issued by TVA
under this Section 2.5.
2.6 Service to Others. Regardless of anything in this Agreement that might
be construed to the contrary, TVA may in the future use the TVA Interconnection
Facilities for serving others; provided that TVA does not unreasonably interfere
with the use of the TVA Interconnection Facilities by LSP pursuant to this
Agreement.
10
<PAGE>
2.7 Changes to TVA Interconnection Facilities. The Parties hereby
recognize that, in the future, circumstances may require changes in the TVA
Interconnection Facilities provided under this Article 2. Such changes may
include additions or replacements, including, but not limited to, changes to
ensure the protection and continued safe and reliable operation of TVA's
electric system. When, in TVA's sole discretion, changes to the TVA
Interconnection Facilities become necessary, or when LSP requests them, such
changes shall be made by TVA at LSP's expense, provided, however, such changes
required by TVA shall be limited to those consistent with Good Utility Practice
and with applicable laws and regulations. LSP shall reimburse TVA for the cost
of any changes TVA makes to the TVA Interconnection Facilities under this
Section 2.7 in accordance with the provisions of Section 2.5. TVA shall give LSP
not less than sixty (60) Days' notice prior to commencing work on any such
changes.
2.8 Standards. TVA shall cause the construction, operation, and
maintenance of the TVA Interconnection Facilities to be consistent with the
procedures, practices, and standards routinely employed by TVA with respect to
the construction, operation, and maintenance of its own similar facilities,
consistent with Good Utility Practice, including without limitation, any
applicable bidding or other cost control procedures.
2.9 Facilities Retirement. If this Agreement terminates, other than by
TVA's breach, LSP shall pay TVA for the cost of retiring the TVA Interconnection
Facilities, (including removal and disposal costs), offset by any salvage
received for reusable materials and equipment of removed TVA Interconnection
Facilities, and TVA shall cause to be abandoned any land rights including
easements and rights-of-way and rights of ingress and egress in, on, over, and
across property owned or controlled by LSP and/or its affiliates from which TVA
Interconnection Facilities are removed for which TVA no longer has any need.
Said abandonment shall be made after payment by LSP to TVA of TVA's costs
incurred under this Section 2.9. The obligations of the Parties under this
paragraph shall survive any such termination until they are discharged.
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ARTICLE 3
LSP INTERCONNECTION FACILITIES
3.1 LSP Interconnection Facilities. Upon completion, testing, and
acceptance of the Interconnection Facilities pursuant to this Agreement and
subject to the other terms and conditions of this Agreement, LSP shall operate
and maintain the LSP Interconnection Facilities as necessary to deliver, when
LSP so elects, electrical energy from the Facility at the Point of
Interconnection. Except as otherwise provided in this Agreement, LSP, at its
expense, shall be responsible for designing, installing, owning, operating, and
maintaining the LSP Interconnection Facilities up to the Point of
Interconnection.
3.2 Description of LSP Interconnection Facilities. (a) The LSP
Interconnection Facilities shall include without limitation: three (3) step-up
transformers; nine (9) 161-kV power circuit breaker installations, including
without limitation foundations, structures, busses, and associated equipment; a
230/161-kV transformer bank; two (2) 161-kV transmission lines extending from
the LSP 161-kV Substation to TVA's Batesville 161-kV Substation, a 230-kV
transmission line extending from the LSP 161-kV Substation to Entergy's
Batesville 230-kV Substation; and the System Protection Facilities.
(b) LSP shall, at its expense, provide the battery and station service
power requirements for the TVA Interconnection Facilities located in the LSP
161-kV Substation.
(c) LSP shall make available to TVA, without cost to TVA, a portion of
LSP's switchhouse located in the LSP 161-kV Substation to be maintained and used
by TVA as it deems appropriate in connection with the operation of the
facilities provided under this Agreement, including, without limitation, any
relaying, metering, and communication and control equipment.
3.3 Standards and Review. (a) The LSP Interconnection Facilities shall
meet standards of Good Utility Practice, shall be capable of providing for the
Facility's continuous parallel operation with TVA's electric system, and shall
include a switching device(s) capable of disconnecting the Facility from said
electric system as required under this Agreement. Said switching device(s) shall
be capable of being operated manually, shall be lockable, and shall provide
visual indication of an open circuit when so operated. The LSP Interconnection
Facilities shall be capable of satisfactory coordination with any protective,
monitoring, and control equipment installed by TVA, shall be consistent with the
Interconnection Criteria, and shall be reviewed and approved by TVA pursuant to
Section 3.3(b) of this Agreement.
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(b) LSP shall provide TVA, for review, inspection, and approval by TVA,
the technical specifications and design drawings for the System Protection
Facilities as are reasonably required to enable TVA to accommodate the
electrical interconnection of the LSP Interconnection Facilities at the Delivery
Point in accordance with Good Utility Practice consistent with the
Interconnection Criteria. Within sixty (60) Days of receiving such complete
material, TVA shall inform LSP, in writing, if said System Protection Facilities
are in accordance with Good Utility Practice and otherwise satisfy the
requirements for interconnection specified in this Agreement; provided, however,
if TVA receives at least sixty (60) Days prior notice of LSP's delivery date for
such complete material and the complete material is delivered on or before the
scheduled delivery date, TVA's review shall be completed within thirty (30) Days
of such scheduled delivery date. Any notice of disapproval shall contain an
explanation of the reason for disapproval and a description of the modifications
that would render the disapproved diagrams or specifications acceptable. TVA's
inspection and approval of the technical specifications and design drawings for
the System Protection Facilities shall only be for the purposes of protection
and safety of TVA's system and employees and shall not constitute a guarantee or
warranty of the System Protection Facilities or of the safety or adequacy of the
System Protection Facilities for LSP's purposes. If these are not found to
satisfy such requirements, LSP shall make such corrections as necessary to
provide System Protection Facilities meeting such requirements. All information
and data required under this Section 3.3(b) must (i) be submitted in a manner
reasonably acceptable to TVA and (ii) be completely submitted at least two
hundred ten (210) Days prior to the Operation Date. TVA shall have no
responsibility to LSP for damages, liabilities, costs and expenses caused by
LSP's failure to install and maintain equipment necessary to protect the
Facility and the LSP Interconnection Facilities from faults and other conditions
on either side of the Point of Interconnection. Each Party, at its own expense,
may install such additional equipment as it deems necessary for the protection
of its own property and operations.
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(c) Prior to any modification proposed by LSP during the term of this
Agreement to any LSP Interconnection Facilities, including System Protection
Facilities, or to any Facility equipment or specifications previously reviewed
by TVA pursuant to the System Impact Study Agreement, dated February 23, 1998,
between TVA and LSP, LSP shall supply to TVA, for review and written approval,
proposed diagrams and specifications for such modification. No modification
shall be made prior to TVA approval. TVA shall make reasonable efforts to
provide notice of approval or disapproval within sixty (60) Days of complete
submittal by LSP, provided, however, if, in TVA's sole judgment and consistent
with Good Utility Practice, a new system impact study is required as a result of
the proposed modification by LSP, or due to the complexity of a proposed
modification and the required additional coordination among TVA, Entergy, and
LSP, TVA may require additional time to provide its approval or disapproval. The
standard for review shall be as provided in Section 3.3(b). Any notice of
disapproval shall contain an explanation of the reason for disapproval and a
description of the modifications that would render the disapproved diagrams or
specifications acceptable. The diagrams and specifications shall be consistent
with good engineering practice and shall specify the equipment to be used as to
manufacturer, model, type, technical specifications, and other pertinent
information. Such approvals and review are provided only insofar as required for
the safe and efficient operation of TVA's facilities and properties and are not
to be construed as confirming or endorsing the design or as any warranty of
safety, durability, or reliability of the LSP Interconnection Facilities.
3.4 Changes to LSP Interconnection Facilities. During the term of this
Agreement, LSP shall be responsible for all costs associated with complying with
changes in or additions to the LSP Interconnection Facilities that TVA may from
time to time determine to be reasonably necessary to meet changing conditions
and requirements on TVA's electric system and for the continued safe and
reliable connection and operation of the Facility in parallel with TVA's
electric system in accordance with this Agreement. Any such changes or additions
shall be limited to those changes or additions which are reasonably necessary
for the safe and reliable operation of the Facility in parallel with TVA's
system and as are consistent with Good Utility Practice and with applicable laws
and regulations. LSP shall be given reasonable notice and adequate time to make
any modifications or changes to its facilities and operations necessary to
maintain compliance with such electric system safety and reliability
requirements.
3.5. TVA's Inspection and Approval. As soon as reasonably practicable, but
in no event more than thirty (30) Days after notification from LSP that the LSP
Interconnection Facilities are installed and operational, TVA shall inspect the
LSP Interconnection Facilities to determine compliance with the provisions of
this Agreement and for the protection and safety of TVA's system and employees
and TVA shall provide written approval or notice of defects. If a notice of
defects is given, TVA shall reinspect the LSP Interconnection Facilities as soon
as reasonably practicable, but in no event more than thirty (30) Days after
notification from LSP that the defect has been corrected, and provide written
approval or notice of defects. TVA's inspection and approval shall only be for
the purposes stated in this Section 3.5 and shall not constitute a guarantee or
warranty of the LSP Interconnection Facilities or of the safety or adequacy of
the LSP Interconnection Facilities for LSP's purposes.
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3.6. Energizing LSP Interconnection Facilities. The LSP Interconnection
Facilities shall not be energized until (i) the written approval by TVA has been
given or (ii) LSP has corrected the material defects specified by TVA and TVA
has inspected and given its written approval of the corrections, in either case
as described in Section 3.5. As a further condition to energizing the LSP
Interconnection Facilities, LSP shall provide TVA with evidence reasonably
satisfactory to TVA that LSP has closed on the construction financing required
to complete the Facility and the LSP Interconnection Facilities and that the
agreements providing for the disbursement of such financing are still in full
force and effect.
3.7. Additional Equipment to be Provided by LSP. LSP shall provide at its
expense: (i) A voice telephone extension for the purpose of TVA accessing TVA's
dial-up metering equipment and for communicating with the TVA's Operations
Center; (ii) An extension of TVA's Operations Center's PBX system in the control
room of the Facility; and (iii) Equipment to transmit and receive telecopies.
Items provided by LSP in accordance with this Section 3.7 shall be subject to
the approval of TVA, which approval shall not be unreasonably withheld.
3.8 Inspection. TVA shall have the right, but shall have no obligation or
responsibility, to:
(i) observe LSP's tests and/or inspection of any of LSP's Interconnection
Facilities, including the System Protection Facilities;
(ii) review the settings of LSP's System Protection Facilities and,
consistent with Good Utility Practice, require LSP to make changes to such
settings; and
(iii) review LSP's maintenance records relative to LSP's Interconnection
Facilities, including the System Protection Facilities.
The foregoing rights may be exercised by TVA from time to time as deemed
necessary by TVA upon reasonable notice to LSP. However, the exercise or
non-exercise by TVA of any of the foregoing rights of observation, review, and
inspection shall be construed neither as an endorsement or confirmation of any
aspect, feature, element, or condition of LSP's Interconnection Facilities,
including System Protective Facilities, or the operation thereof, nor as a
warranty as to fitness, safety, desirability, or reliability of same.
3.9 Operation and Maintenance. LSP shall operate and maintain the LSP
Interconnection Facilities, including the System Protection Facilities, in
accordance with Good Utility Practice and the other provisions of this
Agreement. In the event of an emergency condition on the TVA or Entergy systems,
notwithstanding any other provision in this Agreement that may be construed to
the contrary, LSP agrees to operate the LSP Interconnection Facilities in a
manner as reasonably requested by TVA and Entergy and to the extent LSP
determines that it is reasonably able to respond to such request, consistent
with Good Utility Practice.
3.10 Access to Property and Equipment. LSP shall provide for TVA and its
agents free access to LSP's property to the extent necessary for monitoring and
conducting tests and inspections as provided for in this Agreement. All of TVA's
representatives entering upon LSP's property shall at all times comply with
LSP's applicable safety and security
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procedures that have been conveyed to TVA. TVA shall use its best efforts to
minimize disruption of LSP's operations which might result from the presence of
TVA's employees on LSP's property.
3.11 Transferable LSP Interconnection Facilities. (a) Following the
Operation Date, LSP shall have the option, exercisable upon thirty (30) Days
prior written notice to TVA to transfer ownership of and any associated
operation and maintenance responsibility for the Transferable LSP
Interconnection Facilities to TVA or to any third party affiliated with LSP or
to an unaffiliated third party, in any such case at no cost to TVA. A transfer
of the Transferable LSP Interconnection Facilities to TVA shall be made pursuant
to a bill of sale or such other documentation as required by law and reasonably
acceptable to TVA to effect a transfer of title of the Transferable LSP
Interconnection Facilities with all legal warranties. Such documentation
("Transfer Documents") shall include without limitation a conveyance or
assignment in a form reasonably acceptable to TVA of any land rights including
easements and rights-of-way and rights of ingress and egress in, on, over, and
across property necessary for TVA to own, operate, and maintain the Transferable
LSP Interconnection Facilities. Such transfer of the Transferable LSP
Interconnection Facilities to TVA shall be for no additional consideration by
either Party to the other. Prior to effecting the transfer of the Transferable
LSP Interconnection Facilities to any other party, LSP shall demonstrate to
TVA's reasonable satisfaction that it has made arrangements for any required
maintenance and the continued operation of the Transferable LSP Interconnection
Facilities to be performed consistent with the provisions of this Agreement at
no cost to TVA. Any transfer and assignment to TVA shall be effective upon the
execution and delivery of the Transfer Documents by LSP, provided that the
effective date of such transfer and assignment shall be subject to the
provisions of Section 12.1 of this Agreement. Any costs incurred by TVA to
effectuate such transfer and assignment shall be reimbursed by LSP pursuant to
the provisions of Articles 9 and 14.
(b) TVA shall use due diligence and cooperate in good faith to cause such
transfer and assignment to be effective as soon as possible after LSP's notice
under Section 3.11(a). Upon the effective date of such transfer and assignment
to TVA, the Transferable LSP Interconnection Facilities shall become TVA
Interconnection Facilities and the provisions of Sections 2.5, 2.6, 2.7, 2.8,
and 2.9 of this Agreement shall apply to such facilities transferred to TVA
under this Section 3.11.
(c) The transfer of the Transferable LSP Interconnection Facilities to a
third party to the extent consistent with the provisions of this Section 3.11
shall not require the additional consent of TVA; provided, however, that LSP
shall remain liable for all obligations under this Agreement with respect to
such transferred facilities; and provided further, that, notwithstanding
anything contained in this Section 3.11 that may be construed to the contrary,
said transfer and assignment shall not be effective until TVA, the third party,
and LSP have executed in a manner reasonably acceptable to TVA, all new
agreements and modifications to existing agreements with TVA that TVA, in its
reasonable judgment, deems necessary to effectuate such transfer and continued
interconnection; and provided further, that LSP shall cause LSP's agreements
with said third party to contain appropriate provisions whereby said third party
agrees to operate and maintain the Transferable LSP Interconnection Facilities
in accordance with the provisions of this Agreement.
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(d) The transfer of the Transferable LSP Interconnection Facilities
to a third party shall be at no cost to TVA. LSP agrees to reimburse TVA
for any costs incurred by TVA as a result of such transfer and which would
not have been incurred by TVA had LSP continued to own such transferred
facilities.
(e) TVA's acceptance of the Transferable LSP Interconnection Facilities is
subject to TVA's having the ability to remotely operate any and all of the
161-kV power circuit breakers included as Transferable LSP Interconnection
Facilities in accordance with the provisions of the last paragraph of Section
7.2 after the effective date of transfer of the Transferable LSP Interconnection
Facilities to TVA.
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ARTICLE 4
UPGRADED FACILITIES
4.1 Upgraded Facilities. It is recognized that TVA shall perform work on
the TVA transmission system to upgrade certain facilities owned by TVA in
conjunction with the establishment of the Point of Interconnection. The Upgraded
Facilities include (i) replacement of 161-kV breaker installation No.934 in the
Oxford, MS 161-kV Substation, (ii) replacements of 161-kV Oxford line breaker
installation No. 934 and 115-kV bank breaker installation No. 724 in TVA's
Batesville, MS 161-kV Substation, (iii) rebuilding of the approximately 24-mile
long Batesville-Sardis Tap-Oxford 161-kV Transmission Line using steel-pole
construction and 2034.5 kcmil ACSR conductor, and (iv) installation of current
monitoring equipment on the Batesville 161-115-kV transformer bank,
Batesville-Sardis Tap-Oxford 161-kV Transmission Line and the Batesville-Water
Valley-Coffeeville 161-kV Transmission Line.
4.2 Cost of Upgraded Facilities. TVA shall, at LSP's expense, perform the
work provided for in Section 4.1. LSP shall pay TVA for all actual costs,
including applicable overheads, incurred by TVA in connection with all phases of
TVA's design, construction, and installation of the Upgraded Facilities provided
by TVA under this Article 4 including the necessary acquisition of any
rights-of-way or land rights, in the event the existing rights-of-way and land
rights are not adequate for the upgrade, and any necessary environmental
reviews. LSP shall also pay to TVA all actual costs, including applicable
overheads, incurred by TVA in removing and disposing of the three (3) breaker
installations and the 161-kV transmission line ("Replaced Facilities") to be
replaced by the Upgraded Facilities, and the undepreciated portion of the cost
of installing the Replaced Facilities. The cost of installing the Replaced
Facilities shall be deemed to be the actual total installed cost, including
applicable overheads, less salvage received for reusable materials and
equipment. Payments by LSP to TVA for costs incurred by TVA under this Section
4.2 shall be made in accordance with the provisions of Section 2.4.
4.3 Operation and Maintenance of the Upgraded Facilities. TVA shall, at
its expense, operate and maintain the Upgraded Facilities and the remainder of
the TVA system in accordance with Good Utility Practice. Upon completion of the
Upgraded Facilities and subject to the other terms and conditions of this
Agreement, TVA shall operate and maintain the Upgraded Facilities to maintain at
least the design capacity to which they were upgraded under this Agreement.
4.4 Service to Others. Regardless of anything in this Agreement that might
be construed to the contrary, the Upgraded Facilities are considered to be a
part of the TVA integrated transmission system and may therefore be used by TVA
for serving others.
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4.5 Standards. TVA shall cause the construction, operation, and
maintenance of the Upgraded Facilities to be consistent with the procedures,
practices, and standards routinely employed by TVA with respect to the
construction, operation, and maintenance of its own similar facilities,
consistent with Good Utility Practice, including without limitation, any
applicable bidding or other cost control procedures.
4.6 Synchronization Before Completion of Upgraded Facilities. In the event
that the Upgraded Facilities are not completed by the Initial Synchronization
Date, LSP shall nonetheless be allowed to synchronize the Facility, subject to
the provisions of Section 6.7, and deliver Facility Electrical Output to the TVA
transmission system but only to the extent TVA's transmission system can accept
such energy.
4.7 Changes to Upgraded Facilities. The Parties hereby recognize that, in
the future, circumstances may require changes in the Upgraded Facilities
provided under this Article 4. Such changes may include additions or
replacements, including without limitation changes to maintain the protection
and continued safe and reliable operation of TVA's electric system. When, in
TVA's opinion, changes to the Upgraded Facilities become necessary due to LSP's
continued connection to the TVA electric system, or when LSP requests them, such
changes shall be made by TVA at LSP's expense, provided, however, such changes
required by TVA shall be limited to those consistent with Good Utility Practice
and with applicable laws and regulations. LSP shall reimburse TVA for any
changes TVA makes to the Upgraded Facilities under this Section 4.7 in
accordance with the provisions of Section 2.4. TVA shall give LSP not less than
sixty (60) Days' notice prior to commencing work on any such change.
4.8 Certain Limitations. It is recognized that under certain conditions
identified in the System Impact Study prepared by TVA for LSP, dated May 21,
1998, TVA's Batesville 161-115-kV transformer bank and the Batesville-Water
Valley-Coffeeville 161-kV Transmission Line could become overloaded following
the interconnection of the Facility to the TVA system. While TVA agrees that the
installation of current monitoring equipment on these facilities is consistent
with Good Utility Practice, TVA nonetheless reserves the right to disconnect the
Facility or curtail deliveries from the Facility upon TVA's request in
accordance with Section 7.2 if these facilities become overloaded due to the
Facility. Such rights will be in addition to any other right of Curtailment or
Disconnection TVA may have under Section 7.2.
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4.9 Batesville-Sardis Tap-Oxford 161-kV Transmission Line. Subject to
TVA's right to delay or suspend performance pursuant to Section 9.1(c), TVA
shall use due diligence to complete, or cause to be completed and placed in
service, the rebuilt Batesville-Sardis Tap-Oxford Transmission Line on or before
the Scheduled Completion Date. If LSP reasonably determines that, due to a
willful or negligent act or omission by TVA, the rebuilding of the
Batesville-Sardis Tap-Oxford 161-kV Transmission Line will not be completed by
the Scheduled Completion Date, LSP may provide TVA with written notice of its
determination setting forth in reasonable detail the actions necessary to cure
the failure. If, within thirty (30) Days after such notice, TVA fails to provide
LSP with reasonably satisfactory evidence that it has cured or has plans that
will cure such failure, LSP may, upon thirty (30) Days' notice to TVA, without
prejudice to any other remedies it may have, cause the remaining work to be
completed in accordance with the design specifications and standards for such
work prepared by TVA pursuant to this Agreement by an independent contractor
selected from a list provided by TVA; provided, however, that the provisions of
Section 3 of the TVA Act regarding the payment of the prevailing rate of wages
shall apply to any independent contractor selected by LSP to work on the
Batesville-Sardis Tap-Oxford 161-kV Transmission Line. Notwithstanding the
provisions of this Section 4.9 that may be construed to the contrary, LSP shall
remain responsible for reimbursing TVA, in accordance with the provisions of
Section 4.2, for all of TVA's actual costs, including applicable overheads,
incurred in connection with the rebuilding of the Batesville-Sardis Tap-Oxford
161-kV Transmittion Line.
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ARTICLE 5
FACILITIES STUDY (INCLUDING SCOPING WORKSHOP)
5.1 Facilities Study. A detailed Facilities Study, which shall include a
project scoping workshop, shall be conducted by TVA at LSP's expense. TVA shall
use reasonable efforts, consistent with Good Utility Practice, to complete the
Facilities Study within sixty (60) Days of receiving authorization to complete
the Facilities Study from LSP. The Facilities Study is an engineering study that
includes a detailed cost estimate for the modifications needed to interconnect
the Facility with the TVA transmission system and the Scheduled Completion Date.
It is scheduled for TVA and LSP to participate in the project scoping workshop
in August 1998, or as soon as reasonably practicable thereafter at LSP's
election, as a joint effort between the Parties to develop a detailed scope of
work activities under this Agreement, including without limitation preliminary
design specifications, construction schedule, and budget estimates. Under TVA's
normal operating practices, TVA would not execute this Agreement prior to the
completion of the Facilities Study. However, LSP has informed TVA that time is
of the essence in completing this Agreement. Therefore, in response to the
request of LSP, TVA is agreeable to executing this Agreement subject to the
Parties' understanding and agreement that the specific equipment and facilities
specified in, and associated responsibility for costs under, the provisions of
Articles 2, 3, and 4 and Exhibits A, B, and C are preliminary in nature and
cannot be finalized until after the completion of the Facilities Study;
provided, however, it is the understanding of the Parties that, in order to
establish an interconnection between the LSP Facility and the TVA transmission
system, no other major facilities are to be added to the TVA Interconnection
Facilities or the Upgraded Facilities other than those facilities specified in
Articles 2 and 4. The Parties understand and agree that an amendment to this
Agreement may be necessary after the completion of the Facilities Study to
better define the facilities arrangements and the responsibilities of the
Parties under Articles 2, 3, and 4 of this Agreement. The Parties agree to
exercise good faith efforts and shall cooperate with each other in developing
any required amendment to this Agreement, consistent with the determinations
made in the Facilities Study. In consideration of TVA's executing this Agreement
prior to the completion of the Facilities Study, the Parties agree that after
completion of the Facilities Study TVA shall provide LSP with final versions of
Exhibits A, B, and C which Exhibits shall be attached hereto and made a part of
this Agreement without further action of the Parties. The Parties also agree
that in the future, after final versions of Exhibits B and C are provided by TVA
to LSP, additional changes to Exhibit B and C's specification diagrams may be
necessary. Any such additional changes to Exhibits B and C which have been
mutually agreed to by the Parties, as evidenced by the Parties' authorized
representatives initialing such changed Exhibits, shall be provided by TVA to
LSP and shall be attached hereto and made a part of this Agreement without
further action of the Parties.
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5.2 Cost of Facilities Study. LSP shall reimburse TVA for its actual
costs, including applicable overheads, incurred in conducting the Facilities
Study. As soon as practicable after completion of the Facilities Study, TVA
shall submit to LSP an invoice, in writing, for such costs. The provisions of
Articles 9 and 14 shall apply to the invoice issued by TVA under this Article 5.
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ARTICLE 6
PREOPERATIONAL PERIOD
6.1 Construction of Facilities. TVA shall not commence detailed design or
construction of, or purchase any equipment for, any TVA Interconnection
Facilities or Upgraded Facilities prior to the Authorization Date. Subject to
TVA's right to suspend performance pursuant to Section 9.1(c), TVA shall use due
diligence, consistent with Good Utility Practice, to obtain any applicable
approvals, grants, or permits and to complete the design, any applicable
environmental review, construction, and installation of the TVA Interconnection
Facilities and the Upgraded Facilities on or before the Scheduled Completion
Date. The preliminary estimate for the Scheduled Completion Date is the later of
eighteen (18) Months from either (i) the completion of the scoping workshop
pursuant to Section 5.1 or (ii) the Authorization Date. TVA shall notify LSP of
any changes to the Scheduled Completion Date and shall provide LSP with a
revised Scheduled Completion Date.
6.2 Permits and Licenses. LSP shall be responsible at its own expense for
obtaining and maintaining all Federal, State, and local permits, licenses, and
approvals that are necessary to construct, operate, and maintain the Facility
and any related or associated facilities owned by LSP, including the LSP
Interconnection Facilities. LSP shall also be responsible for the cost of
completing all environmental reviews, analyses, and studies and any associated
public review processes that are necessary for the permitting, licensing, and
approval of the Facility and any related or associated facilities owned by LSP,
including the LSP Interconnection Facilities. TVA shall not have any
responsibility whatsoever for obtaining any permits, licenses, and approvals
necessary to operate, construct, or alter the Facility and any related or
associated facilities owned by LSP, including the LSP Interconnection
Facilities. The Facility and the LSP Interconnection Facilities shall meet all
requirements of applicable safety and/or engineering codes, and further, shall
meet all requirements of any duly constituted regulatory authority having
jurisdiction over the Facility and the LSP Interconnection Facilities.
6.3 Start-Up and Test Schedule. LSP shall submit for TVA's review and
approval a start-up and test schedule for the Facility at least thirty (30) Days
prior to start-up and testing of the Facility. Subject to LSP's reasonable Site
rules conveyed to TVA and with reasonable notice to LSP, TVA shall have the
right to monitor the start-up and testing of the Facility to the extent
necessary to assure compliance with the provisions of this Agreement. LSP shall
cooperate in such monitoring of the Facility as may be reasonably required by
TVA during the start-up and testing of the Facility. TVA's technical review and
inspection of the Facility during the start-up and testing phase shall not be
construed as TVA's approval or endorsement of the design thereof or as any
warranty of the safety, durability, or reliability of the Facility.
6.4 Operating Committee. (a) Following the execution of this Agreement,
the Parties shall each appoint two representatives and one alternate to an
Operating
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Committee. Each such Party shall notify the other Parties of its appointments in
writing. Such appointments may be changed at any time by similar notice. The
Operating Committee shall meet as necessary, but no less than once each calendar
year, to carry out the duties set forth herein. The Operating Committee shall
hold a meeting at the request of any Party, at a time and place agreed upon by
the representatives. Each representative and alternate shall be a responsible
person working with the day-to-day operations of his or her respective
facilities or system. The Operating Committee shall represent the Parties in all
matters arising under this Agreement which may be delegated to it by mutual
agreement of such Parties.
(b) The operating matters subject to coordination under this section shall
include the following:
(i) Matters pertaining to the establishment and maintenance of
control and operating procedures (as described below);
(ii) Matters pertaining to the scheduling of maintenance of the
generating and transmission facilities of the Parties;
(iii) Matters pertaining to the control of energy flow, kilovar
flow, voltage, and other similar matters bearing upon the satisfactory
synchronous operation of the systems of the Parties; and
(iv) Such other matters not specifically provided for herein upon
which cooperation and coordination are necessary in order to carry out the
purposes and provisions of this Agreement.
(c) The Parties shall cooperate in providing to the Operating Committee
all information required in the performance of the Committee's duties. All
decisions and agreements, if any, made by the Operating Committee shall be
evidenced in writing. The Operating Committee shall have no power to amend or
alter the provisions of this Agreement.
(d) The Operating Committee shall mutually develop written operating
procedures (the "Operating Procedures") no later than sixty (60) Days prior to
the Initial Synchronization Date. The Operating Procedures shall be established
by mutual agreement by the Parties based on the designs of the Facility, the LSP
Interconnection Facilities, the TVA Interconnection Facilities, the Upgraded
Facilities, other facilities located on the TVA system, and facilities located
on the Entergy system. The Operating Procedures shall be used as a guide on how
to integrate the Facility and the Facility Electrical Output into TVA's and
Entergy's bulk electric systems. Topics covered shall include without limitation
methods of day-to-day communications, key personnel list for the Parties'
Operations Centers, clearances and switching practices, outage scheduling, daily
estimates of capacity and energy, unit operations log and reactive power
support.
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6.5 Voltage Schedule. (a) TVA shall prepare and submit to LSP a written
voltage schedule (consistent with Good Utility Practice and with applicable laws
and regulations) no later than thirty (30) Days prior to the Operation Date. TVA
may change such voltage schedule upon thirty (30) Days' prior written notice.
Said voltage schedules shall be coordinated and be consistent with the voltage
schedules provided to LSP by Entergy. LSP shall comply with the voltage schedule
specified by TVA as related to the operation of the Facility and shall be
responsible for installing, operating, and maintaining the appropriate equipment
necessary to comply with the voltage schedule specified by TVA. This voltage
schedule shall be based on the normally expected operating conditions for the
Facility and the reactive power requirements of TVA's system; provided that, in
no event shall the voltage schedule require the Facility to be operated at a
power factor outside the range of .95 lagging to .95 leading. TVA may request
LSP to operate the Facility at a power factor outside the range specified above,
but LSP shall not be obligated to do so if such operation would be inconsistent
with the Facility's design limits. Furthermore, if LSP agrees to such request
from TVA, prior to operating outside the range specified above, TVA and LSP
shall agree on the compensation LSP is to receive for operating the Facility at
a power factor outside the range specified in this Section 6.5.
(b) LSP shall reimburse TVA for costs associated with installation on
TVA's system of power factor correction equipment which is or becomes necessary
as a result of LSP failing to operate the Facility in accordance with
appropriate voltage schedules as provided in this Section 6.5(a). Prior to
installing such correction equipment at LSP's expense, TVA shall inform LSP of
the need to do so and shall provide LSP reasonable opportunity to correct the
situation.
(c) If Facility Electrical Output is transmitted across the TVA
transmission system, to the extent applicable and consistent with the
Guidelines, an appropriate adjustment to the charge for reactive supply and
voltage control under the applicable transmission service agreement shall be
made to reflect the contribution to reactive supply and voltage support made by
the Facility.
6.6 Initial Synchronization Date. For purposes of start-up and testing
prior to the Operation Date, LSP shall notify TVA of the planned Initial
Synchronization Date in writing no less than two (2) weeks prior to the first
scheduled occurrence of such date. TVA shall approve the Initial Synchronization
Date (which approval shall not be unreasonably withheld) within two (2) Business
Days of LSP's notice and shall have the right to have representatives present at
the Facility for the initial synchronization to the extent necessary to assure
compliance with the provisions of this Agreement.
6.7 Change in Initial Synchronization Date. TVA reserves the right to
delay the Initial Synchronization Date due to problems with the Facility which
would give TVA a right to disconnect the Facility pursuant to Section 7.2. In
such event, TVA shall give LSP notice of such problems and LSP shall, at its
expense, remedy any such problems with facilities or equipment which LSP is
responsible for installing and/or maintaining.
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6.8 Purchase of Capacity and/or Energy. TVA shall not be purchasing any
capacity and/or energy from LSP under this Agreement. Any purchase by TVA of
capacity and/or energy generated by the Facility shall be covered under a
separate agreement between TVA and LSP.
6.9 Power Supply to LSP. Any needs LSP may have for electric capacity
and/or energy for the operation of its Facility must be obtained under
arrangements separate from this Agreement. Any deliveries of such capacity
and/or energy must be metered and accounted for separately from the Facility
Electrical Output generated by the Facility. Any provision of such capacity
and/or energy by TVA shall be in accordance with the applicable rates, rules and
regulations, and service policies governing such service by TVA to LSP.
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ARTICLE 7
CONTROL AND OPERATION OF THE FACILITY
7.1 Communications. LSP shall inform TVA as to the next Day forecasted
hourly generation levels of the Facility, including, without limitation, any
anticipated outages. LSP shall notify and coordinate with TVA prior to the
commencement of any work by LSP (or contractors or agents performing on LSP's
behalf) that may directly or indirectly have an adverse effect on the TVA,
Entergy, or other electric systems. LSP shall immediately notify TVA at the time
when any unscheduled or forced outages occur to the LSP Interconnection
Facilities or the Facility that would substantially impact the reliable
operation of the TVA, Entergy, or other electric systems. LSP shall immediately
notify TVA upon the occurrence of any changes to the information provided by LSP
to TVA under this Section 7.1. In the event TVA temporarily loses the
telemetered load signals provided to the TVA Control Center under Section 2.3,
LSP shall, when requested by TVA, provide TVA verbally with the metered data,
such data to include periodic updates during each hour of the MW amounts and the
MWh amounts at the end of the hour. It is the responsibility of the Parties to
utilize their best efforts to perform the work necessary to restore the
telemetered load signals as soon as possible.
7.2 Disconnection of Facility or Curtailment of Deliveries. Subject to
Good Utility Practice and consistent with applicable laws and regulations, TVA
may require LSP to disconnect the Facility from the TVA system ("Disconnection")
or to interrupt, suspend, or curtail deliveries from the Facility (the
occurrence of the foregoing referred to collectively as "Curtailment") in the
following circumstances:
(i) if, in TVA's sole opinion, a condition exists which presents a
physical threat to persons or property and Disconnection or Curtailment appears
necessary to protect TVA's customers, employees, or agents or TVA's and its
customers' property; or
(ii) to overcome system reliability problems caused by an emergency; or
(iii) if such Disconnection or Curtailment is necessary to construct,
install, maintain, repair, replace, remove, investigate, inspect or test any
part of the Interconnection Facilities or any other affected part of TVA's
system; or
(iv) to facilitate restoration of line or equipment outages; or
(v) to overcome system reliability problems caused by an outage of TVA's
equipment or generation facilities; or
(vi) in the event LSP refuses to comply with the provisions of Section 8.1
of this Agreement regarding the balancing on an hourly basis of Facility
Electrical Output and the scheduling of energy to third parties; provided that,
there shall be no Disconnection or Curtailment under this Section 7.2 if LSP
takes all actions that are within its control and within the reasonable
capabilities of the Facility to comply with the provisions of Section 8.1; or
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(vii) in accordance with the other express provisions of this Agreement
providing for any such Disconnection or Curtailment including Sections 4.8, 7.4,
7.5, 7.6, 7.7(b), 7.7(c), 8.2, 8.4, and 8.5(b).
TVA shall make a reasonable effort to notify and coordinate such
Disconnection or Curtailment with LSP. Except in the case of an emergency, TVA
shall provide LSP with as much notice in advance of any such Disconnection or
Curtailment as reasonably possible. Such notice may be given orally or by
telecopy to the Facility. Any Disconnection or Curtailment required of LSP
hereunder shall be implemented and completed as soon as possible consistent with
Good Utility Practice. TVA shall keep LSP informed as to the anticipated
duration of each Disconnection or Curtailment. TVA shall restore connection and
resume acceptance of deliveries from the Facility as soon as practicable to the
extent the condition resulting in the Disconnection or Curtailment has abated
sufficiently to permit such resumption.
Notwithstanding anything contained in this Section 7.2, TVA shall have the
right to Disconnect without notice the Facility (or, in lieu of Disconnecting
the entire Facility, open one or more of the 161-kV power circuit breakers
identified as TVA Interconnection Facilities) if, in TVA's sole opinion, a
hazardous condition exists and immediate Disconnection or opening of the 161-kV
power circuit breakers is necessary to protect persons, TVA facilities, or other
customer facilities from damages or interference caused by LSP's interconnection
and/or generating equipment, or lack of properly operating System Protection
Facilities.
7.3 LSP Qualified Personnel. LSP shall ensure that there are a sufficient
number of qualified personnel for operating and monitoring the Facility and for
coordinating operations of the Facility with TVA's system. LSP shall ensure that
such personnel are on duty at all times, twenty-four (24) hours a Day and seven
(7) Days a week.
7.4 Interconnection. LSP and TVA agree that the implementation of this
Agreement shall comply with the then existing (or amended) manuals, standards,
and guidelines of the North American Electric Reliability Council ("NERC") and
the Southeastern Electric Reliability Council ("SERC"), or any successor agency
assuming or charged with similar responsibilities related to the operation and
reliability of the North American electric interconnected transmission grid. To
the extent that this Agreement does not specifically address or provide the
mechanisms necessary to comply with such NERC or SERC manuals, standards, or
guidelines, LSP and TVA hereby agree that both Parties shall provide to the
other Party, upon request, all such information as may be required to comply
with such manuals, standards, or guidelines and shall operate, or cause to be
operated, their respective facilities in accordance with such manuals,
standards, or guidelines. In the event LSP does not comply with such NERC or
SERC requirements, TVA shall have the right, after reasonable notice, to take
any action(s) necessary, consistent with Good Utility Practice, to correct the
situation and charge LSP for the costs incurred to perform such action(s).
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7.5 Failure to Comply. In addition to any other rights TVA may have under
this Agreement, TVA shall have full authority to inspect (upon reasonable
advance notice) the Facility and its records, to the extent necessary to
determine compliance with this Agreement. LSP shall have the right to redact
information regarding costs, revenues, pricing, profit, or losses contained in
such records which LSP can reasonably demonstrate are commercially sensitive.
TVA shall have the right to disconnect the Facility and suspend the performance
of any TVA duties and obligations hereunder upon the occurrence of any of the
following: (i) Subject to thirty (30) Days' prior written notice, LSP fails to
comply with any of the material terms and conditions of this Agreement (or the
Operating Procedures developed pursuant to Section 6.4(d)) that affect operation
of the TVA system, including the construction, installation, and maintenance of
equipment or adherence to any Exhibit to this Agreement, excluding, however,
matters provided for under Section 7.2; or (ii) LSP fails to make any required
payments under this Agreement after receipt of the required notice from TVA as
required in Section 9.1(c); or (iii) Subject to thirty (30) Days' prior written
notice, LSP fails to allow TVA employees and inspectors reasonable access to
inspect, test, examine, or repair, as applicable, the Facility, the LSP or TVA
Interconnection Facilities, System Protection Facilities, metering, or other
electrical equipment where such access is required under the terms of this
Agreement, after reasonable notice by TVA of the need to do so, excluding,
however, matters provided for under Section 7.2.
Upon LSP's resolving any failures by LSP in the performance of its
obligations as provided for under this Section 7.5, TVA shall, as soon as
practicable, restore connection of the Facility and resume performance of any
TVA obligations hereunder.
7.6 Limitations on Services Provided by TVA. TVA shall not supply capacity
and/or energy to LSP or others from its own sources or from its purchases from
other neighboring systems in a manner inconsistent with the TVA Act, and nothing
in this Agreement or in LSP's agreements with others shall have the effect of
making, nor shall anything in this Agreement or said agreements with others be
construed to require TVA to take any action which would make TVA, directly or
indirectly, a source of power supply to LSP or others outside the TVA area in a
manner inconsistent with the TVA Act. The statutory limitations in the first
three paragraphs of subsection (a) of Section 15d of the TVA Act are
incorporated herein by reference as fully as though set out herein, and this
Agreement shall not be construed as permitting any transaction by TVA which
would be inconsistent with those limitations.
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7.7 Control Area Operations. (a) All of the Facility Electrical Output
must be delivered to either the TVA or Entergy Control Areas. At least one (1)
year prior to the Initial Synchronization Date, LSP shall notify TVA in writing
of its initial designation of the Control Area to receive the Facility
Electrical Output. LSP may change its Control Area designation upon one (1)
year's prior written notice to TVA. LSP shall reimburse TVA for all costs
incurred by TVA as a result of LSP changing its Control Area designation. TVA
and LSP recognize that, regardless of the Control Area selected by LSP, if the
Facility Electrical Output is creating an adverse effect on the TVA system which
condition is of the type, magnitude, or duration which, regardless of which
Control Area the Facility was located in or to which system the Facility
Electrical Output was being delivered, would give rise to a right of
Disconnection or Curtailment pursuant to Section 7.2, LSP shall be responsible
for taking whatever action is required to alleviate the condition on the TVA
system to the extent necessary to overcome the adverse effect giving rise to
such right of Disconnection or Curtailment.
(b) TVA and LSP recognize that when LSP has designated Entergy as the
Control Area under Section 7.7(a), unscheduled energy from the Facility may flow
over the TVA system as an indirect, unavoidable, and unintentional consequence
of the physical and electrical characteristics of the interconnected network of
transmission lines of which the transmission systems of TVA and Entergy are a
part. TVA shall permit such flows to occur on its transmission system subject,
however, to the understanding that such flows shall not be of such type,
magnitude, or duration as would create an adverse effect on the TVA system
which, if the Facility Electrical Output were being delivered to TVA, would give
rise to a right of Disconnection or Curtailment pursuant to Section 7.2. Should
such flows of energy become of such type, magnitude, or duration as to cause the
adverse effects set forth above, TVA shall notify Entergy and LSP shall promptly
undertake such action or actions requested by Entergy, up to and including
curtailment of generation, as are necessary to reduce such energy flows to the
extent necessary to overcome the adverse effect giving rise to such right of
Disconnection or Curtailment . Nothing in this Section 7.7(b) shall be construed
to require LSP to take any action inconsistent with Good Utility Practice or a
more specific practice applied by Entergy to generation in its Control Area or
with applicable laws and regulations. LSP agrees that LSP's Interconnection and
Operating Agreement with Entergy, dated May 18, 1998, provides a basis for the
remedial action to be taken as provided above and LSP will make no amendment
that would remove the provision that provides for such remedial action or has
the effect of substantially reducing Entergy's right to take such remedial
action.
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(c) TVA and LSP recognize that when LSP has designated TVA as the Control
Area under Section 7.7(a), unscheduled energy from the Facility may flow over
the Entergy system or other electrical systems (collectively referred to as
"Other System(s)") as an indirect, unavoidable, and unintentional consequence of
the physical and electrical characteristics of the interconnected network of
transmission lines of which the transmission systems of TVA and the Other
System(s) are a part. Should the Other System(s) notify TVA that such flows of
energy have become of such type, magnitude, or duration as would create an
adverse effect on the Other System(s) which, if the Facility Electrical Output
were being delivered to the Other System(s), would give rise to a right of
Disconnection or Curtailment pursuant to Section 7.2 by the Other System. LSP
shall, upon being notified by TVA to such effect, promptly undertake such action
or actions requested by TVA, up to and including curtailment of generation, as
are necessary to reduce such energy flows to the extent necessary to overcome
the adverse effect giving rise to such right of Disconnection or Curtailment. In
the event that LSP, for whatever reasons, does not undertake such action or
actions requested by TVA, TVA may disconnect the Facility from the TVA system.
(d) Notwithstanding the provisions of Section 7.7(a), LSP may, upon one
(1) year's prior written notice to TVA, designate that the Facility Electrical
Output from one (1) or two (2) of the generators at the Facility be delivered to
the TVA Control Area; provided, however, that the implementation of the
arrangements provided for under this Section 7.7(d) shall be contingent upon (i)
the execution of any necessary contractual arrangements required by TVA, (ii)
agreement among TVA, LSP, and Entergy of any necessary operational arrangements,
and (iii) the provision by LSP, at its expense, of any equipment required by TVA
to accommodate such an arrangement. LSP shall reimburse TVA for all costs
incurred by TVA as a result of LSP changing its Control Area designation under
this Section 7.7(d).
7.8 Operation of LSP Interconnection Facilities. If none of the generators
at the Facility are operating, LSP shall not be required to maintain
simultaneous energized interconnection to both the TVA and Entergy systems. If
one or more of the generators at the Facility are operating, LSP shall normally
maintain simultaneous energized interconnection to both the TVA and Entergy
systems. In the event LSP is unable to maintain such simultaneous energized
interconnection due to a facility outage or other circumstances, LSP shall be
allowed to operate generation at the Facility consistent with the provisions of
this Agreement, including without limitation TVA's right of Disconnection or
Curtailment pursuant to Section 7.2. In the event LSP transfers ownership of the
Transferable LSP Interconnection Facilities to any affiliated or unaffiliated
party excluding TVA, LSP shall require said party to agree to comply with the
provisions of this Section 7.8.
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ARTICLE 8
TRANSMISSION, DELIVERY POINT, CONDITIONS OF DELIVERY
8.1 Transmission of Facility Electrical Output. Except as provided below,
if utilization of the TVA transmission system is needed to deliver the Facility
Electrical Output to third parties, LSP, or an eligible transmission customer
purchasing the Facility Electrical Output, shall arrange and be solely
responsible for any necessary transmission of the Facility Electrical Output to
third parties, in accordance with the Guidelines. Any shortfall in Facility
Electrical Output preventing LSP from meeting its commitments to third parties
shall be the sole responsibility of LSP. Notwithstanding any other provisions of
this Agreement, except as agreed to by the Parties and consistent with
applicable law, TVA shall at no time be obligated to deliver any kilowatt
amounts to third parties in excess of the actual Facility Electrical Output that
is scheduled and delivered to the TVA Control Area ("Designated Output").
Consistent with Good Utility Practice, LSP shall take all actions that are
within its control and within the reasonable capabilities of the Facility to
assure that during each hour the amount of Designated Output shall be equal to
or greater than the schedule of energy (including any applicable transmission
losses) delivered by TVA to said third parties. LSP shall immediately notify TVA
of any circumstances which would cause the Designated Output to be less than the
schedule of energy ("Difference") and shall take immediate corrective action. In
order to account for said Difference, said schedule of energy shall be
appropriately reduced or curtailed as soon as possible by the Parties so that
over the hour, as is reasonably practicable, the Designated Output shall be
equal to or greater than the schedule of energy (including any applicable
transmission losses). In the event a Difference nevertheless occurs over an hour
between the scheduled amount and the Designated Output, LSP shall pay, or cause
a third party to pay, the appropriate charges or other compensation applied to
said Difference consistent with the charges or other compensation applied to
similar power production facilities under comparable circumstances located in
the TVA Control Area.
8.2 Delivery of Facility Electrical Output from TVA to Entergy Control
Area. It is recognized that the transmission systems of TVA and Entergy are
interconnected with the Facility. Therefore, if LSP designates the TVA Control
Area to receive the Facility Electrical Output in accordance with Section 7.7,
as long as consistent with Federal open access regulations and FERC decisions
and other applicable law, TVA, at the time of execution of this Agreement, shall
not require LSP or purchasers of the Facility Electrical Output to pay a
transmission service charge (excluding any charges or compensation provided for
in Section 8.1) for the delivery of Facility Electrical Output from the TVA
Control Area to the Entergy Control Area, provided that the Facility remains
directly connected to the Entergy system and that no such transmission service
charge is imputed to TVA or its customers under the Guidelines, and provided,
further, that the scheduling provisions of the Guidelines shall remain in full
force and effect and shall apply to any such deliveries. In the event the
contract path pricing and contracting methodology for transmission service
provided under the Guidelines is changed by TVA to a flow-based pricing and
contracting methodology, the provisions of this Section 8.2 shall be of no force
and effect as of the effective date of such change to the Guidelines.
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8.3 Credit for Transmission Charges. As a result of TVA's installing
the Upgraded Facilities, at LSP's expense, under Article 4, LSP, or upon LSP's
designation (said designation to be provided to TVA prior to the end of the
then-current calendar Month), an eligible transmission customer purchasing
Facility Electrical Output, shall receive a corresponding credit on its monthly
invoice applied to any network, firm point-to-point, or non-firm point-to-point
transmission services charges incurred under the Guidelines for transmitting
Facility Electrical Output, provided, however, any applicable credit applied to
the transmission service charges for network transmission service in a Month
shall be determined as if point-to-point transmission service was used (the
point-to-point transmission rate applied to the highest amount of Facility
Electrical Output in a Month). The total amount available for said credit shall
be up to the amount paid by LSP to TVA for providing the Upgraded Facilities.
8.4 Delivery Point and Conditions of Delivery. The Delivery Point for
Facility Electrical Output shall be the Point of Interconnection of the LSP
Interconnection Facilities to the TVA Interconnection Facilities, as depicted in
Exhibit B. The Facility Electrical Output delivered to TVA at the Delivery Point
shall be in the form of 3-phase, alternating current at a frequency of
approximately 60 hertz and a nominal voltage of 161,000 as defined by the then
latest revision of ANSI C84.1 Standard for Electric Power Systems and Equipment
- - Voltage Ratings (60 HZ). In addition to TVA's right to disconnect the Facility
from the TVA system as provided elsewhere in this Agreement, TVA may disconnect
the Facility from the TVA system at any time that the limits on voltage and
frequency provided for under this Section 8.4 are not maintained and the
deviations by LSP from the voltage and frequency limits specified above are
adversely affecting TVA or a third party.
8.5 Fluctuations or Disturbances on TVA's Electric System Facilities. (a)
LSP shall operate its Facility and the LSP Interconnection Facilities in such
manner that the Facility Electrical Output delivered by LSP shall meet the
requirements for voltage level, power factor, harmonics, and other electrical
specifications specified in writing by TVA in the Interconnection Criteria,
consistent with Good Utility Practice and, to the extent required by applicable
laws and regulations, with the requirements applied by TVA to similar power
production facilities located in the TVA Control Area in comparable
circumstances, including without limitation size, age, location, and operating
characteristics, whether owned by TVA or third parties. In this regard, TVA
shall have the right to inspect, test, and monitor the operation of the Facility
and the LSP Interconnection Facilities to the extent necessary to establish
whether the delivery of the Facility Electrical Output from LSP meets those
requirements. LSP is responsible for conducting whatever tests and inspections
it deems appropriate for its own purposes. Except in an emergency affecting
TVA's system, TVA shall endeavor to (i) conduct all tests and inspections of the
Facility and the LSP Interconnection Facilities during mutually agreeable
periods and (ii) unless otherwise agreed by the Parties, notify LSP at least two
(2) Business Days in advance of any proposed test or inspection. TVA shall use
its best efforts to minimize any disruption of LSP's operations which might
result from any such tests or inspections. All of TVA's representatives entering
upon LSP's property shall at all times comply with LSP's applicable safety and
security procedures that have been conveyed to TVA.
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(b) LSP shall provide, at its expense, suitable equipment which shall meet
the specifications provided by TVA pursuant to this Section 8.5. In the event,
however, that the Facility fails to meet such specifications and such failure
causes, or may cause, a material adverse effect on TVA's electric system, TVA
shall notify LSP of the circumstances, and TVA shall have the right to have the
Facility disconnected from TVA's electric system until the condition causing
such effect is corrected by LSP. LSP shall be given written notice of these
circumstances in addition to the above-mentioned notice, but the requirement of
providing such written notice shall not limit or delay TVA's right to disconnect
the Facility from TVA's electric system to the extent immediate action is
necessary to protect TVA's customers, employees, contractors, or agents or TVA's
and its customers' property. LSP shall notify TVA when satisfactory corrective
measures have been taken and, upon consent of TVA (which shall not be
unreasonably withheld), operations shall be restored as soon as practicable.
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ARTICLE 9
BILLING AND PAYMENT
9.1 Invoicing and Payment. (a) Except as otherwise provided herein, the
Party owed any amount due under this Agreement (the "Billing Party") shall
submit to the other Party (the "Billed Party") an invoice, in writing, as soon
as practicable after the end of each calendar Month for amounts owed by one
Party to the other. Subject to the remaining provisions of this Section 9.1, the
Billed Party shall pay the invoice on or before the twentieth (20th) Day after
the date of the invoice. If the due date falls on a non-business day, then the
payment shall be due on the next following Business Day. The invoice shall
contain the contract number assigned to this Agreement by TVA (98PAP-236148).
(b) If the Billed Party fails to pay the amount of the Billing Party's
invoice when due, the Billed Party shall pay interest on the unpaid amount based
on the maximum rate under the United States Prompt Payment Act, (31 U.S.C.
ss.3901-3906) as published in the Federal Register and adjusted periodically
(currently semi-annually). Interest shall accrue from the date that the amount
was due to the date on which the Billing Party receives payment. The Billing
Party shall submit an invoice to the Billed Party for such added charge, which
shall be due and payable upon receipt.
(c) If the Billed Party fails to pay the amount due by the due date, the
Billing Party shall have the right to delay or suspend the work or services
being performed until after such payment failure has been satisfactorily
resolved, provided that, TVA shall notify LSP at least five (5) Business Days
prior to delaying or suspending the work or services being performed by TVA
under this Agreement. After the Operation Date, said notification period shall
be increased to ten (10) Business Days. Nothing herein contained shall be
construed as relieving the Billed Party of the obligation to pay the Billing
Party for the work or services completed as of the date such work or services
are delayed or suspended.
(d) The Billed Party must notify the Billing Party of any portion of the
invoice that it disputes on or before twelve (12) Months following the date of
the invoice. The Billed Party shall advise the Billing Party in writing of the
reasons for disputing all or a portion on the invoiced amount. At LSP's request,
TVA shall provide LSP with a cost accounting setting forth in reasonable detail
the expenditures for all labor and materials for which LSP is required to
reimburse TVA under this Agreement. Notwithstanding a Party's disputing all or a
portion of an invoiced amount, the full amount of the invoice (including the
amount in dispute) shall be paid in accordance with Section 9.1(a). The Billing
Party shall refund any amount paid and subsequently determined not to have been
owed, promptly after that determination, and with interest at the rate specified
in Section 9.1(b) from the date of overpayment.
9.2 Offset. Each Party reserves to itself all rights, set-offs,
counterclaims and other remedies and defenses (to the extent not expressly
waived or denied in this Agreement) that it has or to which it may be entitled
arising from or out of this Agreement. All obligations to make payment in
connection with or under this Agreement may be offset against each other,
set-off, or recouped from other payments for amounts determined to be due and
owing.
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ARTICLE 10
ASSIGNMENT
10.1 Assignment. This Agreement shall be binding upon and shall
inure to the benefit of, and may be performed by, the successors and assigns of
the Parties, except that, no assignment, pledge, or other transfer of this
Agreement by either Party shall operate to release the assignor, pledgor, or
transferor from any of its obligations under this Agreement unless (a) the other
Party consents in writing to such assignment, pledge, or other transfer, and
releases, in writing, the assignor, pledgor, or transferor from any of its
obligations under this Agreement, which consent and release shall not be
unreasonably withheld; (b) the assignment, pledge, or other transfer is to an
affiliate of the assignor, pledgor, or transferor and the assignee, pledgee, or
transferee has assumed, in writing, all of the obligations of the assignor,
pledgor, or transferor under this Agreement, provided that such assignee,
pledgee, or transferee has demonstrated financial capacity at least equal to
that of the assignor, pledgor, or transferor; or (c) such transfer is incident
to a merger or consolidation with, or transfer of all, or substantially all, of
the assets of the transferor to another person, entity, political subdivision,
or public corporation which shall, as part of such succession, assume all of the
obligations of the assignor, pledgor, or transferor under this Agreement,
provided that such person, entity, political subdivision, or public corporation
has demonstrated financial capacity at least equal to that of the assignor,
pledgor, or transferor. LSP, without the need for consent from TVA (but without
relieving LSP of its obligations hereunder) may also assign, pledge, or transfer
its rights under this Agreement as security for the financing of the Facility.
TVA shall execute and deliver such consent to assignment and opinion of counsel,
as reasonably acceptable to TVA, and as may be reasonably necessary to effect
such assignment as security for the financing of the Facility; provided that no
such assignment shall modify or amend, in any respect, any provision of this
Agreement without the express written agreement of TVA. LSP may also assign such
of its rights under this Agreement (but without relieving LSP of its obligations
hereunder) to the extent such assignment is to any party but TVA, as necessary
to effect a transfer of the Transferable LSP Interconnection Facilities
permitted pursuant to Section 3.11. Except as provided above, neither Party may
assign, pledge, or otherwise transfer its rights under this Agreement to any
other entity without the consent of the other Party, which consent shall not be
unreasonably withheld.
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<PAGE>
ARTICLE 11
FORCE MAJEURE
11.1 Force Majeure Excuse. Neither Party shall be responsible or liable
for or deemed in breach of this Agreement for any delay or failure in the
performance of their respective obligations under this Agreement (except for
obligations to pay money which shall not be excused due to Force Majeure) to the
extent such delay or failure is due solely to circumstances beyond the
reasonable control of the Party experiencing such delay or failure (such Party
referred to herein as the "Non-Performing Party"), including but not limited to
acts of God; labor disturbance; extraordinarily severe weather conditions; war;
riots; requirements, actions or failures to act on the part of governmental
authorities preventing or delaying performance; fire; damage to or breakdown of
necessary facilities (such causes hereinafter called "Force Majeure"); provided
that:
(i) The Non-Performing Party gives the other Party written notice
within two (2) Business Days, with details to be supplied within ten (10)
Days further describing the particulars of the occurrence;
(ii) The suspension of performance is of no greater scope and of no
longer duration than is attributable to the Force Majeure;
(iii) The Non-Performing Party uses its best efforts to remedy its
inability to perform;
(iv) When the Non-Performing Party is able to resume performance of
its obligations under this Agreement, that Party shall give the other
Party written notice to that effect; and
(v) The Force Majeure was not caused by or connected with any
negligent or intentional acts, errors or omissions, or failure to comply
with any law, rule, regulation, order or ordinance or for any breach or
default of this Agreement by the Non-Performing Party.
11.2 Records. Each Party shall retain records of events it claims under
Section 11.1 as Force Majeure and of its efforts to remedy the effects of the
Force Majeure and, on request, shall make those records available to the other
Party.
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ARTICLE 12
GOVERNMENTAL JURISDICTION AND AUTHORIZATION
12.1 Laws, Regulations, Orders, Approvals, and Permits. This Agreement is
made subject to present and future applicable local, state, and Federal laws and
to the regulations or orders of any local, state, or Federal regulatory
authority having jurisdiction over the matters set forth herein, and performance
under this Agreement is conditioned upon securing and retaining such local,
state, or Federal approvals; grants; or permits and upon the satisfactory
performance of all necessary environmental reviews as may from time to time be
necessary with respect to such performance. Each Party shall use its
Commercially Reasonable best efforts to secure and retain all such approvals,
grants, and permits within such time as shall permit it to perform all of its
obligations under this Agreement.
12.2 Rights Under the Federal Power Act or Other Law. The Parties have
agreed upon the terms of this Agreement and no Party shall file a request for an
order or other relief from a regulatory authority having jurisdiction in the
matter; provided, however, if TVA exercises the right to terminate this
Agreement under Section 1.1 or changes terms or requirements under this
Agreement then nothing in this Agreement shall restrict the rights of any Party
to file a request for an order or other relief from a regulatory authority
having jurisdiction in the matter or make any other filing provided for under
any law or regulation applicable to any other matter set forth under this
Agreement. Notwithstanding this provision, neither Party is waiving the right to
challenge the authority of any regulatory authority to which any such request
for order or relief is made.
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ARTICLE 13
RECORDS, RECORD RETENTION, AND CONFIDENTIALITY
13.1 Imaged Agreement. An original executed version of this Agreement or
notice or other communication given under this Agreement may be photocopied and
stored on computer tapes and disks (the "Imaged Agreement"); provided a copy of
the Imaged Agreement is made available to the other Party. The Imaged Agreement,
if introduced as evidence on paper in any judicial, arbitration, mediation, or
administrative proceedings, shall be admissible as between the Parties to the
same extent and under the same conditions as other business records originated
and maintained in documentary form. Neither Party shall contest the
admissibility of the Imaged Agreement under either the business records
exception to the hearsay rule or the best evidence rule on the basis that such
were not originated or maintained in documentary form.
13.2 Confidentiality. A Party may not disclose any information designated
as proprietary or confidential that it receives from the other Party under the
provisions of this Agreement, to a third party (other than on a strict
need-to-know basis to the Party's officers, investors, consultants, lenders,
counsel, or accountants or prospective buyers of the Facility Electrical Output
or assignees permitted pursuant to Article 10 (but only as to the consideration
of an assignment) that have agreed to keep the terms confidential) except to
comply with any applicable law, order, or regulation; provided, however, each
Party shall notify the other Party of any proceeding of which it is aware that
may result in disclosure and use reasonable efforts to prevent or limit the
disclosure consistent with its obligations with respect to such disclosure
required by law or the affected proceeding. The Parties shall be entitled to all
remedies available at law or in equity to enforce, or seek relief in connection
with this confidentiality obligation; provided, however, that all monetary
damages shall be limited to actual direct damages.
13.3 Records Generally. Each Party shall keep complete and accurate
records and all other data required for the purposes of proper administration of
this Agreement.
(a) All such records shall be maintained for a minimum of five (5) years
after the creation of such record or data and for any additional length of time
required by regulatory agencies with jurisdiction over the Parties.
(b) LSP shall maintain an accurate and up-to-date operating log at the
Facility with records of:
(i) real and reactive power production for each clock hour;
(ii) changes in operating status, scheduled maintenance and other
outages of the Facility; and
(iii) any unusual conditions found during inspections.
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<PAGE>
(c) Either Party, consistent with the other provisions of this Agreement,
shall have the right, at its expense, to examine and inspect all such records
insofar as may be necessary for the purpose of ascertaining the reasonableness
and accuracy of all relevant data, estimates, statements, or charges submitted
to it hereunder. Such records that are designated to be proprietary and
confidential shall only be made available to the Party requesting the
examination on the condition that the records and information are not disclosed,
except as required by law, to third parties without the express written approval
of the Party whose records and cost information are being examined. Each Party
shall notify the other Party of any proceeding of which it is aware that may
result in disclosure and use reasonable efforts to prevent or limit the
disclosure, consistent with its obligations with respect to such disclosure
required by law or the affected proceeding. The Parties shall be entitled to all
remedies available at law or in equity to enforce, or seek relief in connection
with this confidentiality obligation; provided, however, that all monetary
damages shall be limited to actual direct damages.
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ARTICLE 14
NOTICES, INVOICES, PAYMENTS
14.1 Notices. Except as otherwise expressly provided in other sections of
this Agreement, any notice provided for in this Agreement must be in writing and
shall be effective on the Business Day following the Day on which it is actually
received (provided that such Day is a Business Day, otherwise it shall be
effective on the Business Day immediately following such Day), in person by U.S.
Mail or other nationally recognized delivery service, or by facsimile
transmission (unless it confirms a prior oral communication, in which case it
shall be deemed effective on the Day received) at the following address:
If to TVA:
Tennessee Valley Authority
1101 Market Street, MR 3H
Chattanooga, Tennessee 37402-2801
Attention: Executive Vice President, Transmission/Power Supply Group
Facsimile: (423) 751-8352
If to LSP:
LSP Energy Limited Partnership
c/o LS Power, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
Attention: Batesville Project Manager
Facsimile: (314) 993-2790
14.2 Invoices. Invoices should be mailed by the Billing Party to the
Billed Party at the following addresses, unless other billing procedures have
been agreed to in writing by the Parties:
If TVA is the Billed Party:
TVA Accounts Payable Department
P.O. Box 15500 (400 West Summit Hill Drive)
Knoxville, Tennessee 37901-5500 (37902-1499)
If LSP is the Billed Party:
LSP Energy Limited Partnership
c/o LS Power, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
Attention: Batesville Project Manager
Facsimile: (314) 993-2790
14.3 Payments. All payments required under this Agreement shall be made by
Automated Clearing House (ACH) to the following accounts (unless an alternate
payment method has been agreed to by the Parties), with the amounts deemed
received as of the date the electronic fund transfer to the recipient's account
is deemed effective:
If to TVA:
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Cash Link-ACH Receiver
401 14th Street, S.W.
Washington, D.C. 20227
Routing Transit No. 051036706
Account No. 349000, for the credit of
Tennessee Valley Authority
If to LSP:
The Chase Manhattan Bank, N.A.
New York, New York
Account No. 900-9-000135
ABA Routing No. 021-000-021
P.T.I.S. Division
Account No. 40184451, for the credit of
LSP Energy Limited Partnership
14.4 Change. A Party may change the location for its notices, invoices, or
payments by notice to the other Party, which change shall be binding on the
other Party no earlier than the second Business Day following the receipt of
notice of change.
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ARTICLE 15
INSURANCE
15.1 Insurance Requirements. Without limiting any obligations or
liabilities under this Agreement, LSP shall, at its own expense, on or before
the Authorization Date, provide and maintain, in effect for the term of this
Agreement, the following policies of insurance:
(a) Workers Compensation insurance which complies with applicable laws and
Employers' Liability Insurance with limits of at least $1,000,000; and
(b) Comprehensive or Commercial General Liability insurance with bodily
injury and property damage combined single limits of at least $4,000,000 per
occurrence/annual aggregate. Such insurance shall include, but not necessarily
be limited to, broad form property damage liability, personal injury liability,
explosion and collapse hazard coverage, products/completed operations liability,
and, where applicable, watercraft protection and contractual liability; and
(c) Comprehensive Automobile Liability insurance with bodily injury and
property damage combined single limits of at least $5,000,000 per occurrence
covering vehicles owned, hired, or non-owned; and
(d) Excess Umbrella Liability Insurance with a single limit of at least
$5,000,000 per occurrence/annual aggregate in excess of the limits of insurance
provided in subsections (a), (b), and (c) above.
The insurance to be provided hereunder shall be written by one or more
nationally reputable insurance companies authorized to do business in
Mississippi, which shall be either Lloyds Companies reasonably acceptable to TVA
or rated B+ VII by AM Best. All of LSP's policies of insurance shall provide TVA
with thirty (30) Days prior written notice of cancellation, expiration, or
material adverse modification (except that notice of cancellation for nonpayment
of premiums shall be ten (10) Days). TVA may require LSP at any time to obtain
and maintain increased minimum amounts of insurance coverage to the extent it
reasonably believes such increased minimum amounts of insurance coverage are
necessary in accordance with standard insurance industry practice to cover
changes caused by inflation.
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15.2 Umbrella Liability Policy, Change to Requirements. The amounts of
insurance required in Section 15.1 above may provide for Commercially Reasonable
deductible amounts and may be satisfied by LSP purchasing or causing to be
purchased primary coverage in the amounts specified or by buying a separate
excess Umbrella Liability policy together with lower limit primary underlying
coverage. The structure of the coverage is at LSP's option, so long as the total
amount of insurance meets TVA's requirements. In the event that any insurance
required under Section 15.1, or any requirement applicable thereto set forth in
Sections 15.3 or 15.4, becomes unavailable on Commercially Reasonable terms and
conditions, LSP may request a revision in such requirements as necessary to
accommodate such change, subject to TVA's approval, not to be unreasonably
withheld.
15.3 Occurrence Form Policies. The coverages requested in Section 15.1(b)
above and any Umbrella or Excess coverage may be "occurrence" form policies or
the AEGIS "claims-made" form coverage. In the event LSP has any other
"claims-made" form coverage, such insurance shall provide for a retroactive date
and continuing "tail" coverage commencing not later than the Authorization Date
and such insurance shall be maintained by LSP, with a retroactive date not later
than the retroactive date required above, for a minimum of five (5) years after
the term of this Agreement.
15.4 Implementing Insurance Requirements. On or before the Authorization
Date, LSP shall cause its insurers to amend its Comprehensive or Commercial
General Liability and, if applicable, Umbrella or Excess Liability policies with
the following endorsement items (a) through (e); and to amend LSP's Workers'
Compensation and Auto Liability policies with endorsement item (e):
(a) TVA, its directors, officers and employees are additional Insureds
under this Policy; and
(b) This insurance is primary with respect to the interest of TVA, its
directors, officers and employees and any other insurance maintained by them is
excess and not contributory with this insurance; and
(c) The following cross liability clause is made a part of the policy: "In
the event of claims being made by reason of (i) personal and/or bodily injuries
suffered by any employee or employees of one insured hereunder for which another
insured hereunder is or may be liable, or (ii) damage to property belonging to
any insured hereunder for which another insured is or may be liable, then this
policy shall cover such insured against whom a claim is made or may be made in
the same manner as if separate policies have been issued to each insured
hereunder, except with respect to the limits of insurance"; and
(d) Insurer hereby waives all rights of subrogation against TVA, its
officers, directors and employees; and
(e) Notwithstanding any provision of the policy, this policy may not be
canceled, non-renewed or materially changed by the insurer without giving thirty
(30) Days' prior
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written notice to TVA (except that notice of cancellation for nonpayment of
premiums shall be ten (10) Days).
15.5 Evidence of Insurance. LSP shall cause its insurers or agents to
provide TVA with annual certificates of insurance evidencing the policies and
endorsements listed above. Failure of TVA to receive certificates of insurance
does not relieve LSP of the insurance requirements set forth herein. Failure to
obtain the insurance coverage required by this Article 15 shall in no way
relieve or limit LSP's obligations and liabilities under other provisions of
this Agreement.
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<PAGE>
ARTICLE 16
LIABILITY
16.1 Indemnification. LSP agrees to fully indemnify and hold TVA, and its
directors, officers, agents, contractors, and employees, harmless from and
against any and all claims, demands, liability, losses, damage, costs, or
expenses (including attorney's fees and other costs of defense), of any nature
or kind whatsoever, including, but not limited to, claims, demands and/or
liability for personal injury to (including death of) any person whomever
(including payments and awards made to LSP's employees or others under any
worker's compensation law or under any plan for employees' disability and death
benefits) and for damage to any property whatsoever (including the Facility, LSP
Interconnection Facilities, TVA Interconnection Facilities, Upgraded Facilities,
and TVA's system) arising out of or otherwise resulting from the use, ownership,
maintenance, or operation of the Facility or the LSP Interconnection Facilities,
regardless of whether such claims, demands, or liability are alleged to have
been contributed to or caused in part by the negligence of TVA, its directors,
officers, agents, contractors, or employees or to have arisen out of TVA's
status as the owner or operator of its facilities; provided, however, that the
provisions of this Section 16.1 shall not apply to the extent any such personal
injury or property damage is caused by the sole negligence or the sole willful
misconduct of TVA, its directors, officers, agents, contractors, or employees.
16.2 Damages. Neither Party shall be liable in contract, in tort
(including negligence), or otherwise to the other Party, its agents,
representatives, its affiliated and associated companies, and/or its assigns,
for any indirect, incidental, consequential or punitive damages resulting from
either Party's performance or non-performance of an obligation imposed on it by
this Agreement.
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ARTICLE 17
MISCELLANEOUS
17.1 Entirety. This Agreement, including any operating arrangements
developed pursuant to Section 6.4, and the Exhibits to this Agreement constitute
the entire Agreement between the Parties relating to the subject matter
contemplated by this Agreement. There are no prior or contemporaneous agreements
or representations (whether oral or written) affecting the subject matter other
than those herein expressed. An amendment or modification to this Agreement
shall be enforceable only if reduced to writing and executed by both Parties.
17.2 Interpretation. Unless otherwise expressly stated, references in this
Agreement to "Articles" and "Sections" are to Articles and Sections of this
Agreement, and references to "Exhibits" are to the Exhibits attached to this
Agreement. Headings as found in this Agreement are used solely for convenience
and do not constitute a part of this Agreement, nor should they be used to aid
in any manner in the construction of the Agreement. Words defined in the
singular have the corresponding meaning in the plural and vice versa. Use of
"including" means including without limitation. References to one gender include
all others. Any capitalized terms used in the Exhibits to this Agreement which
are not specifically defined in such Exhibits shall have the meanings ascribed
to them in this Agreement. Such Exhibits shall constitute a material part of
this Agreement and the provisions of such Exhibits shall be interpreted and
enforced as if such provisions were directly set forth in this Agreement.
17.3 Governing Law and Choice of Forum. This Agreement and the rights and
duties of the Parties relating to this Agreement shall be governed by and
construed in accordance with the Federal laws of the United States of America,
without regard to the laws requiring the application of the laws of another
jurisdiction. Any action arising out of this Agreement or the Parties' rights
and duties under it may be brought, if at all, only in the United States
District Court of the Eastern District of Tennessee and each Party submits
itself to the jurisdiction of that court.
17.4 Creates No Special Relationship. This Agreement shall not be
interpreted or construed to create an association, joint venture or partnership
between the Parties or to impose any partnership obligation or liability upon
either Party. Neither Party shall have any right, power or authority to enter
into any agreement or undertaking for, or act on behalf of, or to act as or be
an agent or representative of the other Party.
17.5 Joint Preparation of Agreement. This Agreement shall be considered
for all purposes as prepared through the joint efforts of the Parties and shall
not be construed against one Party or the other as a result of the preparation,
substitution, submission or other event of negotiation, drafting or execution
hereof.
17.6 Non-Waiver. A waiver by either Party of any one or more defaults by
the other in the performance of any of the provisions of this Agreement shall
not be construed as a waiver of any other default or defaults, whether of a like
kind or different nature.
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17.7 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be considered an original and all of which shall constitute
but one and the same instrument.
17.8 Section References. All references to sections or articles in this
Agreement are to sections and articles in the body of this Agreement unless
otherwise noted. All references to sections in the exhibits to this Agreement
are to the section in the exhibit in which they appear unless otherwise noted.
17.9 Standards. Unless expressly provided otherwise in the specific
provisions of this Agreement, TVA and LSP shall exercise all rights and
discharge all obligations under this Agreement in a prudent manner and in
accordance with Good Utility Practice and applicable laws and regulations and
any exercise by either Party of any right of approval, inspection, or review or
other provisions requiring mutual agreement under this Agreement shall not be
unreasonably withheld or delayed.
17.10 No Third Party Benefits. Nothing in this Agreement, express or
implied, shall be construed to create rights in, or to grant remedies to, or
delegate any duty, obligation, or undertaking established herein to any third
party as a beneficiary to this Agreement.
17.11 Limitation of Liability. Each Party acknowledges and agrees that in
no event shall any partner, shareholder, owner, officer, director, or employee
of either Party be personally liable to the other Party for any payments,
obligations, or performance due under this Agreement, or any breach or failure
of either Party and the sole recourse for payment or performance of the
obligations hereunder shall be against LSP or TVA and each of their respective
assets and not against any other person, except for such liability as expressly
assumed by an assignee pursuant to an assignment of this Agreement in accordance
with the terms hereof.
IN WITNESS WHEREOF, the Parties, by their respective duly authorized
representatives, have executed this Agreement effective as of the date written
first above.
<TABLE>
<CAPTION>
<S> <C>
TENNESSEE VALLEY AUTHORITY LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc. its general partner
By:/s/ William J. Museler By:/s/ Paul G. Thessen
----------------------- --------------------------
Name: William J. Museler Name: Paul G. Thessen
Title: Executive Vice President Title: Assistant Vice President
Tranmission/Power Supply Group
WITNESS: WITNESS
/s/ Patricia A. Smith /s/ Barbara O. Nieri
-------------------------- ------------------------
Name: Patricia A. Smith Name: Barbara O. Nieri
</TABLE>
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PRELIMINARY-6/30/98
EXHIBIT A
INTERCONNECTION CRITERIA
In accordance with Article 5, the Parties understand and agree that Exhibit A is
preliminary in nature and cannot be finalized until after the completion of the
Facilities Study. Following the completion of the Facilities Study, TVA will
provide LSP with a final version of Exhibit A which Exhibit shall be attached
hereto and made a part of this Agreement without further action of the Parties.
<PAGE>
INTERCONNECTION CRITERIA
LSP GENERATION FACILITY
TO
TENNESSEE VALLEY AUTHORITY
I. INTRODUCTION
These Interconnection Criteria are requirements for interconnecting the LSP
Power Project (LSP) to the TVA electric transmission system. The purpose of
these criteria are to ensure the safe operation, integrity, and reliability of
TVA's system and of the facilities to which it is connected.
These requirements are not intended as a design specification. More specific
project scope, available short circuits, and relay and protection schemes are
reflected on Specification Diagram SKM-667 and Communication Specification
Diagram CSD-L-1751- (5 sheets) and are described in Interconnection Agreement
98PAP-236148 (hereinafter referred to as the "INTERCONNECTION AGREEMENT"),
which serves as the controlling legal authority. Reference to the
Interconnection Agreement appears throughout this Exhibit.
Except as set forth in the INTERCONNECTION AGREEMENT, it is recognized that LSP
or its contractor will design, install, own, operate, and maintain all
facilities on the plant side of the Delivery Point. Arrangements for cooperative
review, comment, and approval of the design and installation of such facilities
prior to interconnection are also set forth in the INTERCONNECTION AGREEMENT.
As also set forth in Section 6.4(d) of the INTERCONNECTION AGREEMENT, LSP, TVA,
and Entergy shall mutually develop written Operating Procedures that shall
further define and expand the information provided by this Exhibit.
II. GENERAL REQUIREMENTS
A. Applicable Codes, Standards, Criteria, and Regulations
(see Appendix)
B. Delivery Point (ref. INTERCONNECTION AGREEMENT Section 8.4)
C. Safety and Operation (ref. INTERCONNECTION AGREEMENT Sections 3.4,
6.4(d), 7.4)
D. Inspection, Test, Calibration, and Maintenance
(ref. INTERCONNECTION AGREEMENT Sections 2.5, 3.3(b), 3.3(c), 3.5,
3.8, 6.3)
E. Metering and Telemetering (ref. INTERCONNECTION AGREEMENT
Section 2.3)
<PAGE>
III. PERFORMANCE REQUIREMENTS
A. LSP shall comply with the following requirements (ref.
INTERCONNECTION AGREEMENT Section 8.5):
1. Electrical Disturbances
LSP shall avoid producing or causing effects such as:
a. An abnormal flow of power including but not limited to
unusual fluctuations of power output and motoring of the
generator.
b. Over/undervoltage and over/underfrequency.
c. Local breaker failure.
d. Degraded reliability of the interconnected electric
system.
2. Voltage Flicker
LSP shall limit to acceptable levels the production of voltage
fluctuations (flicker) at the Delivery Point consistent with
the IEEE Recommended Practices and Requirements for Harmonic
Control in Electrical Power Systems (IEEE Standard 519, or its
successor).
3. Harmonic Current Injection
LSP shall limit the production of total harmonic current
distortion (THCD) and individual harmonic current distortion
injected into the TVA system to the levels indicated in IEEE
Standard 519, or its successor. (Exceptions to these harmonic
requirements may be considered by TVA on an individual basis.)
4. Phase Unbalance
The LSP generator shall not cause phase current unbalance
greater than 10 percent.
B. Grounding
LSP shall provide a ground source to the TVA system. LSP shall be
effectively grounded (X0/X1 less than or equal to 3 and R0/X1 less
than or equal to l) up to the Delivery Point. This may be
accomplished using a generator step-up transformer with the high
voltage (TVA) side in a grounded wye and low voltage (LSP) side in
a closed delta or a closed delta tertiary configuration.
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LSP grounding requirements shall be in compliance with the National
Electric Safety Code, ANSI/IEEE Std. 665 - Guide for Generator
Station Grounding, ANSI/IEEE Std. 80 - Guide for Safety in AC
Substation Grounding and any applicable State and Local codes, or
their successors.
C. Voltage Rating, Regulation, and Power Factor
1. It is recommended that the nominal rating of the high-voltage
winding of the generator step-up transformers shall be 165 kV
with a minimum of five high-side taps in 2.5 percent
intervals, utilizing two steps above and two below the nominal
voltage rating. A minimum basic impulse insulation level (BIL)
of 650 kV is recommended. Further, it is recommended that the
neutral end of the high-voltage winding be insulated for 46 kV
(250 kV BIL).
2. LSP shall:
a. Not impose any restrictions for TVA to operate between a
range of 172 and 159 kV, regardless of the effects on
the Facility generators. LSP's generator continuous
capability curve, including over/underexcited operation,
shall not be restricted by auxiliary voltage levels,
main or auxiliary transformer tap settings, control, and
protection, etc.
b. Be capable of operating over a power factor range of at
least 0.95 lagging to 0.95 leading. LSP shall operate
according to voltage schedules specified by TVA (ref.
INTERCONNECTION AGREEMENT Section 6.5) within the
continuous reactive capability of the generator. This
may require the generator to produce or absorb reactive
power depending on day to day operating requirements
specified by TVA. (The normal operating voltage range is
expected to be approximately 165 to 161 kV.)
c. Have an exciter ceiling voltage that is not less than
1.5 times the rated output field voltage.
d. Notify the TVA dispatchers when the generator will not
be operated in automatic voltage control.
e. Test and document the reactive capability of the
generators with the cooperation of the TVA dispatchers,
in accordance with NERC guidelines.
D. Governor Speed/Frequency Control
A speed governor system shall be required, except as noted, with the
following capabilities:
1. The governor shall be set to provide a five percent (5%) droop
characteristic (a 0.15 hertz change in the generator speed
will cause a five percent change in the generator load).
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2. The overspeed control shall be capable of arresting the speed
rise following a full load rejection to a value below the unit
trip setting. The unit shall return to synchronous speed in
preparation for resynchronization with the TVA electric
system. If such capability cannot be provided then LSP shall
discuss and provide technical information to TVA that supports
such limited capabilities. TVA may then agree to other
requirements.
E. Special Generator Disturbance Studies
TVA uses switched and fixed shunt capacitors and reactors for system
voltage control, high-speed reclosing, and single-pole switching at
various locations on the TVA electric system. These devices and
operating modes, as well as other disturbances and imbalances, may
cause or increase stress on LSP. This includes potential
electromechanical resonance (e.g. subsynchronous resonance) between
the generator and the power system. LSP shall be responsible for any
necessary studies to evaluate these stresses and to determine if any
special devices are required to protect LSP.
F. Excitation System and Power System Stabilizers
A modern, solid-state, high-speed excitation system with automatic
voltage regulation shall be provided.
At such time that industry standards, regulations, or TVA requires
Power System Stabilizer (PSS) technology, a PSS shall be provided
and used by LSP for each of its generators at the Facility. The PSS
shall have provisions for accepting a supplemental signal from TVA.
A Line Drop Compensator is required that will compensate for a
minimum of fifty percent (50%) of the step-up transformer impedance.
IV. RELAY AND PROTECTION REQUIREMENTS
It is recognized that primary protection and synchronizing of the LSP
generators are provided by LSP's 161-kV generator step-up transformer
breakers.
It is also recognized that the primary LSP generator step-up transformer
protection is provided by LSP's 161-kV generator step-up transformer
breakers and that failure of these breakers to trip locally will be backed
up via tripping to the appropriate LSP power circuit breakers in the LSP
161-kV Substation.
It is also recognized that primary LSP station service supply will be
connected to the 161 kV bus in the LSP 161-kV Substation. Switching and
primary protective devices shall be provided for station service and other
auxiliary feeds.
TVA's new 161-kV power circuit breakers A and B located in TVA's
Batesville 161-kV Substation provide primary protection for LSP's new
161-kV transmission lines that connect TVA's Batesville 161-kV Substation
to LSP's Facility.
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Relays protecting the LSP generator and generator step-up transformer
shall be utility grade, conforming to ANSI/IEEE C37.90, C37.90.l, or its
successor, and both the relays and relay settings shall be coordinated
with TVA. TVA may at its option duplicate some relays or relay functions
provided for generator or generator step-up protection by LSP.
The following are required but are not intended by TVA to be a
comprehensive list of all relays or relay and protection functions
necessary to protect the generator and generator step-up transformer:
A. Isolating and Synchronizing
1. A manual switch(s) shall be provided that physically and
visibly opens the interconnecting circuit to LSP (ref.
INTERCONNECTION AGREEMENT Section 3.3(a)).
2. LSP shall not energize a TVA line or bus that is de-energized
unless such energization is specifically approved by the TVA
Dispatcher.
3. LSP shall synchronize its generator to the TVA system only
when supervised by a synchronizing relay. LSP shall not
connect to the TVA system in an out-of-synchronization
condition.
B. Generator Step-Up Transformer Protection
Consistent with Specification Diagram SKM-667 LSP shall provide
complete protection of the generator step-up transformer. Such
protection should include but not be limited to bank differential,
overcurrent, hot spot, sudden pressure, etc. LSP shall use generator
step-up transformer high-side neutral current for backup ground
relaying and/or for transmission line relay polarizing if required
by TVA.
C. Over/Underfrequency, Over/Undervoltage Relays
LSP shall provide over/underfrequency and over/undervoltage relays
to protect the generator from severe system frequency or voltage
disturbances. The relay setting used for these relays should not
disconnect the generator from the system for the occasional small
dynamic (transient) oscillations on the power system, which are
stable and damped. The objective is to protect the generators while
at the same time utilize the total machine capability to support the
system and prevent unnecessary loss of load.
The last step of TVA's system-wide underfrequency load-shedding
scheme is 58.7 hertz after a time delay of 30 cycles. To prevent a
generator trip before TVA's load-shedding scheme has completed, the
LSP underfrequency relay shall be capable of both lower and slower
settings. The overfrequency relay shall be capable of mirroring the
underfrequency settings. These settings are required to protect the
generator during system abnormal frequency as described in ANSI/IEEE
C37.106 IEEE Guide for Abnormal Frequency Protection for Power
Generating Plants, or its successor.
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D. Generator Out-of-Step Relay
LSP shall provide an out-of-step relay to prevent damage to LSP's
generators and the TVA transmission system resulting from
system/generator dynamic instability.
E. Breaker Failure and Backup Protection
1. LSP shall trip the TVA high-voltage line power circuit
breakers only for backup protection due to failure of the
primary protection of the generator, generator step-up
transformer, and secondary equipment and feeds.
2. TVA shall provide appropriate breaker failure relays to ensure
that a failure to trip by the TVA high voltage line power
circuit breakers will result in the tripping of appropriate
LSP and Entergy 161-kV power circuit breakers.
3. LSP shall provide appropriate breaker failure and backup
relays to ensure that a failure to trip by the LSP low voltage
equipment/feed protection will be transferred to the next
level of protection.
F. Reverse Power
LSP shall provide a reverse power relay that will operate for
reverse power between 1 and 3 percent of the generator rating.
G. Relay Settings
(ref. INTERCONNECTION AGREEMENT Sections 3.3(b)and 3.3(c))
H. Exchange of Secondary Circuits for Control and Protection
LSP shall provide to `EVA secondary circuits for control and
protection including currents, potentials, dc trips, breaker
position indication, etc. This is critical to the proper
generator-to-system interconnection.
I. Machine and Transformer Modeling Data (ref. System Impact Study
Agreement 98PAP-229184, dated February 23, 1998, between TVA and
LSP)
J. Transformer Bank and Transmission Line Overload Protection
In accordance with Article 4 of the INTERCONNECTION AGREEMENT, TVA
shall install relays and sensing devices to detect thermal overload
of TWA's Batesville 161-115-kV transformer bank, the
Batesville-Water Valley-Coffeeville 161-kV Transmission Line, and
the Batesville-Sardis Tap-Oxford 161-kV Transmission Line. These
devices shall automatically notify TVA and LSP operators of such
overload condition and TVA will designate any action that needs to
be taken by the Parties to reduce such overload condition.
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APPENDIX
Applicable Codes, Standards, Criteria, and Regulations
Except for changes that may be required retroactively by NERC Planning
Standards, all standards (ref. INTERCONNECTION AGREEMENT Section 7.4) shall
apply to initial LSP plant design and construction and to future plant
modifications. Standards are, but are not limited to, the following:
NERC Planning Standards
Insofar as future NERC Planning Standards require modifications or additions to
TVA generating plant design and/or operations, LSP shall likewise abide by and
perform any necessary changes required by future NERC standards. Although all of
the standard applies, the following sections of the NERC Planning Standards may
be of particular interest:
I. System Adequacy and Security
A.Transmission Systems
D.Voltage Support and Reactive Power
II. System Modeling Data Requirements
A.System Data
B.Generation Equipment
III. System Protection and Control
C.Generation Control and Protection
D.Underfrequency Load Shedding
E.Undervoltage Load Shedding
ANSI and IEEE Standards
ANSI/NFPA 70 National Electric Code
ANSI/IEEE C2 National Electrical Safety Code
IEEE 32 Standard Requirements, Terminology, and Test Procedures for
Neutral Grounding Devices
IEEE 80 Guide for Safety in AC Substation Grounding
IEEE 519 Recommended Practices and Requirements for Harmonics
Control in Electric Power Systems
IEEE 665 Guide for Generating Station Grounding
IEEE 693 Recommended Practices for Seismic Design of Substations
IEEE 979 Guide for Substation Fire Protection
IEEE 980 Guide for Containment and Control of Oil Spills in
Substations
IEEE 1001 Guide for Interfacing Dispersed Storage and Generation
Facilities with Electric Utility Systems
IEEE C37.04 Rating Structure for AC High-Voltage Circuit Breakers Rated
on a Symmetrical Current Basis
ANSI C37.06 Preferred Ratings and Related Required Capabilities for AC
High-Voltage Circuit Breakers
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IEEE C37.013 Standard for AC High-Voltage Generator Circuit Breakers
Rated on a Symmetrical Current Basis
ANSI C37.16 Preferred Ratings, Related Requirements, and Application
Recommendations for Low-Voltage Power Circuit Breakers
IEEE C37.30 Standard Requirements for High-Voltage Air Switches
ANSI C37.32 High-Voltage Air Switches, Bus Supports, and Switch
Accessories-Schedules of Preferred Ratings, Manufacturing
Specifications, and Application Guide
IEEE C37.48 Guide for Application, Operation, and Maintenance of
High-Voltage Fuses, Distribution Enclosed Single-Pole Air
Switches, Fuse Disconnecting Switches, and Accessories
IEEE C37.90 Standard for Relays and Relay System Associated with
Electric Power Apparatus
IEEE C37.91 Guide for Protective Relay Applications to Power Transformers
IEEE C37.95 Guide for Protective Relaying of Utility-Consumer
Interconnections
IEEE C37.97 Guide for Protective Relay Applications to Power System Buses
IEEE C37.102 Guide for AC Generator Protection
IEEE C57.12.00 Standard General Requirements for Liquid-Immersed
Distribution, Power, and Regulating Transformers
IEEE C57.12.01 Standard General Requirements for Dry-Type Distribution and
Power Transformers
IEEE C57.13 Standard Requirements for Instrument Transformers
IEEE C57.13.3 Guide for the Grounding of Instrument Transformer Secondary
Circuits and Cases
IEEE C57.116 Guide for Transformers Directly Connected to Generators
IEEE C62.11 Standard for Metal-Oxide Surge Arresters for AC Power Circuits
IEEE C62.22 Guide for the Application of Metal Oxide Surge Arresters
IEEE C62.92.1 Guide for the Application of Neutral Grounding in Electric
Utility Systems, Part I - Introduction
IEEE C62.92.2 Guide for the Application of Neutral Grounding in Electric
Utility Systems, Part II - Grounding of Synchronous Generator
Systems
IEEE C62.92.5 Guide for the Application of Neutral Grounding in Electrical
Utility Systems, Part V - Transmission Systems and
Subtransmission Systems
ANSI C84.1 Voltage Ratings for Electric Power Systems and Equipment
IEEE 1313 Standard for Power Systems - Insulation Coordination
Uniform Building Code
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PRELIMINARY-6/30/98
EXHIBIT B
INTERCONNECTION FACILITIES
In accordance with Article 5, the Parties understand and agree that Exhibit B is
preliminary in nature and cannot be finalized until after the completion of the
Facilities Study. Following the completion of the Facilities Study, TVA will
provide LSP with a final version of Exhibit B which Exhibit shall be attached
hereto and made a part of this Agreement without further action of the Parties.
The Parties also agree that in the future, after a final version of Exhibit B is
provided by TVA to LSP, additional changes to Exhibit B's specification diagram
may be necessary. Any such additional changes to Exhibit B which have been
mutually agreed to by the Parties, shall be provided by TVA to LSP and shall be
attached hereto and made a part of this Agreement without further action of the
Parties other than initialing the revised Exhibit.
<PAGE>
PRELIMINARY-6/30/98
EXHIBIT C
COMMUNICATION FACILITIES
In accordance with Article 5, the Parties understand and agree that Exhibit C is
preliminary in nature and cannot be finalized until after the completion of the
Facilities Study. Following the completion of the Facilities Study, TVA will
provide LSP with a final version of Exhibit C which Exhibit shall be attached
hereto and made a part of this Agreement without further action of the Parties.
The Parties also agree that in the future, after a final version of Exhibit C is
provided by TVA to LSP, additional changes to Exhibit C's specification diagrams
may be necessary. Any such additional changes to Exhibit C which have been
mutually agreed to by the Parties, shall be provided by TVA to LSP and shall be
attached hereto and made a part of this Agreement without further action of the
Parties other than initialing the revised Exhibit.
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Exhibit 10.5
INTERCONNECTION AND OPERATING
AGREEMENT
THIS AGREEMENT is made this 18th day of May, 1998, by and between LSP
Energy Limited Partnership, a limited partnership organized and existing under
the laws of the State of Delaware, sometimes hereinafter referred to as
"Customer", and Energy Mississippi, Inc., a corporation organized and existing
under the laws of the State of Mississippi, sometimes hereinafter referred to as
"Company".
WITNESSETH:
WHEREAS, Customer intends to construct, own and operate a facility for the
generation and sale of electric energy, which facility is located in Batesville,
Mississippi (the "Facility"); and
WHEREAS, the Facility is expected to sell electrical energy and capacity
to one or more power purchasers for resale and to have a generating capacity of
up to 800 MWs in the summer period and up to 900 MWs in the winter period; and
WHEREAS, the Facility is located near the transmission facilities of
Company; and
WHEREAS, Customer has requested and Company has agreed to enter into an
interconnection agreement with Customer in order for Customer to be able to
transmit energy from the Facility across Company's transmission system; and
NOW THEREFORE, in consideration of and subject to the mutual covenants
contained herein, it is agreed:
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ARTICLE I - DEFINITIONS
Whenever used in this Agreement, Appendices and attachments hereto, the
following terms shall have the following meanings:
Company Interconnection Facilities - Those certain Interconnection
Facilities presently in place, presently proposed to be installed or required to
be installed in the future, which facilities are required to interconnect the
Customer Interconnection Facilities to Company's system at Company's Batesville
Substation and were installed or will be installed and will be owned, operated
and maintained by Company, but at Customer's expense pursuant to this Agreement,
and which facilities are more fully described in Appendix A of this Agreement.
Customer Interconnection Facilities - All Interconnection Facilities to be
installed, owned, operated and maintained by Customer on Customer's side of the
Point of Interconnection which facilities are more fully described in Appendix A
of this Agreement.
Customer Interconnection Specifications - shall have the meaning set forth
in Section 3.2.b. of this Agreement.
Good Utility Practice - shall mean any of the practices, methods and acts
engaged in or approved by a significant proportion of the electric utility
industry during the relevant time period, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of the facts known
at the time the decision was made, could have been expected to accomplish the
desired result at the lowest reasonable cost consistent with reliability, safety
and expedition. Good Utility Practice is not intended to be limited to the
optimum practice, method or act to the exclusion of all others, but rather to be
a spectrum of acceptable practices, methods or acts.
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Interconnection Facilities - All Customer Interconnection Facilities,
Company Interconnection Facilities and System Upgrades presently in place or
presently proposed to be installed or required to be installed in the future
pursuant to this Agreement in order to interconnect and deliver energy from the
Facility to Company's system including, but not limited to, any such connection,
transmission, distribution, engineering, administrative, transformation,
switching, metering, communications and safety equipment and any additions
and/or reinforcements to Company's system that the Company, in the exercise of
its reasonable judgment, deems necessary.
Operation Date - The day commencing at 00:01 hours, following the day
during which Interconnection Facilities and equipment of Customer
Interconnection Facilities have been completed to Company's and Customer's
mutual satisfaction pursuant to the requirements of this Agreement and energized
in parallel operation of Company's and Customer's systems as confirmed in
writing.
Point of Interconnection - The point, shown in Appendix A, where the
facilities of Customer interconnect with the facilities of Company as the same
may be modified consistent with Section 3.2.f.
System Protection Facilities - The equipment required to protect (1)
Company's system and its customers from faults occurring at Customer
Interconnection Facilities or the Facility, and (2) Customer Interconnection
Facilities or the Facility from faults occurring on Company's system or on the
system of others to which Company's system is directly or indirectly connected.
System Upgrades - Any Interconnection Facilities comprising an upgrade or
improvement to Company's existing transmission system as specified in Appendix
B.
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Transferrable Interconnection Facilities - Those certain Customer
Interconnection Facilities that may be transferred from Customer to the Company
or to a third party pursuant to Section 3.2.f., as more particularly described
in Appendix C and any rights of way or easements to be assigned to Company in
connection with such transfer pursuant to Section 3.2.f.
ARTICLE II - TERM OF AGREEMENT
2.1 This Agreement shall be binding upon execution, shall remain in effect
for a term of thirty-five (35) year(s) from the Operation Date, and shall renew
thereafter for succeeding five (5) year terms; provided, that during or with
respect to any renewal term either Company or Customer may terminate this
Agreement by giving at least three (3) years written notice to the other
conditioned upon such termination being consistent with applicable law and
regulation.
ARTICLE III - CONSTRUCTION
3.1. Land Rights. Customer agrees to furnish at no cost to Company all
necessary rights of way upon, over, under, and across lands owned or controlled
by Customer and/or its affiliated interests for the construction and operation
of Company Interconnection Facilities under this Agreement and shall, at all
reasonable times, give the Company, or its agents, free access to such
facilities. Customer grants to Company at all reasonable times the right of free
ingress and egress to Customer's premises to the extent necessary for the
purpose of installing, testing, reading, inspecting, repairing, operating,
altering or removing any of the Company Interconnection Facilities located on
Customer's premises or for such other purposes as necessary to enable Company to
receive electric energy or suspend the receipt thereof pursuant to the terms of
this Agreement, or
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determine Customer's compliance with this Agreement. If any part of the Company
Interconnection Facilities, System Upgrades or Transferable Interconnection
Facilities are to be installed on property owned by other than Company or
Customer, Customer shall procure from the owners thereof all necessary permanent
property rights, rights of way and easements for the construction, operation,
maintenance and replacement of Company facilities upon such property in a form
reasonably satisfactory to Company. In the event Customer is unable to secure
such rights by condemnation or otherwise, Company shall use due diligence to
secure such rights and Customer shall reimburse Company for all reasonable costs
incurred by Company in securing such rights. In connection with Company's
exercise of rights under this Section 3.1, while on Customer's premises,
Company's personnel and agents shall comply with all applicable safety rules or
regulations of Customer that are communicated by Customer to Company. Company is
currently expected to install all System Upgrades on existing Company property,
rights of way or easements. If any part of the System Upgrades are to be
installed on property owned by other than Company, Company shall notify Customer
of such additional property requirements. as soon as practicable.
3.2. Facility and Equipment Design and Construction.
a. Customer shall be obligated to design, construct, install, own,
operate and maintain Customer Interconnection Facilities. Customer
Interconnection Facilities shall meet all requirements of applicable safety
and/or engineering codes, and further, shall meet all requirements of any duly
constituted regulatory authority having jurisdiction, as specified by Company
pursuant to this Section 3.2. The Facility shall meet all
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requirements of applicable law including any safety or other codes required by
any duly constituted regulatory authority having jurisdiction.
b. As soon as possible but no later than sixty (60) days after
execution of this Agreement, Company shall provide Customer with all design
specifications or other requirements for the Customer Interconnection Facilities
required to satisfy Company's requirements for operational control, reliability
or safety of the Interconnection Facilities pursuant to the standards specified
in this Agreement (the "Customer Interconnection Specifications"). Customer
shall provide Company with any proposed revisions to such Customer
Interconnection Specifications within thirty (30) days after receipt of such
specifications from Company. Company shall either accept or reject, in whole or
in part, Customer's proposed revisions within thirty (30) days after receipt.
Company shall provide Customer a written explanation of the basis for any
rejection. Customer shall submit the actual specifications for all Customer
Interconnection Facilities, including any System Protection Facilities, to
Company for review prior to connecting said Customer Interconnection Facilities
and equipment to Company's system in order to insure that connection to
Customer's Facility is consistent with the Customer Interconnection
Specifications. Within thirty (30) days after receipt of such specifications,
Company shall confirm in writing the acceptability thereof or provide Customer
with a written notice of any failure of such specifications to satisfy the
Customer Interconnection Specifications, setting forth in reasonable detail an
explanation of the failure and such revisions as believed necessary to remedy
the failure. Customer shall revise the Customer Interconnection Facilities as
necessary to overcome the failure and resubmit such specifications for the
Company's review and approval pursuant to this Section 3.2.b. Company's review
of the
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specifications for Customer Interconnection Facilities shall be solely for the
purpose of confirming their conformance with the Customer Interconnection
Facilities and shall not be construed either as confirming or as endorsing the
design, or as any warranty as to fitness, safety, durability or reliability of
Customer Interconnection Facilities or any portion thereof. Company shall not,
by reasons of such review or failure to review, be responsible for strength,
details of design, adequacy or capacity of Customer Interconnection Facilities
or equipment, nor shall Company's acceptance be deemed to be an endorsement of
any Facility or equipment.
c. Each Party agrees to make changes to the Interconnection
Facilities on its respective side of the Point of Interconnection as may be
reasonably required to cause such facilities to meet the standards of this
Agreement in response to changing requirements of Company's system. It is agreed
that such necessary changes will be made by each Party to its facilities on its
respective side of the Point of Interconnection, at its own expense, unless such
facilities are determined to be Company Interconnection Facilities, in which
case such facilities will be installed, owned and maintained by Company, but at
Customer's expense. Company agrees to give Customer advance written notice of
the time such changes are to be completed, and a reasonable opportunity for
Customer to accomplish these changes. Contemporaneous with such notice, Company
shall supply complete engineering information and specifications to Customer for
use in determining what changes will be necessary on Customer's side of the
Point of Interconnection.
d. Company shall design, license, install, operate, maintain and own
the Company Interconnection Facilities and the System Upgrades. Company shall
provide
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Customer with a detailed description and its preliminary estimate of the
itemized expected budget for the design and construction of the Company
Interconnection Facilities and the System Upgrades pursuant to the standards set
forth in this Agreement no later than fifteen (15) days after execution of this
Agreement. Company shall provide Customer with its best estimate of any
revisions to such description and budget and the schedule for the design and
construction of the Company Interconnection Facilities and System Upgrades
within sixty (60) days after execution of this Agreement. Company understands
that time is of the essence to Customer in the construction of such facilities.
Company shall timely advise Customer of any opportunities to reduce the
scheduled time for such construction by the payment of additional costs or
otherwise. Company shall promptly provide Customer with any material revisions
in such description, budget or schedule, but in any event, no less than sixty
(60) days prior to initiating any work covered by such revision. Customer shall
within sixty (60) days after receipt provide Company with any comments or
proposed revisions to such description, or budget, or schedule estimate. Company
shall use reasonable efforts to address or accommodate the comments received
from Customer pursuant to this Section 3.2.d.; provided that Company shall
reserve the final judgment with respect to any such matters. Company shall not
commence detailed design or construction of any Company Interconnection
Facilities or System Upgrades prior to receiving written authorization to
proceed from Customer. Subject to Company's right to suspend its performance
pursuant to Section 5.2, Company shall use due diligence to complete or cause to
complete and place in service any Company Interconnection Facilities or System
Upgrades on or before sixteen (16) months from the date of receipt of the
authorization to proceed from Customer; or such earlier or later date as set
forth in
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Company's schedule provided under this Section. Company shall be reimbursed by
Customer for all reasonable costs incurred by Company in performing its work
under this Section 3.2.d. If Customer reasonably determines that Company is
failing to use due diligence to complete the Company Interconnection Facilities
or System Upgrades pursuant to the detailed design and schedule provided under
this Section, Customer may provide Company with written notice of its
determination setting forth in reasonable detail the actions necessary to cure
the failure. If, within thirty (30) days after such notice, Company fails to
provide Customer with reasonably satisfactory evidence that it has cured such
failure, Customer may, upon thirty (30) days notice to Company, without
prejudice to any other remedies it may have, cause the remaining work to be
completed in accordance with the design specifications and standards for such
work prepared by Company pursuant to this Agreement by an independent contractor
selected from a list provided by Company. Company shall cooperate reasonably
with Customer to facilitate the transfer of responsibility for work subject to
Customer's exercise of such right, provided that Company shall to oversee and
supervise all such remaining work.
e. The Company shall cause the construction of the Company
Interconnection Facilities and System Upgrades consistent with the procedures,
practices and standards routinely employed by the Company with respect to its
construction of its own comparable facilities in accordance with Good Utility
Practice, including without limitation, any applicable bidding or other cost
control procedures. At Customer's request, Company shall provide Customer with a
cost accounting setting forth in reasonable detail the expenditures for all
necessary facilities and materials comprising the Company Interconnection
Facilities and System Upgrades.
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f. Customer shall have the option, exercisable upon thirty (30) days
written notice to Company to transfer ownership of the Transferrable
Interconnection Facilities to Company or to any affiliated or unaffiliated
thirty party.
A transfer of the Transferrable Interconnection Facilities to Company
shall be made pursuant to a bill of sale or such other documentation
("Facilities Documents") as required by law and reasonably acceptable to the
Company to effect a transfer of title of the Transferrable Interconnection
Facilities to Company with all legal warranties. Customer's transfer shall
include an assignment of any rights of way or easements ("Easement Documents")
necessary for Company to own, operate and maintain the Transferrable
Interconnection Facilities in a form reasonably acceptable to the Company.
Facilities Documents and Easement Documents are referred to collectively as
"Transfer Documents". Such transfer and assignment of the Transferrable
Interconnection Facilities shall be for no additional consideration by either
Party to the other. Prior to effecting the transfer of the Transferrable
Interconnection Facilities, Customer shall demonstrate to Company's reasonable
satisfaction that any required maintenance of the Transferrable Interconnection
Facilities has been performed consistent with the standards of this Agreement.
Such transfer and assignment to Company shall be effective upon the execution
and delivery of the Transfer Documents by Customer. Any costs incurred by
Company to effectuate such transfer and assignment shall be reimbursed by
Customer pursuant to Article V.
Upon transfer of the Transferrable Interconnection Facilities to Company,
Company shall operate and maintain such facilities and easements at the
Customer's expense for the term of the Agreement or as long as Transferrable
Interconnection Facilities are used
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by Customer for transmission of electricity, whichever occurs last.
Reimbursement for such reasonable operation and maintenance expenses to Company
and other related expenses such as taxes and administrative expenses shall be
made pursuant to Article V. Such transfer and assignment shall be subject to any
regulatory approval which may be required by law or rule or regulation
promulgated by a governmental authority with jurisdiction over such a
transaction.
Company shall use due diligence and cooperate in good faith to cause such
transfer and assignment to be effective as soon as possible after Customer's
notice under this Section 3.2.f. Upon the effective date of such transfer and
assignment to Company, the Transferrable Interconnection Facilities shall become
Company Interconnection Facilities as of such date for all purposes of this
Agreement. The transfer of the Transferrable Interconnection Facilities to a
third party shall not require the consent of Company provided that Customer
shall remain liable for all obligations under this Agreement with respect to
such transferred facilities and provided further that the Company, the third
party, and Customer have executed in a manner reasonably acceptable to Company,
all agreements and modifications to existing agreements that Company, in its
reasonable judgment, deems necessary to effectuate such transfer and continued
interconnection.
g. Customer (or Customer's power purchaser(s)) will be responsible
for arranging transmission service necessary for deliveries from the Facility
across Company's system. To the extent appropriate, network, firm
point-to-point, non-firm point-to-point, or comparable service shall be
purchased at the rates established pursuant to the Company's then current tariff
to the extent energy produced by the Facility is transmitted
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over Company's transmission system. Company shall offset such charges by a
credit up to the cost of the System Upgrades paid for by Customer for purposes
of Customer's or Customer's power purchasers, use of network, firm point-to-
point, non-firm point-to-point, or comparable transmission service under
Company's tariff. To the extent any energy produced by the Facility is
transmitted over Company's transmission system pursuant to a network, firm
point-to-point, non-firm point-to-point, or comparable transmission service
agreement, Company shall credit against Customer's (or Customer's purchasers')
use an amount equal to the equivalent point-to-point transmission service rate
for such service until such time as the cost of the System Upgrades has been
fully offset, after which time such offset or credit shall no longer apply. Any
such credit shall be separately identified by Company and applied monthly
pursuant to the terms of the applicable transmission service agreement.
h. At Customer's request, Company shall use due diligence and shall
cooperate in good faith to (i) determine what, if any, modifications to the
Interconnection Facilities are either required or allowable to accommodate a
change in Customer's requirements related to interconnection with Company's
transmission system, and (ii) implement such modifications at Customer's expense
pursuant to the other provisions of this Agreement.
3.3. Metering. Customer shall provide, install, own and maintain metering
equipment at the locations shown in Appendix A, or such other accessible,
protected and satisfactory site selected by mutual agreement of the Parties,
necessary to meet its obligations in this Agreement. Company shall provide,
install, own and maintain metering equipment at the location shown in Appendix
A, or such other accessible, protected and
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satisfactory site selected by mutual agreement of the Parties, necessary to meet
its obligations under this Agreement. All reasonable and documented costs
required for the administration of Company's metering shall be born by Customer.
All reasonable and documented costs required for either the initial installation
of Company's metering, or any changes to metering requested by Customer shall be
borne by Customer. Customer and Company shall share with each other the
necessary output information from their respective meters consistent with the
terms of this Agreement.
ARTICLE IV - OPERATION
4.1. Interconnection. Upon completion, testing and acceptance of the
Interconnection Facilities pursuant to Section 3.2 of this Agreement and subject
to the other terms and conditions of this Article IV, Company shall operate and
maintain the Company Interconnection Facilities and System Upgrades as necessary
to accept electrical energy from the Facility at the Point of Interconnection.
As a condition to energizing the Interconnection Facilities, Customer shall
provide Company with evidence reasonably satisfactory to Company that Customer
has closed on the construction financing required to complete the Facility and
that the agreements providing for the disbursement of such financing are still
in full force and effect. In the event that the System Upgrades are not
completed by the date upon which Customer wishes to synchronize the Facility
with Company's system, Customer shall nonetheless be allowed to synchronize the
Facility and delivery energy to Company's system but only to the extent
Company's system can accept such energy.
4.2. Reliability. The Company and Customer agree that the implementation
of this Agreement shall comply with the then existing (or amended) manuals,
standards, and
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guidelines of the North American Electric Reliability Council ("NERC") and the
Southeastern Electric Reliability Council ("SERC"), or any successor agency
assuming or charged with similar responsibilities related to the operation and
reliability of the North American electric interconnected transmission grid. To
the extent that this Agreement does not specifically address or provide the
mechanisms necessary to comply with such NERC or SERC manuals, standards, or
guidelines, the Company and Customer hereby agree that both parties shall
provide to the other Party all such information as may reasonably be required to
comply with such manuals, standards, or guidelines and shall operate, or cause
to be operated, their respective facilities in accordance with such manuals,
standards, or guidelines.
4.3. Reactive Power. In association with power generated by Customer for
transmission by Company, Customer shall operate the Facility so as to meet the
voltage schedules designated by Company's operations personnel, which shall be
within the normal operating range of the Facility, which schedules shall be
consistent with the voltage schedules provided to Customer by the Tennessee
Valley Authority ("TVA"). To the extent energy produced by the Facility is
transmitted across Company's transmission system, consistent with Company's
currently effective transmission tariff, an appropriate adjustment to the charge
for reactive supply and voltage control in the transmission service agreement
will be made to reflect the contribution to reactive supply and voltage support
made by the Facility.
4.4. Protection and System Quality. It shall be Customer's obligation, at
its expense, to install or have installed and keep operative System Protection
Facilities, including such protective and regulating devices as are identified
by order, rule or
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<PAGE>
regulation of any duly constituted regulatory authority having jurisdiction, or
as are otherwise necessary to protect personnel and equipment and to minimize
deleterious effects to Company's electric service operation, all in accordance
with the standards of this Agreement and as specified pursuant to Section 3.2.
Any such protective or regulating devices that may be required for Company's
Interconnection Facilities or System Upgrades shall be installed by Company at
Customer's expense pursuant to this Agreement.
a. Requirements for Protection. Customer shall provide relays,
circuit breakers, and all other devices necessary to promptly remove any fault
contribution of Customer's generating equipment to any short circuit occurring
on Company's system not otherwise isolated by Company equipment. Such protective
equipment shall include, without limitation, a disconnecting device or switch
with load interrupting capability to be located between Facility and the
Company's system at the point specified in Appendix A hereto or such other
accessible, protected, and satisfactory site selected upon mutual agreement of
the Parties. Customer shall be responsible for protection of Customer
Interconnection Facilities and the Facility from such conditions as negative
sequence currents, over- or under-frequency, sudden load rejection, over- or
under-voltage, and generator loss-of-field. Customer shall be solely responsible
for provisions to disconnect its generation when a disturbance on the Company's
system results in Customer's generation becoming isolated from Company's
generation.
b. System Quality. Customer's Facility and Customer Interconnection
Facilities shall meet the specifications for voltage excursions and voltage
operating range,
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<PAGE>
voltage flicker and sinusoidal voltage or current waves as specified by
appropriate industry guidelines consistent with Good Utility Practice and the
standards of this Agreement.
c. Inspection. Company shall have the right, but shall have no
obligation or responsibility to: i) observe Customer's tests and/or inspection
of any of Customer Interconnection Facilities including any System Protection
Facilities maintained by Customer; ii) review the settings of Customer's System
Protection Facilities; and iii) review Customer's maintenance records relative
to Customer Interconnection Facilities including any System Protection
Facilities. The foregoing rights may be exercised by Company from time to time
as deemed necessary by the Company upon reasonable notice to Customer. However,
the exercise or non-exercise by Company of any of the foregoing rights of
observation, review or inspection shall be construed neither as an endorsement
or confirmation of any aspect, feature, element, or condition of Customer
Interconnection Facilities or the operation thereof, nor as a warranty as to
fitness, safety, desirability, or reliability of same.
4.5 Meters. Each Party shall, at Customer's expense, inspect and test its
respective meters upon their installation and at least once every two years
thereafter. If requested to do so by a Party, the other Party shall inspect or
test its meters more frequently than every two years, at the expense of the
requesting Party. Each Party shall give reasonable notice of the time when any
inspection or test shall take place, and the other Party may have
representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced at
Customer's expense, in order to provide accurate metering. If a meter fails to
register, or if the measurement made by a meter during a test is found not to be
within the accuracy
16
<PAGE>
standards established in the most recent revision of Standard C 12.1 of the
American National Standard Institute, Incorporated, an adjustment shall be made
correcting all measurements made by the inaccurate meter for:
a. the actual period during which inaccurate measurements were
made, if the period can be determined, or if not,
b. the period immediately preceding the test of the meter equal
to one-half the time from the date of the last previous test
of the meter; provided, that the period covered by the
correction shall not exceed six months.
If hourly and/or daily energy readings are available and if such data are
requested by Company, Customer shall report same to Company's representatives as
designated by Company, by telephone, on a schedule to be agreed upon.
At Customer's expense, and in accordance with Section 4.6.b. and the other
standards and requirements of this Agreement, Customer's output information
shall be telemetered to the location specified by Company.
4.6. Control Area. Customer reserves the right to designate from time to
time, but no more frequently than once each year, all, part or none of its
Facility to be located in Company's control area. In the event that all or a
portion of the Facility is located in Company's control area and energy from
such portion of the Facility is scheduled and delivered to or across TVA's
system, no transmission service charge other than any applicable ancillary
services shall be assessed by Company related to such energy provided that the
Facility is directly connected to TVA's system and that no such charge is
imputed to Company or its customers under its current transmission tariff.
17
<PAGE>
4.7 Communications. To the extent communications with Company are required
they shall be conducted in accordance with this Section 4.7.
a. At Customer's expense, Customer shall maintain operating
communications with Company's system dispatcher or representative as designated
by Company in accordance with the standards of this Agreement. Any required
maintenance of the communications equipment shall be performed at Customer's
expense, but may be performed by Customer, the Company, or a subcontractor to
Customer approved by Company. The operating communications shall include, but
not be limited to, system paralleling or separation, scheduled and unscheduled
shutdowns, equipment clearances, next day forecasted hourly generation levels
and hourly and daily load data.
b. A Remote Terminal Unit ("RTU") or other communication method
acceptable to both parties shall be installed by Customer to gather accumulated
and instantaneous data from Customer's meters to be telemetered to the location
designated by Company. The communication protocol for this link will be
specified by Company. Instantaneous analog watt and var flow information must be
telemetered directly to such location. RTU equipment shall also be installed or
modified by Company at Customer's expense to gather accumulated and
instantaneous data from Company's meters.
4.8. Disconnection. Company shall have the right to disconnect, without
notice, the Customer Interconnection Facilities if, in the Company's reasonable
opinion, a hazardous condition exists and immediate disconnection is necessary
to protect persons, Company facilities, or other customer facilities from damage
caused by Customer Interconnection Facilities and/or the Facility, or the lack
of proper or properly operating System Protection Facilities. For purposes of
this Section 4.8, Customer System
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<PAGE>
Protection Facilities may be deemed by Company to be not properly operating if
Company's review under Section 4.4.c. discloses irregular or insufficient
maintenance on such devices contrary to Good Utility Practice or that
maintenance records do not exist or are otherwise insufficient to demonstrate
that adequate maintenance has been and is being performed in accordance with the
standards under this Agreement. Company shall give Customer such notice as
reasonably practicable prior to such disconnection. Company shall (i) use
reasonable care and cooperate reasonably with Customer to avoid and minimize
interruptions in the acceptance of capacity and energy from the Facility
pursuant to this Section 4.8, (ii) keep Customer fully informed as to the
anticipated duration of each interruption, and (iii) restore connection and
resume acceptance of capacity and energy from Customer as soon as practicable to
the extent the condition resulting in the interruption has abated sufficiently
to permit such resumption. Any interruption or disconnection of Customer shall
be done in accordance with Good Utility Practice and be limited to the extent
necessary to effectively relieve the condition necessitating such interruption
or disconnection. Such interruption or disconnection shall not be inconsistent
with open access transmission policies of the Federal Energy Regulatory
Commission ("FERC").
4.9. Continuity of Service. Company shall have the right, exercisable in
accordance with this Section 4.9, to curtail deliveries of energy from Customer
or disconnect Customer Interconnection Facilities : a) for failure by Customer
to company with the provisions of this Agreement, provided that, Company shall
not curtail or disconnect Customer as a result of such material noncompliance
without provided the
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Customer written notice and at least thirty (30) days to cure such
noncomplicance; or b) to the extent required to:
(i) overcome system reliability problems caused by an emergency;
(ii) permit installation, repairs, maintenance, construction or
inspection of any part of Company's equipment or Company's
transmission system;
(iii) facilitate restoration of line or equipment outages; or
(iv) overcome system reliability problems caused by an outage of
Company's equipment or generation facilities; or
(v) for any reason otherwise permitted by applicable rules or
regulations promulgated by a regulatory authority having
jurisdiction over such matters.
Except in case of emergency, in order not to interfere unreasonably with
the other Party's operations, the curtailing or disconnecting Party shall give
the other Party reasonable prior notice of any curtailment or disconnection, the
reason for its occurrence and its probable duration. Company shall (i) use
reasonable care to avoid and minimize curtailments or disconnections in the
acceptance of capacity and energy, (ii) use reasonable care to coordinate any
curtailments or disconnections with scheduled outages or maintenance of the
Facility, (iii) keep Customer fully informed as to the anticipated duration of
each curtailment or disconnection, and (iv) resume acceptance of deliveries of
capacity and energy from Customer as soon as practicable once the condition
resulting in the interruption has abated sufficiently to permit such resumption.
Any curtailment or disconnection of Customer shall be done in accordance with
Good Utility Practice and be
20
<PAGE>
limited to the extent necessary to effectively relieve the condition
necessitating such curtailment or disconnection. Such curtailment or
disconnection shall not be inconsistent with FERC's open access transmission
policies.
4.10 Energy Imbalance. Company reserves the right to file rate schedules
with the FERC concerning any services the Company deems necessary for reliable
and orderly bulk power supply system management, including but not limited to,
any standby or related services that may arise from a failure of Customer to
meet its schedule of deliveries across facilities covered by this Agreement.
ARTICLE V. BILLING AND ADJUSTMENTS
5.1 Notwithstanding any other provision of this Agreement, Customer shall
be responsible for and shall reimburse Company for all actual costs incurred by
Company consistent with Sections 3.2.e. and 3.2.f. with respect to the design,
construction, and installation of the Company Interconnection Facilities, System
Upgrades, and all related equipment. Any estimates of costs provided under the
terms of this Agreement shall be for purposes of forecasting expected costs and
shall not be binding on Company.
5.2 Company shall bill Customer monthly in arrears for the costs to be
reimbursed Company under this Agreement. Customer shall pay all amounts due
within twenty (20) days after receipt of Company's statement. Company shall
provide reasonable documentation supporting Company's statement. In the event
Customer fails to make said monthly payments, Company shall have the right to
suspend its performance of work or other obligations under this Agreement until
such time as any overdue amounts have been paid in full.
21
<PAGE>
5.3 All Costs and expenses to be reimbursed by Customer under this
Agreement shall be reasonably incurred and properly documented by Company and
consistent with the standards of this Agreement.
5.4 In the event adjustments to billing statements are required as a
result of measurements made by inaccurate meters, the Parties shall use the
corrected measurements described in Section 4.5 to compute the amounts due from
or to Company for the energy delivered under this Agreement during the period of
inaccuracy. If the total amount, as computed, due from a Party for the period of
inaccuracy varies from the total amount due as previously computed, and the
payment of the previously computed amount has been made, the difference in the
amounts shall be paid to the Party entitled to it within thirty (30) days after
the paying Party is notified of the recomputation.
ARTICLE VI. FORCE MAJEURE
6.1. The term "Force Majeure" as used herein shall mean any act of God,
labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm
or flood, explosion, breakage or accident to machinery or equipment, any order,
regulation or restriction imposed by governmental military or lawfully
established civilian authorities, or any other cause beyond a Party's reasonable
control. The Party unable to carry out an obligation, imposed on it by this
Agreement, due to "Force Majeure", shall notify the other Party in writing or by
telephone within a reasonable time after the occurrence of the cause relied on.
6.2. Company shall not be responsible for any non-performance under the
Agreement to the extent due to "Force Majeure" whether occurring on Company's
electric system or any connecting electric system to the extent affecting
Company's operations.
22
<PAGE>
Company shall be excused from whatever performance is affected only to the
extent a "Force Majeure" situation exists and prevents such performance and
Company attempts in good faith and reasonable diligence to alleviate such
situation.
6.3. If Customer, because of "Force Majeure", is rendered wholly or
partially unable to perform an obligation imposed on it by this Agreement,
except for the obligation to make payments of money, Customer shall be excused
from whatever performance is affected, but only to the extent a "Force Majeure"
situation exists and prevents such performance and Customer attempts in good
faith and reasonable diligence to alleviate such situation.
ARTICLE VII. INDEMNITY
7.1 Customer agrees to fully indemnify and hold Company, its shareholder,
directors, officers, agents, representatives, employees, servants, its
affiliated and associated companies, their respective shareholders and/or its
assigns, harmless from and against any and all claims, demands, liability,
losses, damage, costs or expenses (including attorneys' fees and other costs of
defense), of any nature or kind whatsoever, including, but not limited to,
claims, demands and/or liability for personal injury to (including death of) any
person whomever (including payments and awards made to Customer's employees or
others under any workers' compensation law or under any plan for employees'
disability and death benefits) and for damage to any property whatsoever
(including Customer Interconnection Facilities, the Facility and Company's
system which includes Company Interconnection Facilities) arising out of or
otherwise resulting from the use, ownership, maintenance, or operation of the
Facility or Customer Interconnection Facilities, regardless of whether such
claims, demands or liability are alleged to have been
23
<PAGE>
caused by negligence or to have arisen out of Company's status as the owner or
operator of facilities involved; provided, however, that the provisions of this
Section 7.1 shall not apply if any such personal injury or property damage is
held to have been caused by the sole negligence or the sole willful misconduct
of Company, its agents or employees.
7.2 Neither Party shall be liable in contract, in tort (including
negligence), or otherwise to the other Party, its agents, representatives, its
affiliated and associated companies, and/or its assigns, for any incidental or
consequential loss or damage whatsoever, including, but not limited to, loss of
profits or revenue on work not performed, for loss of use of or
under-utilization of the other Party's facilities or loss of use of revenues or
loss of anticipated profits, resulting from either Party's performance or
non-performance of an obligation imposed on it by this Agreement.
7.3 Each Party acknowledges and agrees that in no event shall any partner,
shareholder, owner, officer, director, employee, or affiliate of either Party be
personally liable to the other Party for any payments, obligations, or
performance due under this Agreement, or any breach or failure of performance of
either Party and the sole recourse for payment or performance of the obligations
hereunder shall be against the Customer or Company and each of their respective
assets and not against any other Person, except for such liability as expressly
assumed by an assignee pursuant to an assignment of this Agreement in accordance
with the terms hereof.
ARTICLE VIII. MISCELLANEOUS
8.1. Waiver. Any waiver at any time by either Party of its rights with
respect to a default under this Agreement, or with respect to any other matters
arising in connection
24
<PAGE>
with this Agreement, shall not be deemed a waiver with respect to any subsequent
default of other matter.
8.2. Assignment. Neither Party shall voluntarily assign this Agreement, or
any part thereof, without the written consent of the other Party, which consent
shall not be unreasonably withheld, except in connection with the sale or merger
of a substantial portion of its properties including Interconnection Facilities
which it owns, and in the case of Customer, to its lenders in connection with a
financing of the Facility or as permitted with respect to a transfer of
Transferrable Interconnection Facilities pursuant to Section 3.2.f.,and any such
assignment or delegation made without such written consent shall be null and
void. Upon request by Customer, Company shall execute and deliver such consent
to assignment and opinion of counsel as may be reasonably necessary to effect an
assignment to Customer's lenders and reasonably requested by such lenders in
connection with a financing of the Facility.
8.3. Governing Law. The validity, interpretation and performance of this
Agreement and each of its provisions shall be governed by the applicable laws of
the State of Mississippi without regard to the Conflicts of Law provisions.
8.4. Headings Not to Affect Meaning. The descriptive headings o the
various Sections and Articles of this Interconnection Agreement have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms and provisions hereof.
8.5. Amendments. This Interconnection Agreement may be amended by and only
by a written instrument duly executed by each of the parties hereto.
25
<PAGE>
8.6. Standards. Company and Customer shall discharge any and all rights
and obligations under this Interconnection Agreement in a prudent manner and in
accordance with Good Utility Practice. Any exercise by Company of any right of
approval, inspection or review under this Agreement shall not be unreasonably
withheld or delayed.
8.7. Governmental Jurisdiction and Authorization.
a. This Agreement shall become effective when executed by both
parties and shall be subject to the acceptance for filing or approval, of the
FERC. The Company shall use due diligence to file this Agreement with the FERC
and obtain its acceptance for filing or approval. In the event the FERC requires
changes in this Agreement as a condition to its acceptance or, if applicable,
approval of this Agreement, the parties shall negotiate in good faith for a
period of no less than thirty (30) days to effect any required amendments. If,
at the end of such period, the parties have not reached agreement on such
amendment and either party would be materially adversely affected by the
required change, the adversely affected party may terminate this Agreement,
effective upon fifteen (15) days notice to the other party. Company shall also
use due diligence to seek and obtain any other governmental approval required by
it to construct, own, operate and maintain the Company Interconnection
Facilities and the System Upgrades.
b. This Agreement is subject to present and future valid laws and
valid orders, rules and regulations of duly constituted regulatory authorities
having jurisdiction. Each Party expressly reserves, however, the right to appeal
and otherwise contest any change ordered by a governmental agency or court
having jurisdiction in the rights, terms and conditions specified in this
Agreement.
26
<PAGE>
c. Nothing contained herein shall be construed as affecting in any
way the right of the Company or Customer to unilaterally make application to the
FERC for a change in rates, terms or conditions of service under Section 205 or
206 of the Federal Power Act and pursuant to the FERC's Rules and Regulations
promulgated thereunder.
d. Notwithstanding the above provisions of this Section 8.7, Company
and Customer agree that neither Party shall unilaterally petition or otherwise
request the FERC or any successor thereto for any change in any rate, term or
condition set forth in Sections 2.1, 3.2.a., 3.2.b., 3.2.d., 3.2.e., 3.2.f. and
4.1 of this Agreement pursuant to Section 205 or Section 206 of the Federal
Power Act or otherwise and each Party hereby expressly waives its right to make
or request such change to the full extent permitted by law.
8.8. Notices. Any notice, demand or request required or permitted to be
given by either Party to the other and any Instrument required or permitted to
be tendered or delivered by either Party to the other may be so given, tendered
or delivered, as the case may be, by depositing the same in any United States
Post Office with postage prepaid, for transmission by certified or registered
mail, addressed to the Party, or personally delivered to the Party, at the
address set out below:
To Company: Energy Services, Inc.
639 Loyola Avenue
New Orleans, Louisiana 70113
Attention: Interconnection Arrangements Administrator
To Customer: LSP Energy Limited Partnership
c/o LS Power, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
Attention: Batesville Project Manager
27
<PAGE>
ARTICLE IX - INSURANCE
9.1 Without limiting any obligations or liabilities under this Agreement,
Customer shall, at its own expense, provide and maintain or cause to be provided
and maintained, in effect beginning upon the date of Customer's authorization to
proceed to Company pursuant to Section 3.2.d. for the life of this Agreement,
minimum insurance coverage (in any combination of primary and excess/umbrella
and subject to commercially reasonable deductibles) as follows:
A. Workers' Compensation Insurance in accordance with all applicable
State, Federal, and Maritime laws, including Employer's Liability Insurance in
the minimum amount of $2,000,000. Policy shall be endorsed to include a Waiver
of Subrogation in favor of Company and its affiliated and associated companies.
To the extent Customer has employees, this coverage shall be maintained.
B. Comprehensive General Liability Insurance, including contractual
liability coverage for liabilities assumed under this Agreement,
products/completed operations coverage, broad form property liability coverage,
and personal injury coverage, with combined single limit of not less than
$10,000,000 each occurrence. Customer shall furnish to Company an Additional
Insured Endorsement with respect to such insurance in substantially the form
shown in Appendix D.
C. All risk property damage coverage on the Facility and Customer
Interconnection Facilities, including coverage for electrical injury under an
electrical apparatus assumption clause and Boiler and Machinery Insurance upon
commercial operation of the Facility, which shall include mechanical breakdown,
including, but not limited to, any pressure vessels, air tanks, boilers,
machinery, turbine generators,
28
<PAGE>
transformers, pressure piping, and heating and air conditioning equipment.
Customer shall furnish to Company an Additional Insured Endorsement with respect
to such insurance in substantially the form shown in Appendix D.
9.2 The Insurance to be provided hereunder shall be written by one or more
nationally reputable insurance companies authorized to do business in
Mississippi, rated B+ VII by AM Best or Lloyds Companies reasonably acceptable
to Company. All of Customer's policies of insurance shall provide Company with
thirty (30) days prior written notice of cancellation (except that notice for
cancellation for nonpayment of premiums shall be ten (10) days), expiration or
material adverse modification. Prior to the date the Facility is first operated
in parallel with Company's electric system and annually thereafter during the
term of this Agreement, Customer shall furnish a Certificate of Insurance to
Company evidencing the coverages required under this Article IV.
ARTICLE X - GENERAL PROVISIONS
10.1 Company shall not be liable for any costs or damages due to the
inability of Customer or its designated representatives to obtain any licenses
or permits required by any authority having jurisdiction over such matters.
10.2 This Agreement, including all Appendices hereto, constitutes the
entire agreement between the Parties hereto with reference to the subject matter
hereof and no change or modification as to any of the provisions hereof shall be
binding on either Party unless reduced to writing and approved by the authorized
officer or agent of the Customer and the President or a Vice President of the
Company. The terms and conditions of this Agreement any every Appendix referred
to herein shall be amended, as agreed to by the Parties, to comply with changes
or alterations made necessary by a valid applicable order
29
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of any governmental regulatory authority, or any court, having jurisdiction
hereof. This Agreement includes the following appendices which are attached and
incorporated herein:
Appendix A - Company and Customer Interconnection Facilities
Appendix B - System Upgrades
Appendix C - Transferrable Interconnection Facilities
Appendix D - Additional Insured Endorsement
30
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their duly authorized officers on the day and year first above
written.
WITNESSES:
LSP ENERGY LIMITED PARTNERSHIP
BY: LSP Energy, Inc.,
Its: General Partner
By: /s/ Paul G. Thessen
- -------------------------------- --------------------------------
Paul G. Thessen
Title: Assistant Vice President
- -------------------------------- ----------------------------
ENTERGY MISSISSIPPI, INC.
By:
- -------------------------------- --------------------------------
Title: VP Transmission
- -------------------------------- ------------------------------
31
<PAGE>
APPENDIX A
COMPANY AND CUSTOMER INTERCONNECTION FACILITIES
1. Company Interconnection Facilities. The Company Interconnection Facilities
shall be all the necessary equipment needed to interconnect the Company's
system with the Customer's Interconnection Facilities as shown on the
attached drawing. These facilities may include a breaker, switches, bus
work, conductor, poles, foundations, System Protection Facilities,
metering equipment, communication equipment and other facilities as may
be identified in accordance with this Agreement.
2. Point of Interconnection. The Point of Interconnection shall be where the
230kV conductors of the Company Interconnection Facilities interconnect
with the conductors of the Customer Interconnection Facilities at the
fence of the Company's 230kV Batesville Substation.
3. Customer Interconnection Facilities. The Customer Interconnection
Facilities shall include but not be limited to the following:
The necessary transformers, circuit breakers, bus work, relay and
protection equipment, switch gear, transmission line and supporting
structures, metering and communications equipment. The conceptual layout,
location, configuration and extent of Customer Interconnection
Facilities is shown on the attached drawing.
32
<PAGE>
APPENDIX B
SYSTEM UPGRADES
TUNICA TO TUNICA DIST. 115kV--.61 MILE 4/0 COPPER
Upgrade conductor to 1272 and upgrade risers, two switches, and operating bus
at Tunica Dist. 115kV Substation
TUNICA DIST. TO BANKS 115kV Line--14.89 MILES, 4/0 COPPER
Upgrade conductor to 1272 and upgrade risers in Banks Switching Station
BANKS TO WALLS 115kV Line--9.7 Miles 4/9 COPPER AND 1/2 MILE OF 336
Upgrade conductor to 1272 and upgrade risers, two switches, operating bus,
and two line bay busses at Walls Substation
WALLS-DESOTO 115kV LINE--3.9 MILES OF 4/0 COPPER, .48 MILES OF 336
Upgrade conductor to 1272--Partial upgrade and partial dynamic line rating
SARDIS SUBSTATION--115kV
Replace two switches
SENATOBIA 115kV SUBSTATION
Upgrade two risers, two switches, two line bay busses and operating bus
DYNAMIC LINE RATING EQUIPMENT ON:
-- Senatobia to Coldwater
-- Como to Crenshaw
-- Crenshaw to Tunica
The projects listed above are preliminary in nature and will be designed and
specified more fully in accordance with Section 3.2.d.
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<PAGE>
APPENDIX C
TRANSFERRABLE INTERCONNECTION FACILITIES
Transferrable Interconnection Facilities. Transferable Interconnection
Facilities shall consist of those facilities which customer shall designate
as such. The conceptual layout, location, configuration and extent of the
Transferable Interconnection Facilities is shown on the attached drawing.
34
<PAGE>
APPENDIX D
ADDITIONAL INSURED ENDORSEMENT
Customer shall furnish to Company an Additional Insured Endorsement with
respect to such insurance in substantially the following form:
"In consideration of the premium charged, Entergy _______________,
Inc. and its affiliated and associated companies are named as
additional insureds with respect to liabilities arising out of
Customer's use and ownership of Customer's Facilities and
Interconnection Facilities."
"The inclusion of more than one insured under this policy shall not
operate to impair the rights of one insured against another insured
and the coverages afforded by this policy will apply as though
separate policies had been issued to each insured. The inclusion of
more than one insured will not, however, operate to increase the
limits of the carrier's liability. Entergy ____________, Inc. will
not, by reason of its inclusion under this policy, incur liability
to the insurance carrier for payment of premium for this policy."
35
<PAGE>
[ENTERGY LETTERHEAD]
August 18, 1998
LSP Energy Limited Partnership
c/o LS Power, LLC
655 Craig Road, Suite 336
St. Louis, Missouri 63141
LETTER OF AMENDMENT
Ladies and Gentlemen:
In accordance with the terms set forth below, Entergy Mississippi, Inc. (the
Company) agrees to modify the Interconnection and Operating Agreement dated
May 18, 1998 (the Agreement) between the Company and LSP Energy Limited
Partnership (LSP) with the following amendments:
1. Section 3.2(g) of the Agreement shall be amended to read as follows:
g. Customer (or Customer's power purchaser(s)) will be
responsible for arranging transmission service necessary for
deliveries from the Facility across Company's system. Network, firm
point-to-point, non-firm point-to-point, or comparable service shall
be purchased by Customer (or Customer's power purchaser(s)) at the
rates established pursuant to the Company's then current tariff to
the extent energy produced by the Facility is transmitted over
Company's transmission system, and Company shall credit Customer for
such use in an amount equal to the equivalent point-to-point
transmission service rate for such service until such time as the
cost of the System Upgrades previously paid by Customer has been fully
offset, after which time such offset or credit shall no longer apply.
Any such credit shall be separately identified by Company and applied
monthly against charges due Entergy under Customer's applicable
transmission service agreement, or paid directly to Customer in the
event that no charges are due Entergy from Customer for such month
under such transmission service agreement.
<PAGE>
2. Section 8.2 of the Agreement shall be amended by addition, after the
last sentence of such Section, the following:
In addition, Entergy shall be entitled to assign the Agreement to any
wholly owned direct or indirect subsidiary of Entergy Corporation
which succeeds to Entergy's ownership or control of the Entergy
transmission system.
Upon receipt of LSP's executed acceptance of this Letter of Amendment, as
provided below, the Company shall promptly make such filings with the Federal
Energy Regulatory Commission as necessary to cause this Letter of Amendment
to become effective. Upon acceptance for filing by the Federal Energy
Regulatory Commission, the Letter of Amendment will become part of the
Agreement.
Please indicate your agreement to the above terms by signing both copies of
this Letter of Amendment and return one copy to us.
Sincerely,
/s/ John H. Zehanek
- ---------------------
John H. Zehanek
Vice President
Transmission Business
Agreed and Accepted:
LSP Energy Limited Partnership
LSP Energy, Inc. its general partner
By: /s/ Paul G. Thessen
----------------------------
Title: Assistant Vice President
--------------------------
Date: 8/18/98
--------------------------
<PAGE>
Exhibit 10.6
INTERCONNECTION AGREEMENT
BETWEEN
ANR PIPELINE COMPANY
AND
LSP ENERGY LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS............................................................2
ARTICLE II
DESIGN, ENGINEERING AND CONSTRUCTION...................................4
ARTICLE III
OWNERSHIP, COSTS AND EXPENSES..........................................6
ARTICLE IV
OPERATION AND MAINTENANCE.............................................11
ARTICLE V
TERM OF AGREEMENT.....................................................14
ARTICLE VI
GOVERNMENTAL AUTHORIZATIONS...........................................15
ARTICLE VII
CONDITIONS PRECEDENT..................................................15
ARTICLE VIII
LIABILITY AND INDEMNIFICATION.........................................16
ARTICLE IX
TRANSFERS AND ASSIGNMENTS.............................................18
ARTICLE X
NOTICES...............................................................19
ARTICLE XI
FORCE MAJEURE.........................................................20
ARTICLE XII
MISCELLANEOUS PROVISIONS..............................................21
12.01 Applicable Law..................................................21
12.02 Headings........................................................22
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12.03 Severability....................................................22
12.04 Non-waiver of Future Defaults...................................22
12.05 Entirety of Agreement...........................................22
12.06 Conference of Rights............................................22
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INTERCONNECTION AGREEMENT
THIS INTERCONNECTION AGREEMENT, (the "Agreement"), is made and entered
into this 29th day of July, 1998, by and between ANR Pipeline Company ("ANR"), a
Delaware corporation having an office at 500 Renaissance Center, Detroit,
Michigan, 48243, and LSP Energy Limited Partnership ("LSP"), a Delaware limited
partnership having an office at 655 Craig Road, Suite 336, St. Louis, Missouri
63141. ANR and LSP are sometimes hereinafter referred to individually as a
"Party" or collectively as the "Parties".
W I T N E S E T H:
WHEREAS, ANR owns and operates an interstate natural gas pipeline system
("ANR System"), which is partly located in the State of Mississippi and includes
a compressor station located at Sardis, Mississippi ("Sardis Compressor
Station");
WHEREAS, LSP proposes to cause to be constructed and to own and operate a
natural gas-fired electric power generation plant to be located in Batesville,
Mississippi ("LSP Power Plant");
WHEREAS, LSP proposes to cause to be constructed and to own and operate
(or cause to be operated) a natural gas pipeline from an interconnection with
the ANR System in the vicinity of the Sardis Compressor Station to the LSP Power
Plant ("LSP Pipeline");
WHEREAS, LSP desires to establish an interconnection between the ANR
System and the LSP Pipeline in the vicinity of the Sardis Compressor Station;
WHEREAS, ANR is willing to establish such interconnection on the terms and
subject to conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants
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and agreements hereinafter set forth, the Parties, each for itself and
for its successors and permitted assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 "ANR" shall have the meaning set forth in the first paragraph hereof.
1.02 "ANR EMS" shall mean a flow computer, climate controlled equipment
enclosure, batteries, AC/DC battery charger, pressure and temperature
transmitters, pressure and temperature probes in the piping of the LSP
Interconnection Facilities, tubing, conduit, cables, and data communication
equipment. ANR shall use the ANR EMS to obtain the custody transfer flow data at
the Custody Transfer Point.
1.03 "ANR Interconnection Facilities" shall mean yard piping and a tee
welded to ANR's existing 30" Sardis Compressor Station discharge piping, an
insulating flange and all associated piping, valves, controls required to
provide a point of interconnection with the LSP Interconnection Facilities, and
shall also include a connection to commercial power and the ANR EMS. A diagram
of the foregoing facilities is set forth on Exhibit A attached hereto and
incorporated herein by this reference.
1.04 "ANR's Tariff" shall have the meaning set forth in Paragraph 4.04
hereof.
1.05 "Contested Amount" shall have the meaning set forth in Paragraph 3.05
hereof.
1.06 "Custody Transfer Point" shall mean that point at which the custody
of gas transfers from ANR to LSP, which shall occur at the insulating flange
between the ANR Interconnection Facilities and the LSP Interconnection
Facilities.
1.07 "Deferred Costs" shall have the meaning set forth in Paragraph
3.09(b) hereof.
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1.08 "Facility Construction Plan" shall have the meaning set forth in
Paragraph 2.05 hereof.
1.09 "Interconnection Facilities" shall collectively refer to the ANR
Interconnection Facilities and the LSP Interconnection Facilities.
1.10 "LSP" shall have the meaning set forth in the first paragraph hereof.
1.11 "LSP Interconnection Facilities" shall mean yard piping downstream of
ANR's insulating flange, metering, a pulsation bottle (if required in ANR's
reasonable judgment to protect the metering from unacceptable levels of
pulsation), flow control (if required in accordance with Section 2.06), after
ANR has a reasonable opportunity to review the design of the LSP Pipeline and
LSP's plan of operation related thereto), and other associated facilities
located within the Sardis Compressor Station boundary. A diagram of the
foregoing facilities is set forth on Exhibit A.
1.12 "LSP Pipeline" shall have the meaning set forth in the third Whereas
clause hereof.
1.13 "LSP Power Plant" shall have the meaning set forth in the second
Whereas clause hereof.
1.14 "MAOP" shall mean Maximum Allowable Operating Pressure as such term
is commonly used in the natural gas pipeline industry.
1.15 "Party" or "Parties" shall have the meaning set forth in the first
paragraph hereof.
1.16 "Unpaid Balance" shall have the meaning set forth in Paragraph
3.09(b) hereof.
ARTICLE II
DESIGN, ENGINEERING AND CONSTRUCTION
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2.01 The Interconnection Facilities shall be designed, engineered and
constructed with a MAOP of 858 psig and shall have the capability of flowing and
measuring a maximum capacity of 216 MMSCF/D of gas from the ANR Facilities. Any
pressure control device to protect and isolate any pipeline facilities of third
parties located downstream of the Interconnection Facilities due to any
difference in the MAOP of the Interconnection Facilities and such downstream
pipeline facilities shall not be the responsibility of ANR.
2.02 The Interconnection Facilities shall be constructed and installed on
land owned by ANR at ANR's Sardis Compressor Station. ANR shall grant to LSP, on
a fee-free basis, an easement for such parcel of land as required for the
installation, operation and maintenance of the LSP Interconnection Facilities
and to otherwise permit LSP to fulfill its rights and obligations hereunder.
2.03 Upon written authorization to proceed from LSP, ANR shall proceed to
design, engineer and construct, or cause to be designed, engineered and
constructed, the ANR Interconnection Facilities.
2.04 LSP shall design, engineer and construct, or cause to be designed,
engineered and constructed, the LSP Interconnection Facilities.
2.05 Prior to constructing its portion of the Interconnection Facilities,
each Party shall submit to the other Party for review and approval (which shall
not be unreasonably withheld) drawings, specifications and construction
procedures with respect to its portion of the Interconnection Facilities, in
such detail as the other Party may reasonably request (collectively "Facility
Construction Plan"). Within fourteen (14) days of a Party's receipt of a
Facility Construction Plan, the receiving Party shall notify the submitting
Party of its exceptions to (if
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any), or approval of, such Facility Construction Plan. Each Party shall design,
engineer and construct its portion of the Interconnection Facilities in
accordance with the Facility Construction Plan approved by the other Party. The
Parties shall cooperate in good faith to eliminate any exceptions by the
approving Party.
2.06 Each Party shall design, engineer, construct and install, or arrange
for the design, engineering, construction and installation of, its portion of
the Interconnection Facilities in accordance with (i) sound and prudent
standards and practices common to the natural gas pipeline industry, (ii) all
applicable laws, rules, regulations, certificates, decisions, orders, and
directives of all federal, state and local authorities having jurisdiction over
such facilities and (iii) the measurement standards of the American Gas
Association applicable to facilities such as the Interconnection Facilities. The
LSP Interconnection Facilities shall also comply with ANR's Specification for
Standard for Customer/Custody Transfer Company Facilities on ANR Owned Property,
Specification E.S. - 20, a copy of which is attached hereto as Exhibit B and
incorporated herein by this reference. In the event of any conflict between any
of these standards, the more stringent condition(s) or provision(s) shall apply.
2.07 Each Party shall have the right to have a representative present to
review and inspect the manner in which the other Party is constructing and
installing its portion of the Interconnection Facilities. Each Party shall
comply with all reasonable requests of the other Party's representative relating
to performance of the construction and installation of its portion of the
Interconnection Facilities in accordance with the Facility Construction Plan
approved by such other Party.
2.08 Each Party shall use commercially reasonable efforts to have its
portion of the
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Interconnection Facilities constructed and ready to be placed in service on or
before the in-service date of the LSP Pipeline, which the Parties currently
expect to occur on or about October 1, 1999. LSP shall promptly notify ANR in
writing of any change in the expected in-service date of the LSP Pipeline. The
Parties will establish a schedule to coordinate the construction of the
Interconnection Facilities.
ARTICLE III
OWNERSHIP, COSTS AND EXPENSES
3.01 At all times during the design, engineering, construction, testing,
placing in service, and operation of the Interconnection Facilities, ANR shall
own and retain title to the ANR Interconnection Facilities and LSP shall own and
retain title to the LSP Interconnection facilities. Each Party shall be
responsible for the risk of loss of its respective facilities, and shall be
responsible for insuring its interest therein.
3.02 LSP shall fully reimburse ANR for all reasonable direct and indirect
costs incurred by ANR with respect to the design, engineering, construction,
testing and placing in service of the ANR Interconnection Facilities, but in no
event shall such reimbursable costs exceed $250,000. Such reimbursable costs
shall include, but shall not be limited to, filing cost, right of way and land
acquisition cost, material cost and/cancellation penalties, legal cost,
permitting cost, construction-related cost, inspection cost, gas loss, testing
cost, applicable taxes and overhead cost, plus an allowance for funds used
during construction.
3.03 As soon as practicable after completion of construction of the ANR
Interconnection Facilities, and ANR's receipt of all invoices related thereto,
ANR shall invoice LSP for all direct and indirect costs incurred by ANR with
respect to the design, engineering,
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construction, testing and placing in-service the ANR Interconnection Facilities.
3.04 LSP shall pay such invoice within thirty (30) days following its
receipt thereof. If LSP fails to remit full payment or any portion thereof
within such thirty day period, LSP shall pay interest on the unpaid amount of
such invoice at a rate equal to the prime rate per annum published in the Wall
Street Journal from time to time for the period such amount remains unpaid.
3.05 LSP may, within such thirty day period, take written exception to the
invoice rendered by ANR or any part thereof ("Contested Amount"), on the ground
that the Contested Amount was not incurred (a) by ANR in connection with the
design, engineering, construction, testing and placing in service of the ANR
Interconnection Facilities as approved by LSP in the Facility Construction Plan
or (b) in accordance with the standards set forth in Paragraph 3.08 hereof. LSP
shall nevertheless pay in full when due the amount of the invoice submitted by
ANR. Such payment shall not be deemed to be a waiver of the right of LSP to seek
a refund of the Contested Amount or a part thereof as hereinafter provided. If
the Contested Amount or any part thereof is ultimately determined by a final and
non-appealable order of a court of competent jurisdiction to be an amount for
which ANR is not entitled to reimbursement hereunder, or if the Parties reach an
alternate arrangement in respect of the Contested Amount or any part thereof,
such amount as so determined shall be refunded by ANR to LSP together with
interest thereon at a rate equal to the prime rate per annum published by the
Wall Street Journal from time to time during the period from the date of payment
by LSP to the date of refund by ANR.
3.06 LSP understands that the Internal Revenue Service may deem the costs
of the
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ANR Interconnection Facilities to be a contribution in aid of construction under
the Internal Revenue Code. LSP agrees to reimburse ANR for, and to indemnify and
hold ANR harmless against, all additional federal taxes that will be due and
owing to the Internal Revenue Service if such costs are deemed to be a
contribution in aid of construction, including without limitation all interest
and penalties that may be assessed in respect of such additional federal taxes.
ANR shall use commercially reasonable efforts to minimize such costs.
3.07 LSP shall have the right during normal business hours, for a period
of twelve (12) months after the end of the calendar year in which the ANR
Interconnection Facilities are completed and determined by ANR to be ready to
commence service, to audit ANR's books and records relating to the ANR
Interconnection Facilities to verify the direct and indirect costs incurred by
ANR for the design, engineering, construction, testing and placing in service
thereof. ANR shall not be required to adjust any item unless (a) a claim
therefore is presented within twelve (12) months after the close of the calendar
year in which the invoice therefore is rendered and (b)(i) ANR agrees that such
adjustment is appropriate or (ii) the adjustment or any part thereof is
ultimately determined by a final and non-appealable order of a court of
competent jurisdiction to be an amount for which ANR is not entitled to
reimbursement hereunder . In the absence of such timely claim or adjustment, the
invoice rendered by ANR shall be conclusively presumed to be correct.
3.08 ANR shall cause the design, engineering, construction, testing and
placing in service of the ANR Interconnection Facilities to be preformed in a
manner which is consistent with the procedures, practices and standards
routinely employed by ANR with respect to its own comparable facilities,
including without limitation, any applicable bidding or other cost
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control procedures. All costs and expenses which may be required to be
reimbursed by LSP under this Agreement shall be reasonably incurred and properly
documented by ANR and shall be consistent with the standards of this Agreement.
ANR shall provide LSP with a cost accounting on a monthly basis setting forth in
reasonable detail the expenditures and costs incurred with respect to the ANR
Interconnection Facilities.
3.09 ANR and LSP recognize that the operation of the LSP Power Plant may
result in the collection by ANR of firm transportation revenue which would not
otherwise be collected and that the amount of such collections cannot reasonably
be determined at this time. In recognition of the foregoing, ANR is willing to
defer and/or waive all or a portion of the collection of the cost reimbursement
provided for in this Article III under the following conditions:
(a) LSP shall notify ANR in writing, within thirty (30) days of it
receipt of ANR's invoice pursuant to Paragraph 3.03 above,
that it elects the alternate method described herein to
satisfy its cost reimbursement obligations under this Article
III.
(b) Upon receiving notification of LSP's election under Paragraph
3.09(a) above, ANR will defer its collection of costs under
this Article III as hereinafter provided ("Deferred Costs")
and such Deferred Costs shall bear interest at a rate of 15%
per annum. At the end of each of the three consecutive twelve
(12) month periods during the thirty-six (36) month period
beginning on the later to occur of (a) the in - service date
of the LSP Power Plant or (b) the end of the fifth month
following the month in
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which the in - service date of the Interconnection Facilities
occurs, the Deferred Costs(plus accumulated interest) that
remains unpaid at the end of such twelve month period ("Unpaid
Balance") will be reduced by an amount equal to twenty-five
percent (25%) of the capacity reservation charges collected by
ANR for all new transportation service agreement(s) using
existing capacity on the ANR System and specifying the
Interconnection Facilities as the primary delivery point.
Moreover, if, after the end of the first twelve month period,
the Unpaid Balance (as it may have been reduced) is greater
than two thirds of the Deferred Costs, ANR shall invoice and
LSP will pay such difference. If, after the end of the second
twelve month period, the Unpaid Balance (as it may have been
reduced) is greater than one third of the Deferred Costs, ANR
shall invoice and LSP will pay such difference. At the end of
such thirty-sixth month period, ANR, shall invoice and LSP
shall pay the Unpaid Balance (as it may have been reduced) .
ARTICLE IV
OPERATION AND MAINTENANCE
4.01 Each Party shall be fully responsible for the operation, maintenance,
repair and replacement of its portion of the Interconnection Facilities, and for
all cost, expense and risk associated therewith; provided, however, that ANR
shall operate and perform minor maintenance within the capability of ANR's field
technicians on the gas measurement equipment used to determine the volume and
quality of the natural gas delivered by ANR to
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LSP at the Custody Transfer Point and further provided that ANR shall operate,
but not maintain, that portion of the LSP Interconnection Facilities located on
ANR owned land at the Sardis Compressor Station.
4.02 In the case of explosion, fire storm or other emergency involving the
LSP Interconnection Facilities, ANR shall take such steps and incur such expense
as ANR determines, in the exercise of its sole discretion, are required to abate
the emergency and to safeguard life and property. ANR shall, as promptly as
possible, report such emergency to LSP. LSP shall reimburse ANR for all such
costs caused by the LSP Interconnection Facilities in responding to each such
emergency.
4.03 Each Party, or its designee, shall operate, maintain and repair its
portion of the Interconnection Facilities in accordance with sound, workmanlike
and prudent practices common to the natural gas industry, and such practices
shall not be less than the standards and practices followed by such Party in the
operation, maintenance and repair of similar natural gas pipeline facilities
owned and/or operated by such Party. Each Party shall require its contractors
and subcontractors furnishing labor, material, supplies and/or services for said
work to follow the same practices and standards.
4.04 All gas delivered by ANR to LSP at the Interconnection Facilities
shall conform to the specifications set forth in the General Terms and
Conditions of ANR's Federal Energy Regulatory Commission ("FERC") Gas Tariff,
Second Revised Volume 1, or any successor thereto ("ANR's Tariff").
4.05 ANR shall deliver gas at the Custody Transfer Point at ANR's
prevailing line pressure; provided, however, that ANR and LSP shall each make
reasonable efforts to control
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its respective prevailing line pressure to permit gas to enter the LSP Pipeline
from ANR or other sources.
4.06 Custody of the gas shall transfer from ANR to LSP after it passes
through the Custody Transfer Point. The actual quantity of natural gas,
expressed in dekatherms, delivered by ANR to LSP shall be determined using the
recorded meter information from the ANR EMS.
4.07 The reading, testing, calibrating, and/or adjusting of the ANR EMS or
any custody transfer measurement facilities shall be performed and paid for by
ANR. Testing and calibrating of the measurement facilities, and any adjustments
for inaccuracies related thereto, shall be performed in accordance with ANR's
Tariff and with ANR's applicable measurement standards.
4.08 ANR shall provide LSP with reasonable advance notice of the reading,
testing, calibrating, inspection, repair, changing and/or adjusting of the ANR
EMS or any custody transfer measurement facilities. LSP may have representatives
and/or designees present during the time that such work is being performed. ANR
shall also provide LSP with reasonable advance written notice of all scheduled
maintenance or repair work on such facilities. For any maintenance or repair
work which could reasonably result in an interruption or curtailment of gas
deliveries to LSP at the Custody Transfer Point, ANR shall use commercially
reasonable efforts to perform such work during the maintenance outages of LSP's
Power Plant or such other times as are agreeable to LSP and ANR shall use
commercially reasonable efforts to complete such work in the shortest time
reasonably practicable. LSP shall provide ANR with reasonable advance notice of
LSP's need to gain
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access to the Sardis Compressor Station to perform maintenance work or otherwise
fulfill LSP's obligations under this Agreement.
4.09 ANR shall provide LSP with a serial communication signal from the ANR
EMS which shall provide real time pressure and real time cumulative flow and
volume information.
ARTICLE V
TERM OF AGREEMENT
5.01 This Agreement shall be effective as of the date first above written
and shall remain in full force and effect until (i) terminated by the mutual
agreement of the Parties and (ii) LSP's final removal and/or abandonment of the
LSP Interconnection Facilities. Notwithstanding the foregoing, this Agreement
may be terminated by either Party upon no less than sixty (60) days written
notice to the other Party if such other Party has materially breached its
obligations hereunder, and such failure has continued uncured for a period of
sixty (60) days after such other Party receives notice of such breach from the
first Party; provided that this Agreement shall not be terminated if the other
Party has commenced action to cure such breach and continues with reasonable
diligence to effect such cure within such sixty (60) day period.
5.02 Termination of this Agreement shall not relieve either Party from any
obligation accruing prior to the date of such termination.
5.03 The right of either Party to terminate this Agreement shall be
subject to the obligations of the Parties under all applicable laws, order,
rules and regulations of governmental authorities having jurisdiction, and the
termination of this Agreement shall not be effective unless and until all laws,
order, rules and regulations governing transfer or
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abandonment of the Interconnection Facilities have been complied with.
5.04 Each Party shall be responsible for all costs associated with the
removal and/or abandonment of its portion of the Interconnection Facilities, and
obtaining of all regulatory approvals to do so under all applicable laws,
orders, rules and regulations.
ARTICLE VI
GOVERNMENTAL AUTHORIZATIONS
6.01 This Agreement, and the obligations of the Parties hereunder, are
subject to all valid laws, orders, rules and regulations of duly constituted
authorities having jurisdiction over the Parties and/or the Interconnection
Facilities, in whole or in part.
6.02 Each Party is solely responsible for (a) securing all approvals,
permits, certificates and authorizations required for the construction and
operation of its portion of the Interconnection Facilities and (b) all costs
associated therewith. Each Party agrees to use reasonable commercial efforts to
secure such approvals, permits, certificates and authorizations in a timely
manner. Each Party shall provide reasonable cooperation to the other Party (if
required) in connection with obtaining such approvals, permits, certificates and
authorizations.
ARTICLE VII
CONDITIONS PRECEDENT
7.01 ANR shall have no obligation to commence construction of the ANR
Interconnection Facilities, LSP shall have no obligation to commence
construction of the LSP Interconnection Facilities, and neither Party shall have
any obligation to flow gas through the Interconnection Facilities, until the
following conditions precedent have been satisfied:
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(a) ANR has received and accepted, on terms and conditions acceptable to
ANR (in the exercise of its sole discretion), all necessary
governmental and regulatory approvals and authorizations (which
approvals and authorizations must be final and non-appealable)
required for ANR to own, construct and operate the ANR
Interconnection Facilities;
(b) ANR and LSP have each received all necessary management and/or Board
of Directors' or Management Committee approvals to construct, own
and operate its portion of the Interconnection Facilities and
perform its obligations hereunder. Each Party will exercise
reasonable commercial effort to obtain such approvals within sixty
(60) days of the date this Interconnection Agreement is signed by
both Parties; provided that neither Party gives the other Party any
assurance that such approvals can be obtained.
(c) LSP has closed on the construction financing for the LSP Power
Plant.
7.02 ANR and LSP each agree to undertake commercially reasonable efforts
to satisfy the conditions precedent set forth in Paragraph 7.01 above in order
that the Interconnection Facilities may be ready for service on the date herein
provided.
ARTICLE VIII
LIABILITY AND INDEMNIFICATION
8.01 Each Party agrees to protect, defend, indemnify and hold harmless the
other Party and its affiliates, and their respective shareholders, directors,
officers, employees and agents from and against any and all losses, claims,
liens, expenses, damages and demands arising out of, or in connection with, any
personal injuries or death to persons, or damage to
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property, occurring as a result of, or in any way incident to, any act or
omission of such Party, or its directors, officers, employees and agents related
to its performance (or failure in the performance) of its obligations under this
Agreement.
8.02 In the event a claim is filed against either Party for which the
other Party is obligated to indemnify such Party under the terms of this
Agreement, such Party will promptly notify the other Party of such claim and
will not settle such claim without the prior written consent of the other Party.
Participation by a Party in the defense of any claim or suit for which the other
Party shall be found liable, shall not constitute a waiver of such Party's
rights to indemnification hereunder.
8.03 Neither Party shall be liable under any circumstances to the other
Party for special, indirect, punitive, or consequential damages resulting from
or arising out of any act or omission related to its performance (or failure in
the performance) of its obligations under this Agreement, including, without
limitation, loss of profit or business interruption, however the same may be
caused, whether by the sole, joint or concurrent negligence, fault or liability
without fault of any Party, except to the extent caused by gross negligence or
willful misconduct.
8.04 Each Party shall comply with the insurance requirements set forth in
Exhibit C attached hereto and incorporated herein by this reference.
8.05 Each Party shall require all of its contractors and subcontractors
performing any work on the Interconnection Facilities to carry and maintain in
force and effect for the benefit of both ANR and LSP insurance of the type and
in the amounts that each Party normally requires of its contractors and
subcontractors for work on similar facilities. All property peril
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policies carried by contractors and subcontractors must contain a waiver of
subrogation in favor of ANR and The Coastal Corporation, and all liability
policies must name ANR and The Coastal Corporation as additional named insureds
without limitation or restriction.
8.06 Each Party acknowledges and agrees that in no event shall any
partner, shareholder, owner, officer, director, employee, or affiliate of either
Party be personally liable to the other Party for any payments, obligations, or
performance under this Agreement, or any breach or failure of performance of
either Party. The sole recourse for payment or performance of the obligations
hereunder shall be against a Party and not against any other Person.
ARTICLE IX
TRANSFERS AND ASSIGNMENTS
9.01 Any person who succeeds by purchase, merger, or consolidation to all,
or substantially all, of the properties of either ANR or LSP shall be entitled
to the rights and shall be subject to the obligations of its predecessor in
title under this Agreement. This Agreement shall be binding upon and will inure
to the benefit of the successors, nominees and assignees of the Parties.
9.02 No assignment of this Agreement, or any right or obligation
hereunder, shall be made without prior written notice to, and consent of, the
other Party (which consent shall not be unreasonably withheld), except that any
Party shall have the right to assign this Agreement to any financially
responsible affiliate (with equal or higher credit rating) without the prior
written consent of the other Party and no prior written consent of the other
Party is required if the assignment is carried out pursuant to Paragraph 9.03 or
Paragraph 9.04 below.
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9.03 Nothing contained herein shall prevent or restrict either Party from
pledging, granting a security interest in, or assigning as collateral all or any
portion of such Party's interest in this Agreement to secure any debt or
obligation of such Party under any mortgage, deed, trust, security or similar
instrument. ANR shall cooperate with LSP in delivering the necessary consent to
assignment and other documentation reasonably required by lenders in connection
with LSP's financing.
9.04 Nothing contained herein shall prevent or restrict LSP from assigning
all or any portion of its interest in this Agreement to a public or governmental
entity in connection with its financing of infrastructure related to LSP's Power
Plant; provided however, that any such assignment shall relieve LSP of its
obligations and liabilities under this Agreement only to the extent such
obligations and liabilities are assumed and accepted by such entity.
ARTICLE X
NOTICES
10.01 Any notice required or permitted to be given under this Agreement,
or any notice which ANR or LSP may desire to give to the other, shall be in
writing and shall be deemed to have been received upon receipt thereof if sent
by hand delivery, on the day of transmission if sent by telecopier, or upon the
seventh day following the posting thereof if sent by mail, provided such notice
is addressed as follows:
If to LSP:
LSP Energy Limited Partnership
655 Craig Road, Suite 336
St. Louis, Missouri 63141
Attention: Batesville Project Manager
Telecopier No.: 314-993-2790
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If to ANR:
ANR Pipeline Company
500 Renaissance Center
Detroit, Michigan 48243
Attention: Senior Vice President
Project Development and
Facility Planning
Telecopier No. (313) 496-2196
10.02 If either Party elects to change its address or phone number, such
Party shall provide notice to the other Party in accordance with Paragraph
10.01.
ARTICLE XI
FORCE MAJEURE
11.1 Force Majeure. If by reason of Force Majeure either Party hereto is
rendered unable, wholly or in part, to carry out its obligations under this
Agreement, and if such Party gives notice and reasonably full particulars of
such Force Majeure in writing or by facsimile to the other Party within a
reasonable time after the occurrence of the cause relied on, the Party giving
such notice, so far as and to the extent that it is affected by such force
majeure, shall not be liable in damages during the continuance
of any inability so caused; provided, such cause shall be remedied with all
reasonable dispatch.
11.2 Force Majeure Defined. AS used herein, Force Majeure shall mean
causes or events beyond the reasonable control of, and without the fault or
negligence of, the Party claiming such Force Majeure, including, without
limitation, acts of God, unusually severe action of the elements such as floods,
hurricanes, or tornadoes; sabotage; terrorism; war; riots or public disorders;
fire; and actions or failures to act of any Governmental Agency (including
expropriation, requisition, change-in-law or change in any Governmental Approval
or
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environmental constraints lawfully imposed by any Governmental Agency)
preventing, delaying, or otherwise adversely affecting performance of a Party
hereto.
11.3 Limitations. Such force majeure affecting the performance hereunder
by either Party, however, shall not relieve such Party of liability in the event
of its failure to use due diligence to remedy the situation and to remove the
cause in an adequate manner and with all reasonable dispatch, nor shall such
causes or contingencies affecting such performance relieve either Party from its
obligations to make payments then due hereunder.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01 This Agreement shall be construed according to the laws of the State
of Mississippi.
12.02 The numbering and heading of particular provisions of this Agreement
is for the purpose of convenience only, and shall not be construed as having any
substantive effect on the terms of this Agreement.
12.03 The various articles, sections, provisions, and clauses of this
Agreement are severable. The invalidity of any portion hereof shall not affect
the validity of any other portion or the entire Agreement.
12.04 A waiver by either ANR or LSP of any default by the other in the
performance of this Agreement shall not operate or be construed as a waiver of
any future default whether of a like or different character.
12.05 This Agreement constitutes the entirety of the understandings and
agreements of ANR and LSP with respect to the subject matter dealt with herein,
and supersedes and
20
<PAGE>
cancels any prior understandings and agreements, whether written or oral,
relative to said subject matter. No modification or alteration of this Agreement
shall be effective unless first reduced to writing and executed by both ANR and
LSP.
12.06 Nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person not a Party any rights, remedies or
obligations under or by reason of this Agreement.
IN WITNESS WHEREOF, ANR and LSP have executed this Agreement in two (2)
duplicate originals, effective as of the date first written above.
ANR PIPELINE COMPANY
By: /s/ Stanley A. Babuik
--------------------
Name: Stanley A. Babuik
Title: Senior Vice President
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc. Its general partner
By: /s/ Paul G. Thessen
-------------------
Name: Paul G. Thessen
Title: Assistant Vice President
21
<PAGE>
Title:
23
<PAGE>
EXHIBIT A
<PAGE>
Exhibit A
[GRAPHIC]
<PAGE>
Exhibit B
<PAGE>
ANR PIPELINE COMPANY
SPECIFICATION FOR
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
Specification
E.S. - 20
Approved By: /s/ W.W. Vukonich 18 SEP 95
---------------------------- ---------
W.W. Vukonich
Director, Engineering Design
Issue: Revision 4
Originally Issued: September 14, 1983
Dated: September 15, 1995
<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
1.0 GENERAL
All facilities used in the transportation, metering, and regulation of
natural gas that are to be installed on property owned by ANR Pipeline
Company, shall be designed, installed, tested, and maintained in
accordance with the requirements of this Specification, and Federal and
State Codes and statutes.
Any exception to this Specification will be subject to review and approval
by ANR Pipeline Company.
2.0 DEFINITIONS
For the purpose of this Specification, the definitions in this paragraph
shall apply.
2.1 Customer/Custody Transfer Company (abbreviated C/CT Company) -
Company to which ANR Pipeline Company transfers custody of natural
gas, or Company from which ANR Pipeline Company receives gas.
2.2 ANR Pipeline Company - (abbreviated ANR).
2.3 Design Pressure - the maximum pressure at which a natural gas
handling facility may be operated is governed by applicable codes
and material limitations. This pressure is always either equal to or
greater than the maximum allowable operating pressure as defined
below.
2.4 Maximum Allowable Operating Pressure (MAOP) - the maximum pressure
at which a natural gas handling system may be operated as determined
by the maximum upstream pressure or by Limitations imposed by the
operating company and guaranteed by a pressure limiting device as
required by Paragraph 192.195 of the Federal Safety Standards. This
MAOP may never exceed design pressure.
3.0 CODES AND SPECIFICATIONS
3.1 All natural gas handling facilities shall be designed, constructed,
tested and maintained in accordance with the requirements of the
Department of Transportation Minimum Federal Safety Standards for
Gas Lines (Part 192, Title 49, Code of Federal Regulations, herein
abbreviated D.O.T.), and State Codes when applicable, except that a
design factor (F) of no greater than 0.50 shall be used in the
design of all piping components.
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ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
3.2 The following standards and specifications are incorporated in this
Specification by reference, and each is referred to in this
Specification by the indicated abbreviation:
ASTM A-106: "Standard Specification for Seamless Carbon
Steel Pipe for High Temperature Service", latest
revision and edition approved by D.O.T.
API-5L: "API Specification for Line Pipe", latest
revision and edition approved by D.O.T.
ANSI B16.9: "Factory-Made Wrought Steel Butt Welding
Fittings", latest revision and edition.
MSS SP-75: "Specification for High Test Wrought Welding
Fittings", latest revision and edition.
MSS SP-44: "Steel Pipe Line Flanges", latest revision and
edition.
ANSI B31.8: "Gas Transmission and Distribution Piping
Systems", latest revision and edition.
API-1104: "Standard for Welding Pipe Lines and Related
Facilities", latest revision and edition
approved by D.O.T.
API-12K: "A.P.I. Specification for Indirect Type Oil
Field Heaters", latest revision and edition.
ASME Sec. VIII: "ASME Boiler and Pressure Vessel Code, Section
VIII, Division 1, latest revision and edition
approved by D.O.T.
AGA XFO277: American Gas Association, Classification of
Gas Utility Areas for Electrical
Installations, latest revision.
NEC: National Electric Code (National Fire
Protections Association 70), latest edition
approved by D.O.T.
ENV-041: ANR Environmental Compliance Procedure For
Sandblasting Wastes, latest revision.
ENV-042: ANR Environmental Compliance Procedure for
Painting Wastes, latest revision.
4.0 MATERIALS
4.1 All valves, fittings, piping, and appurtenances shall be fabricated
using only those materials which meet the specifications identified
in Appendix "A" and "B" of D.O.T. with the following supplemental
requirements:
a. All facilities exposed to ANR design pressure, including the
entire first stage of regulation and its downstream service
valve, shall be fabricated using only steel components. No
cast iron or semi-steel valves or other components are
acceptable through this regulation stage.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
b. C/CT Company's second stage regulation facilities may contain
cast iron or semi-steel components of sufficient pressure
rating provided that the inlet pressure to this stage does not
exceed 100 psi. If the second stage inlet pressure exceeds 100
psi, only steel components may be used and no cast iron or
semi-steel components are acceptable throughout this
regulation stage.
4.2 C/CT Company shall install pipe of the following minimum
Specifications:
Pipe Description Specification
----------------------------------------- ------------------
1/4" Nom. O.D. thru 2" Nom. O.D. XH W.T. ASTM A-106, API-5L
3" Nom. O.D. thru 24" Nom. O.D. Std. W.T. ASTM A-106, API-5L
*Pipe fully equivalent to those listed above may be used but only
with prior approval from ANR.
4.3 All fittings 12" and smaller shall be Grade "B" fittings
manufactured in accordance with ANSI B16.9. Fittings 16" and larger
may be either GR "B" or high yield strength if pressure requirements
dictate. If high yield strength fittings are utilized they shall be
manufactured in accordance with MSS-SP-75 (for elbows and tees) and
MSS-SP-44 (for flanges). Fittings wall thickness shall have minimum
nominal thicknesses equivalent to the minimum thickness of the pipe
as required in Section 4.2.
4.4 All fittings 1-1/2" and larger in size shall be butt weld. Fittings
1-1/4" and smaller which are to be installed below grade shall be
socket weld.
4.5 Screwed fittings 1-1/4" and smaller in size may be used on above
grade piping.
4.6 Fittings made from malleable iron shall not be used.
4.7 In all cases only weld neck, forged steel flanges shall be used.
Slip-on, lap joint or other similar type flanges are prohibited.
4.8 The use of connection fittings such as elbowlets, threadolets,
couplings ... etc., shall not be used on Elbows or Tees.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
4.9 Field or shop fabricated branch connections shall not incorporate
weld pads, saddles, sockolets, or weldolets over 2" in size.
Weldolets and sockolets 2" in size or less shall not be used
whenever tees can be obtained. A minimum of 2 inches shall be
maintained between adjacent welds of branch connections. The use of
weldolets shall be subject to approval on an individual basis by
ANR. The use of "crosses" and "lateral" fittings is prohibited.
Extruded branch connections shall be designed in accordance with
192.157 of D.O.T., and with Paragraph 831.6, "Extruded Outlets", of
ANSI B31.8.
4.10 All materials purchased shall be suitable for the hydrostatic test
pressure of the C/CT Company's facilities as by this Specification.
5.0 PRESSURE RELIEVING OR LIMITING DEVICES
5.1 C/CT Company relief valves or other pressure limiting devices shall
be designed to protect C/CT Company's facilities from being
over-pressured. The C/CT Company shall contact ANR's Area Manager
for the design pressure of facilities subject to ANR's System MAOP.
When relief valves are used to protect C/CT Company's facilities,
their capacity must be equal to or greater than the maximum possible
capacity that could be seen at the C/CT Company's facilities. When
the MAOP of C/CT Company's facilities is less than 60 psi the actual
set pressure of the C/CT Company relief valves shall not exceed the
set pressures set forth in D.O.T. When the MAOP of C/CT Company's
facilities is greater than 60 psi the actual set pressure of the
C/CT Company's relief valves shall not exceed the MAOP by the lesser
of:
a. 10% of the MAOP of the system being protected or,
b. 75% of SMYS of the weakest component of the system being
protected downstream of regulation.
5.2 Relief valves shall be installed downstream of each stage of
regulation where monitoring regulators are not used. A relief valve
of adequate capacity (adequate capacity meaning the maximum possible
capacity that could ever be seen at the facility) shall be installed
immediately downstream of any regulator which has a lower maximum
allowable outlet pressure than inlet pressure. If installed, service
valves upstream of relief valves shall be equipped with locks
adapted so that the service valves can be closed for maintenance
purposes only and only by authorized persons. Relief valve outlets
shall be adequately braced and piped to the outside of buildings.
Under normal operation the service valve shall be locked in the open
position.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
5.3 Relief valves are not required where monitoring regulators are used
and operated in accordance with Paragraphs 192.201 and 192.739 of
the Federal Safety Standards.
5.4 C/CT Company shall indicate, on the design and construction
drawings, the design and test pressure for each stage of regulation
and the set pressures for all regulators and relief valves.
5.5 C/CT Company shall supply ANR with the MAOP of their facilities. If
the C/CT Company will be transferring gas to ANR, C/CT Company shall
supply ANR with data concerning the maximum capacity that could be
transferred.
5.6 The pressure regulation facilities shall meet the noise level
criteria of Section 13.0. Guaranteed overall sound pressure levels
shall be provided by C/CT Company at a reference point 48 inches
downstream and 29 inches perpendicular to the centerline of the
regulator valve. If regulation facilities are contained in a sound
abating building, C/CT Company shall inform ANR its sound abatement
characteristics.
6.0 HEATERS
6.1 Only indirect water bath heaters shall be used unless specifically
reviewed and approved by ANR. All heater piping, together with the
coil and coil header of the heater, shall be designed in accordance
with ASME Boiler and Pressure Vessel Code Section VIII, Division 1
for the greater of: the design pressure of ANR's facilities or C/CT
Company's facilities. Coils shall be 100% radiographed as per
API-1104. Safety drilling of return bends will not be allowed. The
heater shell shall be designed for a maximum working pressure
capable of withstanding the pressure resulting from the hydrostatic
head of the water bath. The heater, excluding the coil and coil
header shall be designed as per API-12K. Indirect water bath heaters
shall be located a minimum of 15 feet from any building structure
and/or the station blow-off. A heater may be enclosed provided the
installation meets the provisions of the National Electrical Code
and other applicable fire safety codes. If the construction of the
heater permits the removal of the coils the C/CT Company has the
option to either:
a. remove the coils and inspect them at intervals not
exceeding five years (the inspection
rejection/acceptance criteria shall be based on DOT Part
192.485, or 192.487, and ASME Guide Material Appendix
G-6), or
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
b. hydrostatically test the heater in accordance with
Section 12.0 every five years.
If the coils are not removable the heater shall be removed from
service and hydrostatically tested every five years in accordance
with Section 12.0.
6.2 All heaters shall be equipped with a safeguard device which will
shut off fuel to the burner(s) in the event of pilot outage and high
water temperature. All heaters equipped with an automatic re-light
device will remain in the shut-down position if main burner and
pilot fail to be automatically re-lit after three purge and re-light
cycles are attempted. Natural draft firetube burners shall be
equipped with an automatic secondary air controller to control
excess oxygen and to prevent firetube drafting when the burners are
off.
6.3 Heater noise levels shall meet the noise level criteria of Section
13.0. C/CT Company shall provide guaranteed sound pressure levels
(overall level and Octave Band Sound Pressure levels) as measured
from a distance of 3 feet in any direction from the fire tube
combustion air intake and the exhaust stack outlet.
6.4 C/CT Company to provide the maximum emission rate in pounds per
hour of the following at maximum burner capacity:
a. Nitrogen Oxides
b. Hydrocarbons
c. Carbon Monoxides
6.5 Building space heaters shall be either catalytic or electric type.
Open flame space heaters shall not be allowed.
7.0 ODORIZATION FACILITIES
7.1 Odorant storage tanks must be located above ground and shall be
located in an approved secondary containment area.
7.2 Odorant storage tanks shall be designed and fabricated in accordance
with ASME Boiler and Pressure Vessel Code Section VIII, Division 1.
7.3 Underground Storage Tanks (USTs) shall not be allowed.
7.4 Odorant storage tanks must be sized to contain a one year's supply
of odorant.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
7.5 Tank shall be designed and maintained in accordance with applicable
Federal, State, and Local Codes.
8.0 ELECTRICAL FACILITIES
All electrical facilities shall be designed and installed in accordance
with the National Electrical Code (NEC). The AGA's XF0277 recommended
practices shall be used as a guide for classifying areas for electrical
and instrumentation equipment.
8.1 A Class I, Division 1 area is a location where a combustible gas or
vapor is present in the atmosphere under normal operating conditions
(reference the NEC). The extent of a Class I, Division 1 area is
generally 5 feet from the source (reference XFO277).
8.2 A Class I, Division 2 area is a location where a combustible gas or
vapor is present in the atmosphere under abnormal operating
conditions, i.e. accidental rupture of the process piping or vessel
(reference the NEC). The extent of a Class I, Division 2 area is
generally 15 feet from the source (reference XFO277).
9.0 BY-PASS
C/CT Company regulator piping may incorporate a by-pass around regulator
facilities provided that the by-pass piping shall be of a rating designed
to adequately handle the regulators inlet design pressure and include
pressure taps with gauges located downstream of the by-pass isolation
valve. The by-pass valve shall be locked closed when the by-pass is not in
use. When the by-pass is open, the by-pass isolation valve shall be
continuously manned. Locked by-pass valves are not required if the by-pass
is a secondary parallel regulator run conforming to the requirements of
Section 5.0 of this Specification. A by-pass around measurement assemblies
shall not be permitted unless the by-pass is a parallel measurement
assembly.
10.0 BUILDINGS AND ENCLOSURES
10.1 All buildings and enclosures shall be constructed of non-combustible
materials.
10.2 New buildings should be compatible, in color and texture, with newer
buildings existing on the property. In the case of existing older
buildings, the new buildings should be environmentally compatible,
but do not necessarily need to match the older existing buildings.
10.3 Buildings are to be located a minimum of 10 feet from any fence or
property line or as property restrictions dictate.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
11.0 WELDING
All welding on piping components of the C/CT Company facilities shall be
in accordance with D.O.T. All burr welds shall be 100% radiographically
inspected prior to hydrostatic testing.
12.0 HYDROSTATIC TESTING
12.1 C/CT Company facilities shall be hydrostatically tested to
demonstrate the structural integrity of the piping system and to
prove that no leaks exist. Sections of the piping system which are
of different design pressures shall be tested independently to at
least the test pressures established by this section.
12.2 The test pressure for the C/CT Company facilities for systems
operating at a hoop stress greater than 30% of SMYS, shall range
between a maximum of 1.55 times the MAOP and a minimum of 1.5 times
the MAOP for 8 hours. (Unless facilities are to be located in the
State of New York where the duration will be 12 hours).
12.3 Facilities operating below 30% SMYS and above 100 psig (below 20% if
in New York) shall be leak tested between a maximum 1.55 times the
MAOP and a minimum of 1.5 times the MAOP for one hour or until it is
determined that there are no hazardous leaks, whichever is greater.
12.4 For facilities located in a Class 4 location the test medium may
only be water.
12.5 Systems having design pressures at or less than 100 psig shall be
leak tested in accordance with D.O.T.
12.6 Caution shall be exercised during testing to insure that valves are
in a half-open position when tested at pressures in excess of their
maximum working pressure.
12.7 All instrumentation piping and tubing shall be leak tested as per
D.O.T.
12.8 Upon completion of the hydrostatic test, the C/CT Company shall
forward a copy of hydrostatic test report to ANR's Area Manager with
the letter of certification. (See Section 17.0). The report shall
list the types of pressure/temperature equipment and a copy of the
charts.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
12.9 Hydrotest waters shall be removed from property and disposed of in
accordance with Federal, State, and Local Codes. A copy of disposal
records shall be forwarded to ANR's Area Manager. Hydrotest water
shall not be discharged on ANR or adjacent property.
13.0 NOISE LEVELS
13.1 The combined noise level contribution for all C/CT Company
facilities at the nearest residence shall not exceed 40 dBA, or the
measured L 90 level, whichever is greater. If equipment or
attenuation devices fail to perform to the calculated noise level,
it is the C/CT Company's responsibility to provide remedial measures
to achieve the guaranteed level.
13.2 C/CT Company shall provide a statement of compliance (letter) to
ANR's Area Manager, certifying that the facilities installed meet
the sound level requirements of Paragraph 13.1.
13.3 C/CT Company shall provide to ANR:
a. Basis for determination of allowable noise level at
existing or future residence.
b. Equipment manufacturer guaranteed sound pressure levels.
c. Proximity of C/CT Company facilities to fence lines and
nearby residences (scaled vicinity map with C/CT Company
facilities and nearby residences shall be provided). At
ANR's discretion, the sound level requirements in
Paragraph 13.1 may be defined at a distance where the
potential for future development exists.
d. Any acoustical attenuation values given to:
1. distance
2. atmospheric absorption
3. ground effects
4. barriers and enclosures
14.0 SANDBLASTING AND PAINTING WASTES
All sandblasting and painting by C/CT Company shall be performed in
accordance with OSHA regulations.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
14.1 Procedures describing the testing and disposal for sand, paint
chips, and related waste generated during sandblasting for paint
removal shall be submitted by C/CT Company to ANR's Area Manager for
review and approval. These procedures should be in conformance with
ANR Environmental Compliance procedure #ENV-041.
14.2 Procedures describing the storage, shipping, and disposal of
painting wastes shall be submitted by C/CT Company to ANR's Area
Manager for review and approval. These procedures should be in
conformance with ANR Environmental Compliance Procedure #ENV-042.
15.0 PERMITS
C/CT Company shall be responsible for obtaining all installation permits
and environmental clearances for any C/CT Company facilities to be
installed on property owned by ANR. Copies of permits and environmental
clearances for any C/CT Company facility shall be submitted to ANR's Area
Manager for review and approval.
16.0 SPECIAL RESTRICTIONS
16.1 Special restrictions may apply to specific stations due to
agreements with adjacent landowners, townships, etc. These
restrictions may regard aesthetics, set-backs, fencing, barricades,
access, etc. ANR shall advise C/CT Company if such special
restrictions exist that could affect C/CT Company facilities.
16.2 The application of paints and primers containing mercury, chromium,
cadmium or lead shall not be allowed.
16.3 All chemicals/materials, (e.g. glycol, methanol, hydrocarbons, etc.)
shall be stored and handled in accordance with Manufacturer's
Recommendations and in accordance with all Federal, State, and Local
Codes. Storage must be in an ANR approved vessel. Copies of
applicable Federal, State, or Local permits, notifications,
registrations, spill plans, material safety data sheets (MSDS), etc.
shall be provided to ANR. Any spills shall be handled and reported
in accordance with Federal, State, and Local Codes. ANR's Area
Manager shall also be notified immediately when a spill is reported.
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<PAGE>
ENGINEERING SPECIFICATION NO. ES-20
STANDARD FOR CUSTOMER/CUSTODY TRANSFER COMPANY FACILITIES
ON ANR OWNED PROPERTY
- --------------------------------------------------------------------------------
17.0 APPROVALS
17.1 Prior to the installation of any C/CT Company facilities on ANR
property, the C/CT Company shall forward to ANR's Area Manager, for
review and approval:
a. Three (3) sets of prints of the related design and
construction drawings showing complete construction
material specifications;
b. Notes regarding testing, x-ray and design pressures;
c. Any procedures regarding sandblasting and painting waste
management and,
d. Any analysis of allowable noise levels for C/CT Company
facilities.
Upon completion of review, any revisions required for the design to
meet the current ANR Standards and design practices shall be
incorporated on the construction drawings by the C/CT Company and
forwarded to ANR's Area Manager. In any event, drawings of
reproducible quality shall be forwarded to ANR prior to commencement
of any construction. AutoCadd drawings (Release 11 or newer version)
may be submitted in disk format. No construction shall commence
until written authorization is received from ANR's Area Manager. ANR
reserves the right to make additional prints for its internal use.
18.0 C/CT Company facilities shall not be placed in service without prior
written approval from the Area Manager. Approval to place C/CT
Company facilities in service will be contingent upon the receipt of
the C/CT Company's letter to ANR's respective Area Manager,
certifying that the facilities have been installed in accordance
with approved plans, 100% x-rayed and hydrostatically tested in
accordance with this Specification. The C/CT Company shall forward
as-built drawings (or AutoCadd disk) of the facilities within sixty
(60) days to ANR for file retention.
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<PAGE>
EXHIBIT C
Exhibit "C"
INSURANCE REQUIREMENTS
Each Party shall procure, pay premiums, and maintain at all times during the
term hereof sufficient insurance as may be required by law to protect each Party
from and against all claims, demands and causes of action arising by reason of
any work performed under this contract. Such insurance shall be written in the
following minimum amounts.
(a) Workers Compensation Insurance and Employers Liability Insurance as
provided by Statute including coverage under U.S. Longshoremen and Harbor
Workers Act if applicable.
(b) Comprehensive General Liability and Property Damage Insurance: Bodily
Injury and Property Damage Combined Single Limit Each Occurrence:
$1,000,000.
(c) Such policy will include Contractual Liability, Products and Completed
Operations, Independent Contractors, Sudden Accidental Pollution
Liability, Broad Form Property Damage, Premises and Operations, and
deletion of "X", "C", and "U" exclusions, if applicable. Said policy shall
contain a severability of interest clause or a standard cross-liability
endorsement.
(d) Automobile Public Liability and Property Damage Insurance, including all
owned, hired, rented or non-owned automotive equipment. Bodily Injury and
Property Damage Combined Single Limit Each Occurrence: $1,000,000.
(e) Umbrella Liability Insurance coverage in excess of the limits and terms in
(A) through (C) above, with a combined single limit for Bodily Injury and
Property Damage of at least $4,000,000 for each occurrence. For a claims
made policy, either nose or tail coverage for unknown liabilities from the
inception date of this agreement shall be purchased if the policy is
replaced or cancelled.
Each Party agrees to furnish the other Party, prior to the beginning of any work
hereunder, proper Certificates of Insurance evidencing the insurance coverages
required herein. All policies required shall provide a minimum of thirty (30)
days notice to each Party prior to cancellation. Each Party shall be named as
additional insured under all policies required with the exception of the Workers
Compensation policy. All insurance policies required to be carried hereunder
shall contain a waiver of subrogation as to each Party, its agents, employees
and the Parties for which it is operating.
22
<PAGE>
Exhibit 10.7
June 23, 1998
LSP Energy Limited Partnership
655 Craig Road; Suite #336 -
St. Louis, Missouri 63141
Attention: Mr. Paul Thessen
Re: Facilities Agreement
Install Hot Taps, EGM & Inspect
Tennessee's M.P. 63-3+6.8 and
M.P. 63-4+6.8
TGP Contract: TGPLPMRRM3475
Facility No.: 1214
Gentlemen:
This Facilities Agreement ("Agreement") constitutes the agreement between
TENNESSEE GAS PIPELINE COMPANY ("Tennessee") and LSP Energy Limited Partnership
("LSP") concerning the establishment of Tap Facilities and Connecting Facilities
for a new point of delivery at a proposed point of interconnection on
Tennessee's system at or near Tennessee's M.P. 63-3+6.8 and M.P. 63-4+6.8 in
Panola County, Mississippi, which shall occur in three phases: the
"Preconstruction Phase" which shall consist of certain preliminary activities
including preliminary design, detail design, engineering, environmental studies,
cost estimating and preparation and submittal of regulatory filings required to
obtain all necessary certificates, approvals and permits; the "Material
Acquisition Phase" which shall consist of the acquisition of materials,
including certain long lead-time materials; and the "Construction Phase" which
shall consist of the construction, installation and testing of facilities as
well as post-construction compliance monitoring. All three phases shall be
referred to collectively herein as the "Project." Tennessee and LSP are each a
"Party" and together are the "Parties" to this Agreement. Exhibit "A",
graphically representing the responsibilities under this Agreement, is attached
hereto and incorporated herein for all purposes. In consideration of the mutual
covenants, promises and agreements herein contained, Tennessee and LSP agree as
follows:
SECTION I - TAP FACILITIES
1-1 Tap Facilities. The "Tap Facilities" shall consist of the following: two
(2) 12" hot tap assemblies designed for a maximum volume of 216,000
Mcf/day assuming a gas pressure of 550 psig and a gas flow velocity not to
exceed 100 feet per second, electronic gas measurement and communications
equipment ("EGM"), gas chromatograph equipment, EGM/chromatograph
building, valving and appurtenant facilities.
<PAGE>
LSP Energy Limited Partnership
July 23, 1998
Page 2
1.2 Tennessee's Rights and Obligations.
(a) Tennessee or its designee shall design, install, construct, inspect
and test the Tap Facilities, in accordance with "Tennessee's
Specifications" which shall include, but not be limited to, those
specifications stated in Tennessee's Meter Station Design Specifications
and Measurement Practices and Design Specifications for Dry Land Minor
Facilities (Less Than 12" Piping) to be Built by Others, as may be revised
from time to time, in accordance with sound and prudent natural gas
industry practice, and in accordance with all laws, rules, regulations,
orders and directives of any applicable authority having jurisdiction.
Tennessee shall be responsible for applying for and obtaining any
applicable regulatory or environmental approvals required for
construction, operation and maintenance of the Tap Facilities.
(b) Tennessee shall own the Tap Facilities at all times, and the Tap
Facilities shall be subject to Tennessee's sole discretion as to the
standards and requirements of engineering, safety and method of use.
(c) Tennessee agrees to make reasonable effort to complete and place
in-service the Tap Facilities by October 1, 1999, provided that LSP has
complied with and made payment to Tennessee pursuant to Section 3.1(c)
herein by March 1, 1999, or by such other completion date mutually
agreeable to the parties, provided however that such date may be extended
pursuant to Section 6.17 hereunder.
1.3 LSP's Rights and Obligations.
(a) LSP shall reimburse Tennessee for the costs incurred by Tennessee
associated with the Tap Facilities in accordance with the provisions of
Section 3 hereunder.
(b) LSP shall provide support for any regulatory authorization or
permitting requirements necessary for the Tap Facilities at any duly
authorized federal, state or government agency having jurisdiction
including, but not limited to, support for all exhibits required by an
application for FERC authorization.
(c) LSP shall maintain responsibility for the acquisition of all necessary
rights-of-way and permits for the site upon which any portion of the Tap
Facilities located outside of Tennessee's right-of-way will be located.
Unless mutually agreed otherwise, such site shall be adjacent to
Tennessee's right-of-way, and LSP shall perform the necessary site
preparations, site maintenance and improvements, including installation of
site fencing and, if Tennessee deems it to be necessary, both electrical
and telephone service. LSP shall provide, if not already existing, and
shall maintain an all-weather road to access the Tap Facilities site for
performance of the obligations hereunder. Tennessee shall have free and
unrestricted use of such all-weather road at all times to access the Tap
Facilities. Provisions for the necessary property-related document(s)
shall be coordinated with Mr. Randy Keyes, Senior Property Rights
Specialist, at (318) 396-1459, Ext.-2035.
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LSP Energy Limited Partnership
June 23, 1998
Page 3
1.4. Operation and Maintenance. Tennessee or its designee shall, at its own
cost and expense, operate, repair, replace and maintain the Tap
Facilities, in accordance with Tennessee's Specifications, in accordance
with Article X of the General Terms and Conditions of Tennessee's FERC Gas
Tariff, in accordance with sound and prudent natural gas industry
practice, and in accordance with all laws, rules, regulations, orders and
directives of any applicable authority having jurisdiction. Exhibit "B",
specifying Tennessee's and LSP's separate responsibilities under
Tennessee's Operation and Maintenance Policy, is attached hereto and
incorporated herein for all purposes.
1.5. EGM. Measurement will be in accordance with Article IV of the General
Terms and Conditions of Tennessee's FERC Gas Tariff. LSP shall change
measurement charts, furnished by Tennessee, if utilized temporarily prior
to implementation of the EGM, and shall mail such charts to Tennessee for
first integration. Tennessee shall maintain responsibility for the
volumetric determination and thermal (Btu) analysis. The Parties hereby
agree to utilize Tennessee's EGM for volumetric determination and custody
transfer purposes, and Tennessee shall grant access to the electronic
signal to LSP; provided however, Tennessee shall not be liable or
responsible to LSP in any action or claim for consequential, direct or
special damages, loss of use, loss of profits or loss of product as a
result of LSP's use of such electric signal output data made available to
LSP.
1.6 Title. Title to the Tap Facilities shall be in Tennessee's name, and shall
be owned by Tennessee.
1.7 Gas Quality. The applicable gas quality standards shall be in accordance
with Article 11 of the General Terms and Conditions of Tennessee's FERC
Gas Tariff.
SECTION 2 - CONNECTING FACILITIES
2.1 Connecting Facilities. The "Connecting Facilities" shall consist of the
following: measurement facilities, and interconnecting pipeline and
appurtenant facilities.
2.2 Tennessee's Rights and Obligations.
(a) Tennessee has the right, but not the obligation, to inspect the
Connecting Facilities at all reasonable times to assure compliance with
Tennessee's Specifications.
(b) Tennessee or its designee, has the right of access to the Connecting
Facilities installed by LSP at all reasonable times to install Tap
Facilities , and to inspect, test and witness LSP's testing of the
Connecting Facilities to ensure that such facilities are, as applicable,
constructed, installed, operated, maintained, inspected and tested in
accordance with Tennessee's Specifications.
(c) In the event that LSP desires Tennessee to install any Connecting
Facilities to effectuate compliance hereunder, upon written notification
to and acceptance by Tennessee, such Connecting Facilities shall be
installed subject to all terms and conditions of this Agreement, as
applicable.
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LSP Energy Limited Partnership
June 23, 1998
Page 4
(d) Upon the request of LSP Tennessee will advise, and provide input and
recommendations to LSP regarding the design of the Connecting Facilities
to facilitate compliance with Tennessee's Specifications and operational
flexibility of LSP's downstream facilities; provided, however, Tennessee
makes no representation or warranty as to the outcome of such
participation in the design of the Connecting Facilities, nor does
Tennessee's participation relieve LSP of its obligation to comply with the
provisions of this Agreement.
2.3 LSP's Rights and Obligations.
(a) LSP shall design, install, construct and test the Connecting
Facilities in accordance with Tennessee's Specifications in accordance
with sound and prudent natural gas industry practice, and in accordance
with all laws, rules, regulations, orders and directives of any applicable
authority having jurisdiction.
(b) Prior to the start of construction of the Connecting Facilities, LSP
or its designee shall submit to Tennessee for approval such drawings and
documentation as required by Tennessee to verify compliance with
Tennessee's Specifications, and LSP shall provide to Tennessee copies of
any required permits.
(c) In the event any Connecting Facilities installed by LSP are determined
not to be in accordance with Tennessee's Specifications, all necessary
changes and modifications shall be undertaken by LSP at no expense to
Tennessee prior to gas flow.
(d) LSP shall reimburse Tennessee for the costs incurred by Tennessee
associated with the inspection of the Connecting Facilities, and any
expenses incurred by Tennessee pursuant to Section 2.2(c), as applicable,
in accordance with the provisions of Section 3 hereunder.
(e) In the event Tennessee installs any Connecting Facilities pursuant to
Section 2.2(c), LSP shall provide support for any regulatory authorization
or permitting requirements necessary for such Connecting Facilities at any
duly authorized federal, state or government agency having jurisdiction
including, but not limited to, support for all exhibits required by an
application for FERC authorization.
(f) LSP shall maintain responsibility for the acquisition of all necessary
rights-of-way and permits for the Connecting Facilities and for the site
upon which the Connecting Facilities will be located. Unless mutually
agreed otherwise such site shall be adjacent to Tennessee's right-of-way,
and LSP shall perform the necessary site preparations, site maintenance
and improvements, including installation of site fencing, and if Tennessee
deems it to be necessary, both electrical and telephone service. LSP shall
provide, if not already existing, and shall maintain an all-weather road
to access the Connecting Facilities for performance of the obligations
hereunder. Tennessee shall have free and unrestricted use of such
all-weather road at all times to access the Connecting Facilities.
Provisions for the necessary property-related document(s) shall be
coordinated with Mr. Randy Keyes, Senior Property Rights Specialist, at
(318) 396-1459, Ext.-2035.
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LSP Energy Limited Partnership
June 23, 1998
Page 5
(g) LSP shall be responsible for providing pressure regulation and
over-pressure protection for LSP's facilities down stream of the
Connecting Facilities.
(h) At LSP's sole cost, expense and liability, LSP shall maintain
responsibility for the injection of all odorant, if any, at levels
required by all regulatory authorities.
2.4 Operation and Maintenance. LSP or its designee shall operate, repair,
replace and maintain the interconnecting pipeline and appurtenant
facilities, and shall repair, replace and maintain the measurement
facilities in accordance with Tennessee's Specifications, in accordance
with sound and prudent natural gas industry practice, and in accordance
with all laws, rules, regulations, orders and directives of any applicable
authority having jurisdiction. Tennessee or its designee shall operate the
measurement facilities in accordance with Tennessee's Specifications, in
accordance with Article X of the General Terms and Conditions of
Tennessee's FERC Gas Tariff, in accordance with sound and prudent natural
gas industry practice, and in accordance with all laws, rules,
regulations, orders and directives of any applicable authority having
jurisdiction. Exhibit "B," specifying Tennessee's and LSP's separate
responsibilities under Tennessee's Operation and Maintenance Policy, is
attached hereto and incorporated herein for all purposes.
2.5 Title. Title to the Connecting Facilities shall be in LSP's name, and
shall be owned by LSP.
SECTION 3 - PAYMENT TERMS
3.1 Payment. LSP shall pay Tennessee for all costs incurred by Tennessee for
the Project as described herein, including, but not limited to, all costs
and expenses associated with the following: the design, installation,
construction, inspection and testing of the Tap Facilities, the inspection
of the Connecting Facilities, and any expenses incurred by Tennessee
pursuant to Section 2.2(c) as applicable, including any overhead charges,
gas losses and liability as provided in Section 4.2, subject to Sections
1.3(a) and 2.3(d). The incurrence of costs by Tennessee for the Project
shall be in a manner that is consistent with the standards adopted by
Tennessee in undertaking the construction of its own facilities of a
similar nature. It is estimated that the total costs to be paid to
Tennessee by LSP shall be Two Hundred Thirty-One Thousand Dollars
($231,000.00), but such estimate shall not be construed as limiting
payment by LSP. LSP shall pay Tennessee in accordance with the following:
(a) Tennessee estimates that the total costs Tennessee will incur to
complete the Preconstruction Phase, inclusive of overhead charges,
shall be Nineteen Thousand Five Hundred Seventeen Dollars
($19,517.00), but such estimate shall not be construed as limiting
payment by LSP. Within two (2) working days after Tennessee's
execution of this Agreement, Tennessee shall invoice LSP and prior
to the commencement of the Preconstruction Phase, LSP shall pay
Tennessee this estimated amount.
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LSP Energy Limited Partnership
June 23, 1998
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(b) Tennessee estimates that the total costs Tennessee will incur to
complete the Material Acquisition Phase, inclusive of overhead
charges, shall be One Hundred Thirty Thousand, Six Hundred Forty
Dollars ($130,640.00), but such estimate shall not be construed as
limiting payment by LSP. Unless mutually agreed otherwise, Tennessee
shall be under no obligation to commence the Material Acquisition
Phase until LSP has notified Tennessee to proceed with the Material
Acquisition Phase, the Preconstruction Phase has been completed and
LSP has paid Tennessee this estimated amount. Tennessee shall not
invoice LSP for this estimated amount until LSP has notified
Tennessee to proceed with the Material Acquisition Phase.
(c) Tennessee estimates that the total costs Tennessee will incur to
complete the Construction Phase, inclusive of overhead charges,
shall be Eighty Thousand, Eight Hundred Fourty-three Dollars
($80,843.00), but such estimate shall not be construed as limiting
payment by LSP. Unless mutually agreed otherwise, Tennessee shall be
under no obligation to commence the Construction Phase until LSP has
notified Tennessee to proceed with the Construction Phase, the
Material Acquisition Phase has been completed and LSP has paid
Tennessee this estimated amount. Tennessee shall not invoice LSP for
this estimated amount until LSP has notified Tennessee to proceed
with the Construction Phase.
(d) If during any phase of the Project Tennessee anticipates that the
total cost of the Project will exceed the total estimated cost, as
shown in Section 3.1, by twenty percent (20%) or more, Tennessee
shall notify LSP in writing and include documentation to support
such increase. Unless LSP notifies Tennessee within three (3)
working days to discontinue work hereunder, Tennessee shall continue
with the work. If LSP elects to discontinue further construction
work and so advises Tennessee, LSP shall reimburse Tennessee for all
costs incurred up to the time of such notice and for all costs,
including demobilization, necessary to cease such work.
3.2 Reconciliation. As soon as practical after completion of the project as
described herein, Tennessee shall render an invoice or a credit, as the
case may be, for any variance between the prepayment and the total project
cost, including overheads. Within thirty (30) days after completion of
this project as described herein, Tennessee agrees to provide LSP
documentation setting forth in reasonable detail the expenditures and
costs incurred with respect to the Tap Facilities and Connecting
Facilities as applicable.
3.3 Remittance. LSP shall make payment to Tennessee at Houston, Texas within
thirty (30) days from the date such invoice(s) is rendered. Should LSP
fall to make timely payment of such invoice, Tennessee shall be entitled
to collect the amount of such invoice, together with interest, at a rate
equal to the lesser of one percent (1%) above the prime rate from time to
time charged by Chase Manhattan N.A., or the maximum applicable
non-usurious rate of interest. Such interest shall accrue on unpaid
amounts, including on unpaid interest, compounded daily, beginning on the
payment due date of Tennessee's invoice to LSP, and shall terminate when
such invoice is paid.
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LSP Energy Limited Partnership
June 23, 1998
Page 7
3.4 Early Termination. In the event LSP elects to discontinue the project
described herein prior to completion of said project, LSP shall reimburse
Tennessee for all costs incurred by it in accordance with the terms of
this Agreement prior to such discontinuance.
3.5 Right to Audit. Each Party shall have the right, upon thirty (30) day
advance written notice, to examine, at any reasonable time during business
hours, the books and records of the other Party to the extent necessary to
verify the accuracy of any statement or computation made under or pursuant
to provisions hereunder. Any such audits may be initiated at any time
hereunder, but must be initiated not later than twelve (12) months after
the date of Requesting Party's receipt from Tennessee of written notice
that the project described herein has been completed. Should either Party
fail to initiate an audit within such 12-month period, the books and
records of account as prepared shall be presumed to be correct. In the
event an audit reveals discrepancies, errors, or that costs were not
incurred in accordance with the terms of this Agreement , the cost of the
Project shall be adjusted in accordance with the results of the audit and
a reconciliation shall be made in accordance with Section 3.2 hereof. All
costs incurred to conduct the audit shall be borne by the Party requesting
the audit.
SECTION 4 - INDEMNITIES
4.1 Tennessee's Indemnity. Notwithstanding any other provision in this
Agreement, Tennessee agrees to protect, defend, indemnify and hold LSP,
its directors, officers, employees, attorneys-in-fact, agents, and
affiliated companies, free and harmless from and against any and all
losses, claims, liens, demands, and causes of action of every kind and
character, including, but not limited to, the amounts of judgments,
penalties, interest, court costs, investigation expenses and costs and
legal fees incurred by LSP, its directors, officers, employees,
attorneys-in-fact, agents and affiliated companies, in defense of same
arising in favor of any governmental agencies, third parties, contractors
or subcontractors, on account of taxes, claims, liens, debts, personal
injuries, death or damages to property, and all other claims or demands of
every character occurring or in anywise incident to, in connection with,
or arising out of Tennessee's or its contractors or subcontractors
negligence, gross negligence or willful misconduct solely related to
activities performed under this Agreement. This indemnity provision may be
limited as necessary by applicable law.
4.2 LSP's Indemnity. Notwithstanding any other provision in this Agreement,
LSP agrees to protect, defend, indemnify and hold Tennessee, its
directors, officers, employees, attorneys-in-fact, agents, and affiliated
companies, free and harmless from and against any and all losses, claims,
liens, demands, and causes of action of every kind and character,
including, but not limited to, the amounts of judgments, penalties,
interest, court costs, investigation expenses and costs and legal fees
incurred by Tennessee, its directors, officers, employees,
attorneys-in-fact, agents and affiliated companies, in defense of same
arising in favor of any governmental agencies, third parties, contractors
or subcontractors, on account of taxes, claims, liens, debts, personal
injuries, death or damages to property, and all other claims or demands of
every character occurring or in anywise incident to, in connection with,
or arising out of LSP's or its contractors or subcontractor's negligence,
gross negligence or willful misconduct solely related to activities
performed under this Agreement. This indemnity provision may be limited as
necessary by applicable law.
4.3 Limitation on Liability Notwithstanding any other provision in this
Agreement, in no event shall either Party be liable to the other Party for
consequential, incidental or punitive
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LSP Energy Limited Partnership
July 23, 1998
Page 8
losses, damages or expenses (including lost profits or savings) even if
advised of their possible existences, except to the extent caused by gross
negligence or willful misconduct.
SECTION 5 - TERM AND TERMINATION
5.1 Term and Termination. This Agreement shall be effective as of April 15,
1998 and shall remain in full force and effect thereafter until the final
removal and/or FERC approved abandonment of any Tap Facilities or Tap
Facilities and Connecting Facilities constructed hereunder is complete,
unless sooner terminated by either Party, as follows:
(a) In the event LSP desires to disconnect the Connecting Facilities
from Tennessee, LSP shall tender sixty (60) days advance written
notice to Tennessee of such intent, and upon such disconnection of
the Connecting Facilities, this Agreement shall terminate; or,
(b) Tennessee shall have the right to terminate this Agreement upon
sixty(60) days advance written notice to LSP (i) in the event LSP
has failed to make timely payment of the estimated amount in
accordance with the payment provisions hereunder, and LSP fails to
cure any such breach during the sixty(60) day period following its
receipt of notice from Tennessee, or (ii) LSP has not authorized
Tennessee by March 1, 1999 to proceed in accordance with Section
3.1(c) and LSP fails to authorize Tennessee to proceed during the
sixty(60) day period following its receipt of notice from Tennessee.
Otherwise, Tennessee shall have the right to terminate this
Agreement upon sixty (60) days advance written notice to LSP if gas
has not flowed through the Connecting Facilities for the previous
period of twelve (12) consecutive months, or if LSP or its designee
has caused the Connecting Facilities to be disconnected or removed.
5.2 Survival. The indemnification provisions and payment obligations hereof
shall survive any termination relative to all losses, deaths, injuries,
claims, billings, liens, demands and causes of action of every kind and
character, discovered or undiscovered, arising out of, in connection with,
or as an incident to this Agreement.
SECTION 6 - MISCELLANEOUS
6.1 Liens. Each Party agrees to notify the other Party immediately of the
filing of all such claims and any liens including, without limitation,
laborers', materialmen's and mechanics' liens upon property of the other,
and upon which the work is located, arising out of the services, labor and
material furnished by either Party or its contractors or subcontractors
under this Agreement. Either Party may, upon receipt of notice of the
filing of any such liens, at its option, require a bond in an amount and
with such sureties as may be approved by such Party, conditioned to
indemnify and save harmless such Party from all such liens upon or against
its property. In the event such Party fails or refuses to furnish such
bond when so required, the other Party shall have the right to pay any
sums necessary to obtain the release of such liens and bill the costs to
the Party failing to keep the others property free of claims.
6.2 Drug and Alcohol Testing. Tennessee and LSP shall be in compliance with
the terms of the United States Department of Transportation Federal
Pipeline Safety Drug and Alcohol Testing regulations, as applicable.
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LSP Energy Limited Partnership
June 23, 1998
Page 9
6.3 Reliance. All factual recitals, covenants, agreements, representations and
warranties made herein shall be deemed to have been relied on by the
Parties in entering into this Agreement.
6.4 Dispute Resolution. If a disagreement under this Agreement arises between
the Parties, prior to sending a formal demand letter from counsel or
filing a lawsuit, LSP and Tennessee will seek in good faith to resolve the
dispute by agreement. Agreement will not be considered unachievable until
the matter has been turned over to an executive officer of LSP and
Tennessee respectively and they are unable to resolve the matter.
Unreasonable delay on the part of an officer to attend to a dispute will
indicate that agreement is unachievable. Agreement between LSP and
Tennessee in a dispute may include disposition of the matter, agreement to
submit the dispute to arbitration or agreement upon a conciliatory method.
6.5 Legal Fees. If any legal action is brought by either of the Parties
hereto, it is expressly agreed that the Party in whose favor final
judgment shall be entered shall be entitled to recover from the other
Party reasonable attorney's fees in addition to any other relief which may
be awarded.
6.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF TENNESSEE AND
LSP SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
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LSP Energy Limited Partnership
June 23, 1998
Page 10
6.7 Notices. Any statements, payments or other communications provided for in
this Agreement shall be in writing and shall be given by personal delivery
or shall be deposited with the United States Postal Service, postage
prepaid, and addressed as follows:
(a) All notices to be sent to Tennessee shall be addressed to:
Tennessee Gas Pipeline Company
P.O. Box 2511
Houston, Texas 77252
Attention: Manager, Property Rights Services
Phone: (800) 781-4152
FAX: (713) 420-2155
For Invoice Matters:
Attention: Property Accounting Department (713) 420-7006
Re: Reimbursement Agreement No.: TGPLPMRRM3475
Facility Request No.: 1214
For Engineering Matters:
Attention: Mr. James Odom
(713) 420-3006
For Measurement Matters (Operations, Equipment, Maintenance, etc.):
Attention: Operating Network
(800) 231-2800
(b) All notices to be sent to LSP shall be addressed to:
L.S. Power 655 LSP's 24-hr Contact & Phone:
Craig Road; Suite #336
St. Louis, Missouri 63141
Attention: Mr. Paul Thessen
(314) 993-2700
FAX: (314) 993-2790
Either Party may change its address for notice by giving notice. LSP shall
provide to Tennessee LSP's 24-hour contact and phone number prior to
initial gas flow.
6.8 Governmental Laws and Regulations.
(a) This Agreement, and all the terms and conditions contained herein, are
subject to Tennessee's FERC Gas Tariff and to all valid and applicable
laws, orders, directives, rules and regulations of duly constituted
authorities having jurisdiction, as amended from time to time. This
Agreement is conditioned upon the receipt and acceptance of all regulatory
authorizations necessary to the rendering of this service by Tennessee on
terms acceptable to Tennessee in its sole discretion. No construction or
installation shall be commenced hereunder prior to the receipt and
acceptance of such regulatory authorizations.
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LSP Energy Limited Partnership
June 23, 1998
Page 11
(b) Tennessee shall not use the costs incurred and reimbursed hereunder
for the construction of the Tap Facilities and Connecting Facilities as
either revenues or costs in establishing its general system rates.
(c) Nothing herein shall require Tennessee to file an application for a
certificate of public convenience and necessity under Section 7(c) of the
Natural Gas Act.
6.9 Successors and Assigns.
(a) The rights and obligations contained in this Agreement shall not be
assigned by either Party without the express written consent of the
non-assigning Party being first obtained, except that either Party may
assign to any of its subsidiary or affiliated companies the performance or
exercise of its obligations or rights hereunder, and, to the extent its
obligations are so performed by its affiliate such performance shall be
applied to its obligation but no such designation or assignment shall
relieve Tennessee or LSP of any obligations hereunder except to the extent
the same are fully performed by such designee or assignee, and LSP may
assign this Agreement to its lenders in connection with its financing
without first obtaining that consent; provided further that LSP may assign
the rights but not the obligations under this agreement to a public or
governmental entity without first obtaining that consent.
(b) This Agreement shall bind and inure to the benefit of any successors
or assigns to the original Parties to this Agreement, but such assignment
shall not relieve either Party of any obligations incurred prior to such
assignment, nor shall any assignment be effective as to the non-assigning
Party until the aforementioned written consent is granted and a copy of
the recorded instrument of assignment together with written notice of
transfer is delivered to the non-assigning Party.
(c) The assigning Party must provide written notification to the
non-assigning Party of such assignment of this Agreement, complete with
signatures of both the assignor and the assignee. The recognition date of
any assignment for the purposes of this Agreement shall be the first day
of the month following the latter of: i) the date written notification of
assignment is delivered to the other Party; or, ii) the date written
consent is granted if required.
6.10 Severabilily. If any of the terms and conditions of this Agreement are
held by any court of competent jurisdiction to contravene, or to be
invalid under, the laws of any political body having jurisdiction over
this subject matter, that contravention or invalidity shall not invalidate
this entire Agreement. Instead, this Agreement shall be construed as
reformed as to the extent necessary to render valid the particular
provision or provisions held to be invalid, consistent with the original
intent of that provision and the rights and obligations of the Parties
shall be construed and enforced accordingly, and this Agreement shall
remain in full force and effect as reformed.
6.11 Entire Agreement. This Agreement, including any exhibits and any written
amendments expressly made a part of this Agreement, states the entire
understanding between the Parties concerning the subject matter of this
Agreement, and supersedes all prior oral and written communications. No
amendment to this Agreement shall be effective unless it is in writing and
signed by an authorized employee of each of the Parties hereto.
6.12 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all the Parties had signed the
same document. All
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LSP Energy Limited Partnership
June 23, 1998
Page 12
counterparts shall be construed together and shall constitute one and the
same instrument when executed by an authorized employee of each of the
Parties hereto.
6.13 Incorporation of Exhibits. Any Exhibit or Appendix attached to this
Agreement is incorporated into this Agreement as fully as if stated within
the body of this Agreement. In the event of a conflict between this
Agreement and any Exhibits or Appendices attached hereto, the terms of the
Agreement shall override.
6.14 Captions. The titles and captions to each of the various Sections in this
Agreement are inserted only for convenience and for reference and shall
not affect the construction or interpretation of this Agreement.
6.15 Drafting Party. This Agreement expresses the mutual intent of the Parties
to this Agreement. Accordingly, the rule of construction against the
drafting Party shall have no application to this Agreement.
6.16 Waiver of Rights. The respective rights and remedies of each Party to this
Agreement are cumulative, and no exercise or enforcement by either Party
or remedy hereunder shall preclude the exercise or enforcement by such
Party of any other night or remedy hereunder, or which such Party is
entitled by law to enforce. Each Party may waive any obligation of, or
restriction upon the other Party under this Agreement only in writing. No
failure, refusal, neglect, waiver, forbearance, or omission of either
Party to exercise any right under this Agreement or to insist upon full
compliance by the other with its obligations hereunder shall constitute a
waiver of any provision of this Agreement nor shall it impair the exercise
of any such right or of any other right to which it is entitled.
6.17 Force Maieure Event. Neither Party shall be liable in damages to the other
Party for any act, omission or circumstances occasioned by or in
consequence of any force majeure events, including acts of God, strikes,
lockouts or other industrial disturbances, acts of the public enemy or
terrorists, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, explosions or accidents to
machinery or wells or lines of pipe, line or well freeze-ups, inability to
obtain or unavoidable delay in obtaining materials, supplies, equipment,
permits or labor to perform or comply with any obligations or conditions
of an agreement, inability to obtain access to rights-of-way, the binding
order of any court or governmental authority which has been resisted in
good faith by all reasonable means, or any other act, omission or
circumstances occasioned by or in consequence of any other cause, whether
of the kind herein enumerated, or otherwise, beyond the reasonable control
of and without the fault or negligence of the affected Party. The Party
experiencing a force majeure event shall give prompt written notice of the
force majeure event, its expected duration, and its termination to the
other Party. The suspension of performance shall be no longer than the
duration of the force majeure event.
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LSP Energy Limited Partnership
June 23, 1998
Page 13
If the foregoing correctly reflects your understanding of our agreement, please
evidence your acceptance in the space provided below and return both originals
to the attention of the undersigned (Suite E-619). The Agreement will then be
presented to Tennessee's management for acceptance and execution. This letter
shall not constitute an offer by Tennessee, and shall only become a Contract
after it is accepted by Tennessee upon execution by a Tennessee Officer or duly
appointed "Agent and Attorney-in-fact." Upon such acceptance and execution by
Tennessee, a fully executed original will be returned for your retention. In the
event the Agreement is not executed within ninety (90) days after the date of
submission, the terms and conditions set forth herein shall become null and
void.
Very truly yours,
TENNESSEE GAS PIPELINE
COMPANY
/s/ Tommy R. Fadal
-----------------------
Tommy R Fadal
Senior Contract Analyst
AGREED TO AND ACCEPTED THIS 24th DAY OF July, 1998.
---- ---- --
TENNESSEE GAS PIPELINE COMPANY
By:/s/ Wiaston A. Johnson
-----------------------------
Name: Wiaston A. Johnson II
--------------------------
Title: Vice President
-------------------------
AGREED TO AND ACCEPTED THIS 17th DAY OF July, 1998.
---- ---- --
LSP ENERGY LIMITED PARTNERSHIP
BY: LSP ENERGY, INC., ITS GENERAL PARTNER
By: /s/ Paul G. Thessen
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Name: Paul G. Thessen
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Title: Assistant Vice President
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EXHIBIT "B"
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TENNESSEE GAS MEASUREMENT DEPARTMENT
OPERATION/MAINTENANCE POLICY FOR NEW FACILITIES
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OPERATIONS
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BY TENNESSEE:
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1) Volume and gas quality (BTU) determination
a) Electronic Custody Transfer:
- chromatographs or samplers and gas analysis
- electronic instrumentation (flow computer, xducers, etc.)
b) If Conventional Measurement:
- chart integration and gas analysis
- supply of charts
- supply of envelopes
2) Facility inspections and calibration tests
3) Plate changes
4) Flow/volume control
5) Hot taps
BY CUSTOMER:
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1) Chart changing, if utilized temporarily
2) Pressure regulation, over-pressure protection
3) Heating facilities
4) Plate changes
5) Interconnecting pipeline
MAINTENANCE
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BY TENNESSEE:
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1) Additional orifice plates (the complete initial set to be furnished by
customer)
2) Minor repairs
- ink and inking systems
- linkages
- instrument valves
3) Hot taps
BY CUSTOMER:
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1) Repair or replacement of major equipment
- valves
- orifice fittings
- valve actuators
- recorder bellows
- etc.
2) General site upkeep
- building
- painting
- yard and fences
- security
- all-weather access road
- etc.
3) Interconnecting pipeline
* Tennessee will ALWAYS operate and maintain Tennessee-installed electronic
equipment.
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Exhibit 10.8
TURNKEY ENGINEERING, PROCUREMENT AND
CONSTRUCTION AGREEMENT
by and between
LSP Energy Limited Partnership
as Owner
and
BVZ Power Partners - Batesville
as Contractor
Dated as of July 22, 1998
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TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS.......................................................1
ARTICLE 2. RELATIONSHIP OF OWNER, CONTRACTOR AND SUBCONTRACTORS.............15
2.1. Status of Contractor................................................15
2.2. Subcontractors......................................................15
2.3. Data From Subcontractors............................................16
ARTICLE 3. CONTRACTOR'S RESPONSIBILITIES....................................17
3.1. Facility Design and Construction....................................17
3.2. Subcontractors......................................................18
3.3. Control of the Work.................................................18
3.4. Related Costs.......................................................18
3.5. Operator Orientation................................................18
3.6. Clean-up............................................................18
3.7. Safety..............................................................19
3.8. Reasonable Access...................................................19
3.9. Emergencies.........................................................19
3.10. License............................................................20
3.11. Approvals, Certificates, Permits, and Licenses.....................20
3.12. Compliance with Laws...............................................20
3.13. Status Reports.....................................................21
3.14. Taxes..............................................................21
3.15. Owner's Right to Inspect; Correction of Defects....................21
3.16. Procurement........................................................22
3.17. Assistance.........................................................23
3.18. Publicity..........................................................24
3.19. Personnel - General................................................24
3.20. Project Executive..................................................24
3.21. Approval of Key Personnel..........................................25
3.22. Spare Parts........................................................25
3.23. Final Manuals and Record Drawings..................................26
3.24. Interconnection....................................................26
3.25. Contractor Consumables.............................................26
3.26. Fire Prevention....................................................26
3.27. First Aid Facilities...............................................27
3.28. Environmental Conditions...........................................27
3.29. Site Conditions....................................................27
3.30. Owner's Field Office...............................................28
3.31. Responsibility for Work, Security and Property.....................28
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3.32. Commercial Activities..............................................28
3.33. Illumination.......................................................29
3.34. Explosives.........................................................29
3.35. Consumables Assistance.............................................29
3.36. Coordination of Final Acceptance Tests.............................29
3.37. Coordination of Early Substantial Completion.......................30
ARTICLE 4. OWNER'S RESPONSIBILITIES.........................................30
4.1. Owner Consumables...................................................30
4.2. Payment.............................................................31
4.3. Access to Site......................................................31
4.4. Owner Approvals, Certificates, Permits, and Licenses................31
4.5. Owner Taxes.........................................................31
4.6. Owner Operating Personnel...........................................32
4.7. Interconnection.....................................................32
4.8. Approval of Engineering Drawing.....................................32
4.9. Owner's Project Manager.............................................33
4.10. Waste Disposal.....................................................33
4.11. Spare Parts........................................................33
4.12. Acceptance of Electricity..........................................34
4.13. Cooperation in Purchase Order Administration.......................34
ARTICLE 5. COMMENCEMENT OF WORK.............................................34
5.1. Commencement of Work................................................34
5.2. Schedule............................................................34
5.3. Limited Notice to Proceed...........................................35
ARTICLE 6. CHANGE ORDERS; FORCE MAJEURE.....................................35
6.1. Change Orders.......................................................35
6.2. Request by Owner....................................................35
6.3. Request By Contractor...............................................36
6.4. Price and Schedule Adjustments for Change Order Work................37
6.5. Force Majeure.......................................................37
ARTICLE 7. MAXIMUM PRICE; CONTRACT PRICE; PAYMENTS TO CONTRACTOR............38
7.1. Maximum Price; Contract Price.......................................38
7.2. Progress Payments...................................................38
7.3. Final Acceptance Test Completion Payment............................39
7.4. Final Completion Payment............................................40
7.5. Payments Not Acceptance of Work.....................................41
7.6. Payments Withheld...................................................41
7.7. Payment of Subcontractors...........................................42
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7.8. Liens...............................................................42
7.9. Late Payments.......................................................43
ARTICLE 8. TITLE AND RISK OF LOSS...........................................43
8.1. Clear Title.........................................................43
8.2. Risk of Loss........................................................43
ARTICLE 9. INSURANCE........................................................44
ARTICLE 10. COMPLETION......................................................44
10.1. Mechanical Completion; Substantial Completion; Final Acceptance Test
Completion...............................................................44
10.2. Notice of Substantial Completion...................................49
10.3. Punchlist. Concurrent with the submission of any Certificate of
Substantial Completion by Contractor,....................................50
10.4. Notice of Final Acceptance Test Completion.........................50
10.5. Final Completion...................................................51
10.6. Right of Waiver....................................................51
10.7. Long-Term Obligations..............................................51
10.8. Operating Revenues.................................................51
ARTICLE 11. WARRANTY AND GUARANTY...........................................52
11.1. Contractor's Warranty..............................................52
11.2. Remedy.............................................................52
11.3. Vendor Warranties..................................................53
11.4. Warranty Limitations...............................................54
ARTICLE 12. ACCEPTANCE TESTING AND SCHEDULE AND PERFORMANCE GUARANTEES......54
12.1. Guarantee of Timely Completion.....................................54
12.2. Delays Caused by Contractor........................................54
12.3. Schedule Bonus.....................................................55
12.4. Acceptance Tests...................................................55
12.5. Setoff; Payment of Liquidated Damages..............................65
ARTICLE 13. LIMITATIONS ON LIABILITY; BONUSES...............................65
13.1. Limitation of Liquidated Damages...................................65
13.2. Limitations of Bonuses.............................................65
13.3. Maximum Liability..................................................65
13.4. Consequential Damages..............................................66
13.5. Releases Valid in All Events.......................................66
13.6. Liquidated Damages Not Penalty.....................................66
13.7. No Implied Warranties..............................................67
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ARTICLE 14. CONTRACTOR'S REPRESENTATIONS....................................67
14.1. Corporate Standing.................................................67
14.2. No Violation of Law; Litigation....................................67
14.3. Consents; Licenses.................................................68
14.4. No Breach..........................................................68
14.5. Partnership Action.................................................68
14.6. Qualifications.....................................................68
ARTICLE 15. OWNER'S REPRESENTATIONS.........................................69
15.1. Corporate Standing.................................................69
15.2. Litigation.........................................................69
15.3. No Breach..........................................................69
15.4. Partnership Action.................................................69
ARTICLE 16. DEFAULT AND TERMINATION.........................................70
16.1. Default by Contractor..............................................70
16.2. Optional Termination by Owner......................................73
16.3. Termination by Contractor..........................................74
16.4. Suspension of the Work.............................................75
ARTICLE 17. INDEMNITIES.....................................................76
17.1. General Indemnity..................................................76
17.2. Patent Indemnification.............................................77
17.3. Effect of Owner's Actions..........................................77
17.4. No Limitation of Contractor's Obligation...........................77
17.5. Tax Indemnity......................................................78
17.6. Availability Reimbursement. (a)...................................78
ARTICLE 18. DISPUTE RESOLUTION..............................................79
18.1. Procedure..........................................................79
18.2. Litigation and Submission to Jurisdiction..........................80
18.3. Continuation of Work...............................................80
ARTICLE 19. MISCELLANEOUS PROVISIONS........................................81
19.1. Entire Agreement...................................................81
19.2. Amendments.........................................................81
19.3. Joint Effort.......................................................81
19.4. Captions...........................................................81
19.5. Notice.............................................................82
19.6. Severability.......................................................83
19.7. Confidentiality....................................................83
19.8. Assignment.........................................................84
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19.9. No Waiver..........................................................85
19.10. APPLICABLE LAW....................................................85
19.11. Successors and Assigns............................................85
19.12. Exhibits..........................................................85
19.13. Obligations.......................................................85
19.14. Financing Assistance..............................................86
19.15. Further Assurances................................................86
19.16. Priority..........................................................86
19.17. Counterparts......................................................87
19.18. Lender Approval...................................................87
19.19. Non-Recourse......................................................87
19.20. Joint and Several Liability.......................................87
ARTICLE 20. INFRASTRUCTURE..................................................88
20.1. Intention..........................................................88
20.2. Engineering and Design.............................................88
20.3. Payments...........................................................90
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EXHIBIT INDEX
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Exhibit A -- Acceptance Tests
Exhibit B -- Form of Certificate of Substantial Completion
Exhibit C -- Form of Certificate of Final Acceptance Test Completion
Exhibit D -- Form of Final Completion Certificate
Exhibit E-1 -- Form of Limited Notice to Proceed
Exhibit E-2 -- Form of Notice to Proceed
Exhibit F-1 -- Schedule of Values
Exhibit F-2 -- Estimated Cash Flow
Exhibit G -- Form of Progress Invoice
Exhibit H -- Project Schedule
Exhibit I-1 -- Scope of Services - Plant
Exhibit I-2 -- Scope of Supply - Plant
Exhibit I-3 -- Scope of Services - Infrastructure
Exhibit I-4 -- Scope of Supply - Infrastructure
Exhibit J -- Site Description
Exhibit K -- List of Owner-Procured Equipment and Services
Exhibit L -- List of Common Facilities Equipment
Exhibit M -- Permits
Exhibit N -- Reimbursement Schedule for Change Orders
Exhibit O -- Insurance
Exhibit P -- List of Approved Subcontractors
Exhibit Q -- Plans/Specifications
Exhibit R -- Owner Obligations
Exhibit S -- Requirements of Project Agreements
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TURNKEY ENGINEERING, PROCUREMENT
AND CONSTRUCTION AGREEMENT
This TURNKEY ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
dated as of July 22, 1998 (the "Effective Date"), by and between LSP Energy
Limited Partnership, a Delaware limited partnership, having its principal place
of business at c/o LS Power, LLC, Two Tower Center, 10th Floor, East Brunswick,
New Jersey 08816 ("Owner") and BVZ Power Partners - Batesville, a joint venture
between Black & Veatch Construction, Inc., a Missouri corporation and H.B.
Zachry Company, a Delaware corporation, having its principal place of business
at 11401 Lamar Avenue, Overland Park, Kansas 66211 ("Contractor").
W I T N E S E T H:
WHEREAS, Owner desires to engage Contractor to design, engineer,
procure, construct, start-up and test a nominal 800 megawatt gas-fired, electric
generation plant (the "Facility"), to be located in Batesville, Mississippi;
WHEREAS, Contractor desires to provide design, engineering,
procurement, construction, start-up and testing for the Facility on a turnkey,
stipulated, fixed-sum basis under the terms and conditions of this Agreement;
WHEREAS, Contractor is willing to guarantee the timely completion
and warrant the proper construction and installation of the Facility, as
hereinafter described; and
WHEREAS, Contractor is willing to guarantee the operating
performance of the Facility to certain minimum standards for a period of
operation, as hereinafter described.
NOW THEREFORE, in consideration of the premises and the mutual
promises and agreements of the parties herein expressed, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Except as otherwise expressly provided or unless the context
otherwise requires, the following terms shall have the meanings specified in
this Article 1 when capitalized and used in this Agreement. The meanings
specified are applicable to both the singular and plural.
"Acceptance Tests" shall mean the Unit Power Output Test, the
Maximum Unit Power Output Test, the Unit Heat Rate Test, the Auxiliary Load
Test, the Maximum Auxiliary Load Test, the Cooling Tower Performance Test, the
Availability Test, the Reliability Test, the Start-up Test, the Sound Level
Test, the Emissions Test and the Capability Tests, as such tests are described
in Exhibit A.
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"Acceptance Testing Notice" shall have the meaning set forth in
Section 12.4(a).
"Affiliate" shall mean any entity owned by, owning, controlled by,
controlling, or under common control with or ownership of Contractor, any
general partner of Contractor or Owner, as the case may be.
"Agreement" shall mean this Turnkey Engineering, Procurement and
Construction Agreement (including all Exhibits attached hereto) as amended,
supplemented or otherwise modified from time to time.
"Authority" shall mean the Mississippi Major Economic Impact
Authority, a division of and within the Department of Economic and Community
Development of the State of Mississippi.
"Auxiliary Load Guarantee" shall mean the "Auxiliary Load"
performance criteria for the facility set forth in Exhibit A.
"Auxiliary Load Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of the Facility with the Auxiliary Load
Guarantee.
"Availability Guarantee" shall mean the availability performance
criteria for the Facility set forth in Exhibit A.
"Availability Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of the Facility with the Availability
Guarantee.
"Base Conditions" shall mean those conditions specified in Exhibit A
under which the Guaranteed Values are made.
"BTU" shall mean British Thermal Unit.
"Business Day" shall mean any calendar day other than a Saturday,
Sunday or Federal holiday.
"Capability Tests" shall mean, collectively, the Substantial
Completion Capability Tests and the Final Completion Capability Tests.
"Certificate of Final Acceptance Test Completion" shall mean the
certificate furnished by Contractor pursuant to Section 10.4 in the form of
Exhibit C attached hereto.
"Certificate of Substantial Completion" shall mean the certificate
furnished by Contractor pursuant to Section 10.2 in the form of Exhibit B
attached hereto.
"Change in Law" shall mean any changes in applicable Law following
the Effective Date.
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"Change Order" shall mean a written order to Contractor pursuant to
Article 6 hereof, signed by Owner, and countersigned by Contractor, authorizing
an addition, deletion or revision in the Work, the Scope of Work, the Project
Schedule, the Guaranteed Completion Date, the Payment Schedule or the Maximum
Price.
"Commercial Tolerance Band" shall mean (a) with respect to Unit
Power Output and Maximum Unit Power Output, 0.0075 and (b) with respect to Unit
Heat Rate, 0.0125, in each case as such commercial tolerance band may be
adjusted pursuant to Section 2.1.8 of Exhibit A.
"Common Facilities" shall mean the Equipment designated as "common
facilities" on Exhibit L, together with all associated equipment, buildings,
facilities, supports, wiring, instruments and controls, pumps and piping,
motors, actuators, valves and other systems which are needed to make them
operational.
"Construction Financing" shall mean the arrangements made by Owner
to fully finance the development, construction, start-up and testing of the
Facility.
"Consumables" shall have the meaning set forth in Section 4.1.
"Contract Price" shall mean the amount representing the difference
between the Maximum Price and the Extra-Contractual Costs and, with the
exception of the reimbursements for taxes to be made by Owner to Contractor
pursuant to Section 4.5 and Article 7, shall be the entire amount which is
payable by Owner to Contractor for performing the Work (including the
Preliminary Work) to be performed by Contractor under this Agreement. Owner and
Contractor agree that the Contract Price is initially estimated to be the amount
of Sixty-Seven Million Four Hundred Ninety-Eight Thousand Three Hundred dollars
($67,498,300), to be adjusted subsequently, however, as provided herein.
"Cooling Tower Performance Guarantee" shall mean the "Cooling Tower
Performance" criteria for the Facility set forth in Exhibit A.
"Cooling Tower Performance Shortfall" shall have the meaning set
forth in Section 12.4(c)(6).
"Cooling Tower Performance Test" shall mean the test described in
Exhibit A to demonstrate and verify compliance of the Facility with the Cooling
Tower Performance Guarantee.
"Date Certain" shall mean the date or dates which occur(s) three
hundred (300) Days after the Guaranteed Completion Date.
"Day" shall mean a calendar day and shall include Saturdays, Sundays
and holidays, except that, in the event that a monetary obligation to be
performed under this
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Agreement falls due on a day other than a Business Day, such obligation shall be
deemed due on the next Business Day thereafter.
"Delay Liquidated Damages" shall mean the liquidated damages payable
by Contractor to Owner pursuant to Section 12.2, Section 16.1.6 (b) and Section
17.6.
"Effective Date" shall mean the date stated as the Effective Date on
the first page hereof.
"Emissions Guarantee" shall mean each Unit's performance criteria
for air emissions and exhaust set forth in Exhibit A.
"Emissions Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of each Unit with the Emissions Guarantee.
"Equipment" shall mean all of the machinery, equipment, materials,
apparatus, structures, supplies and other goods provided or required by the
terms of this Agreement to be provided by Contractor and each Subcontractor or
procured by Owner pursuant to Section 3.16(b) in connection with the performance
of the Work (except that the term "Equipment" shall not include any materials,
apparatus, or tools owned by Contractor or any Subcontractor which are used to
complete the Work but are not contemplated under this Agreement to become part
of the Facility).
"Extra-Contractual Costs" shall mean the sum of the various costs of
all the Owner Purchases, including all other direct costs associated with the
procurement thereof, including, without limitation, any transportation or
insurance charges, duties, fees, or royalties imposed with respect thereto, any
late charges or interest imposed by a Vendor or other manufacturer, owner,
supplier on, or any foregone discounts for early payment of, an invoice, bill or
statement caused by an unreasonable delay by Contractor in the review,
verification, approval and forwarding to Owner thereof for payment pursuant to
Section 3.16(b), but excluding any sales, use, contractor's or similar taxes
which are imposed with respect to the Owner Purchases.
"Facility" shall mean, collectively, the Plant and the
Infrastructure.
"Final Acceptance Test Completion" shall have the meaning set forth
in Section 10.1(c).
"Final Completion" shall have the meaning set forth in Section 10.5
hereof.
"Final Completion Capability Tests" shall mean the Duct Burner
Maximum Capability Test, the Water/Steam Purity Test, the Steam Turbine By-pass
Test, the Facility Backup Power Transfer Test, the Boiler Feed Pump Trip Test,
the Demineralizer Capacity Test, the Power Factor Test and the Wastewater
Discharge Test described in Exhibit A to demonstrate the ability of such
equipment and systems within the Facility to meet the requirements specified in
Exhibit A.
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"Final Completion Certificate" shall mean the certificate duly
completed and executed by Contractor, substantially in the form of Exhibit D
hereto.
"Final Completion Date" shall mean the date on which Final
Completion occurs in accordance with the provisions of Section 10.5 hereof.
"Final Test Report" shall mean Contractor's written report
describing the results and procedures of the Acceptance Tests in sufficient
detail to verify the Facility has met the requirements set forth in Exhibit A
hereto.
"First Unit" shall mean the first Unit to achieve Mechanical
Completion.
"Force Majeure" shall mean any act or event beyond the reasonable
control of, and without the fault or negligence of, the person relying upon the
act or event, including without limitation the following acts or events, but
only to the extent such act or event (i) is the cause of a delay in or prevents
performance or the meeting of an obligation of Contractor or a Subcontractor or
Owner hereunder and (ii) is reasonably unforeseeable:
(a) any destruction of or damage to material items of equipment, or any
interruption, suspension or interference with Contractor's, a
Subcontractor's or Owner's performance hereunder, which destruction,
damage, interruption, suspension or interference is caused by acts
of God, landslides, lightning, earthquakes, fires or explosions,
floods, epidemic, hurricanes, tornadoes, abnormal severe storms,
accidents or delays in shipping or transportation that are the
direct result of any other event enumerated in this subsection (a),
acts of a public enemy, wars, blockades, riots, rebellions,
sabotage, insurrections, governmental actions or inactions or civil
disturbances; or
(b) national, regional or local labor strikes, work stoppages, boycotts,
walkouts and other labor difficulties or shortages ("Labor
Disputes"), provided, however, that Labor Disputes on the Site and
involving Contractor's (or its Affiliate's) or Subcontractor's
employees shall not constitute an event of Force Majeure unless such
Labor Disputes are caused by a national labor strike.
Force Majeure shall not mean any act or event to the extent
resulting from the financial inability of any person to perform its obligations
under this Agreement. Force Majeure shall not include (i) the inability to
obtain labor, equipment or other materials or supplies for the Work (unless the
result of a Force Majeure event), (ii) equipment failures due to wear and tear
or defects in manufacture, design, and construction, (iii) changes in market
conditions that affect the cost or availability of supply of goods or services
and (iv) the failure to timely apply for government permits and approvals.
"Funding Date" shall mean the date on which funds are available to
be drawn down by Owner under the terms of the Construction Financing.
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"Guaranteed Completion Date" shall mean July 1, 2000; provided, that
(i) in the event the Notice to Proceed is not issued by Owner on or prior to
August 5, 1998, the Guaranteed Completion Date with respect to Unit 3 shall mean
July 1, 2000 as extended day for day for each day in the period from August 5,
1998 up to (but not including) such date as the Notice to Proceed is issued,
(ii) in the event the Notice to Proceed is not issued by Owner on or prior to
August 10, 1998, the Guaranteed Completion Date with respect to Unit 2 shall
mean July 1, 2000 as extended day for day for each day in the period from August
10, 1998 up to (but not including) such as date as the Notice to Proceed is
issued and (iii) in the event the Notice to Proceed is not issued by Owner on or
prior to August 20, 1998, the Guaranteed Completion Date with respect to Unit 1
shall mean July 1, 2000 as extended day for day for each day in the period from
August 20, 1998 up to (but not including) such date as the Notice to Proceed is
issued; provided, further, any such date(s) may be extended pursuant to the
terms of Article 6 hereof.
"Guaranteed Test Fuel Quantity" shall mean 2,924,000 million BTU,
which quantity is the total quantity of fuel guaranteed by Contractor to be
required to perform the Acceptance Tests set forth in Exhibit A to demonstrate
the achievement of Substantial Completion of the three Units.
"Guaranteed Values" shall mean the Unit Heat Rate Guarantee, the
Unit Power Output Guarantee, the Maximum Unit Power Output Guarantee, the
Auxiliary Load Guarantee, the Maximum Auxiliary Load Guarantee, the Cooling
Tower Performance Guarantee, the Availability Guarantee, the Reliability
Guarantee, the Start-up Guarantees, the Sound Level Guarantee and the Emissions
Guarantee.
"Hazardous Materials" shall mean any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. ss.ss. 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. ss.ss. 1801, et seq.),
"hazardous wastes" as defined in the Resource Conservation and Recovery Act, as
amended (42 U.S.C. ss.ss. 9601, et seq.), "toxic substances" as defined in the
Toxic Substance Control Act as amended (15 U.S.C. ss.ss. 2601 et seq.),
"contaminants" as defined in the Environmental Protection Act, R.S.O. 1990.,
C.E. 19, "toxic substances" as defined in the Environmental Protection Act, S.C.
1991 c. 15.3, as amended and in the regulations adopted, published, and
promulgated pursuant thereto, or in any other Laws.
"Independent Engineer" shall mean the engineering firm retained by
the Lender (other than the Authority or Local Government) to review and report
on the development and construction of the Facility for the Lender.
"Infrastructure" shall mean those portions of the Facility
(excluding the Plant) generally described as an industrial water supply system,
a process wastewater disposal system, a fire protection system, and a natural
gas pipeline and interconnection system, to be constructed or included at the
Site in accordance with this Agreement and in accordance with and as more
particularly described in the Scope of Work - Infrastructure and as set forth in
Exhibit I-3 and Exhibit I-4.
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"Infrastructure Equipment" shall mean that portion of the Equipment
and/or systems relating to the Infrastructure.
"kW" shall mean kilowatts.
"kWh" shall mean kilowatt-hours.
"Key Personnel" shall mean the individuals appointed by Contractor
and approved by Owner to serve as Project Executive, and the engineering, Site,
construction, and start-up managers.
"Law" shall mean any applicable constitution, charter, act, statute,
law, ordinance, code, rule, regulation, judgment, decree, writ, order, permit,
approval, or the like, as any of the foregoing may change from time to time, of
any federal, state or local government or any agency, department, authority,
political subdivision or other instrumentality thereof.
"Lender" shall mean the bank, financial institution or institutions,
Authority or Local Government providing Construction Financing for the Facility.
"Limited Notice to Proceed" shall mean a notice to Contractor by
Owner with respect to the Preliminary Work, substantially in the form set forth
in Exhibit E-1, hereto.
"Liquidated Damages" shall mean, collectively, Delay Liquidated
Damages and Performance Liquidated Damages.
"Local Government" shall mean, collectively, Panola County,
Mississippi and the Industrial Development Authority of the Second Judicial
District of Panola County, Mississippi..
"Maximum Auxiliary Load Guarantee" shall mean the "Maximum Auxiliary
Load" performance criteria for the Facility set forth in Exhibit A.
"Maximum Auxiliary Load Test" shall mean the test described in
Exhibit A to demonstrate and verify compliance of the Facility with the Maximum
Auxiliary Load Guarantee.
"Maximum Price" shall mean the total amount of Two Hundred
Thirty-Nine Million Nine Hundred Ninety Eight Thousand and Three Hundred dollars
($239,998,300), which amount (i) represents, with the exception of the
reimbursements for taxes to be made by Owner to Contractor or Subcontractors
pursuant to Section 4.5 and Article 7, the total cost to Owner for the entire
Facility, (ii) represents the aggregate of the Contract Price and the
Extra-Contractual Costs, and (iii) is not subject to change except as
subsequently otherwise adjusted herein.
"Maximum Unit Power Output Guarantee" shall mean the "Maximum Unit
Power Output" performance criteria for each Unit set forth in Exhibit A.
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"Maximum Unit Power Output Test" shall mean the test described in
Exhibit A to demonstrate and verify compliance of each Unit with the Maximum
Unit Power Output Guarantee.
"Mechanical Completion" shall mean, with respect to a Unit or the
Common Facilities, that (except for portions of the Work which the parties agree
do not materially affect the operability, safety and mechanical and electrical
integrity of the Unit and the Facility)(i) Contractor has complied with all
provisions of this Agreement relating to the installation of all necessary
components and systems; (ii) it is mechanically and electrically sound and free
from defects; (iii) Contractor has successfully completed start-up and check-out
of all components and systems; (iv) Contractor shall have completed the training
program required under Section 3.5; (v) the equipment may be initially operated
by Owner's operating personnel without damage to the Unit, the Facility or any
other property and without injury to any person; (vi) initial synchronization
with the utility transmission system(s) has occurred; (vii) the equipment
(including interconnection equipment) is ready for initial operation, adjustment
and testing; and (viii) it is ready for commencement of the Acceptance Tests.
"Non-Significant Change Order" shall mean all Change Orders issued
with respect to Work relating to or being performed on the Site until the
aggregate of such Change Order work being performed by Contractor and any
Subcontractors, collectively, exceeds one thousand (1000) engineering manhours
and ten thousand (10,000) construction manhours.
"Notice to Proceed" shall mean a notice to be delivered by Owner to
Contractor on or after the Funding Date directing the commencement of the Work,
substantially in the form set forth in Exhibit E-2.
"Operator" shall mean the operator under the agreement to be
entered into by Owner providing for the operation and maintenance of the
Facility.
"Owner Delay" shall mean a delay caused by Owner's failure to (i)
perform or cause the performance of its obligations under Article 4 (other than
an act or inaction by Owner acting under or in accordance with Contractor's
instructions or authorizations) or (ii) provide the Notice to Proceed on or
before August 20, 1998.
"Owner Purchases" shall mean, collectively, the purchases of those
certain services and/or items of machinery, equipment, and component materials
becoming an integral part of the Facility, including but not limited to those
items listed in Exhibit K, which will be procured and paid for directly by Owner
pursuant to and in accordance with the procurement procedures described in
Section 3.16(b) under which such purchases shall be considered sold directly to,
billed directly to, and paid for directly by Owner.
"Payment Schedule" shall mean, collectively, Schedule of Values set
forth in Exhibit F-1 and the estimated cash flow as set forth in Exhibit F-2.
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"Performance Guarantees" shall mean the Unit Power Output Guarantee,
the Maximum Unit Power Output Guarantee and the Unit Heat Rate Guarantee.
"Performance Liquidated Damages" shall mean the liquidated damages
specified in Section 12.4(c) payable to Owner by Contractor in the event of
failure of a Unit to attain the Performance Guarantees or the Facility to attain
the Auxiliary Load Guarantee, the Maximum Auxiliary Load Guarantee and the
Cooling Tower Performance Guarantee.
"Performance Tests" shall mean the Unit Power Output Test, the
Maximum Unit Power Output Test, the Unit Heat Rate Test the Auxiliary Load Test,
the Maximum Auxiliary Load Test and the Cooling Tower Performance Test.
"Plant" shall mean those portions of the Facility (excluding the
Infrastructure) generally described as the electric generation plant as more
particularly described in the Scope of Work set forth in Exhibit I-1 and Exhibit
I-2 and all associated auxiliary equipment and facilities, including without
limitation, each of the three (3) Units and all wiring, foundations, supports,
controls, piping, valves, paving and fencing, to be constructed or included at
the Site in accordance with this Agreement.
"Power Purchase Agreement" shall mean, collectively, each of the
agreements (together with all attachments and exhibits thereto) by and between
Owner and a Power Purchaser, as amended, supplemented or otherwise modified from
time to time, for the sale by Owner and purchase by a Power Purchaser of all or
any portion of the net electric energy and/or capacity produced by the Facility.
"Power Purchaser" shall mean, collectively, each purchaser of all or
any portion of the net electric energy and/or capacity produced by the Facility.
"Preliminary Work" shall mean Work commenced by Contractor prior to
the Funding Date pursuant to a Limited Notice to Proceed as provided in Section
5.3.
"Primary Warranty Period" shall have the meaning set forth in
Section 11.1.
"Prime Rate" shall mean the rate of interest established by The
Chase Manhattan Bank, as its "prime rate" with each change in such rate to be
effective for purposes of this Agreement on the day which such change is
effective.
"Progress Invoice" shall mean Contractor's monthly invoices for
payments associated with the progress achieved toward the Schedule of Values
activities in accordance with Section 7.2, which Progress Invoices shall be in
the form of Exhibit G hereto.
"Progress Report" shall have the meaning set forth in Section 3.13.
"Project Agreement Technical Requirements" shall mean the technical
requirements set forth in Exhibit S.
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"Project Executive" shall have the meaning set forth in Section
3.20.
"Project Schedule" shall mean the schedule of key dates and
milestones for the progress of the Work attached hereto as Exhibit H as such
schedule may be amended from time to time to reflect actual progress of the
Work.
"Prudent Utility Practice" means those practices, methods, equipment
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by professional construction and
engineering firms performing turnkey engineering and construction services on
facilities of the type and size similar to the Facility, which in the exercise
of reasonable judgment and in the light of the facts known at the time the
decision was made, are considered good, safe and prudent practice in connection
with the design, construction and use of electrical and other equipment,
facilities and improvements, with commensurate standards of safety, performance,
dependability, efficiency and economy. Prudent Utility Practices are not
intended to be limited to the optimum practice or method to the exclusion of all
others, but rather to be a spectrum of reasonable and prudent practices and
methods.
"Punchlist Items" shall mean those finishing items which must be
completed by Contractor prior to the Final Completion Date, without which the
Facility is nonetheless commercially operable in a safe manner and in accordance
with all applicable Laws.
"Reliability Guarantee" shall mean the reliability performance
criteria for each Unit set forth in Exhibit A.
"Reliability Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of each Unit with the Reliability Guarantee.
"Retainage" shall mean an amount equal to five percent (5%) of the
amount paid pursuant to each Progress Invoice.
"Schedule of Values" shall mean the allocation of the Maximum Price
as set forth in Exhibit F-1.
"Scope of Services" shall mean the description of the services to be
furnished by Contractor under this Agreement, as set forth in Exhibit I-1 and
Exhibit I-3 hereto.
"Scope of Supply" shall mean the description of the Equipment to be
furnished by Contractor under this Agreement, as set forth in Exhibit I-2 and
Exhibit I-4 hereto.
"Scope of Work" shall mean, collectively, the Scope of Supply and
Scope of Services set forth in Exhibit I-1, Exhibit I-2, Exhibit I-3 and Exhibit
I-4 hereto.
"Site" shall mean the real property located within the jurisdiction
of the Local Government on which the Facility will be constructed, as more fully
described in Exhibit J.
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"Sound Level Guarantee" shall mean the sound level performance
criteria for the Facility set forth in Exhibit A.
"Sound Level Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of the Facility with the Sound Level
Guarantee.
"Start-up Guarantees" shall mean start-up criteria for each Unit and
the Facility set forth in Exhibit A.
"Start-up Test" shall mean the start-up and shut down sequences
described in Exhibit A to demonstrate and verify compliance of each Unit and the
Facility with the Start-up Guarantees.
"Subcontractor" shall mean any direct or indirect subcontractor,
supplier or Vendor of Contractor, including those retained by Owner under
Section 3.16(b) hereof.
"Substantial Completion" shall have the meaning set forth in Section
10.1(b).
"Substantial Completion Capability Tests" shall mean the Ramp Rate
Test and the Minimum Load Operation Test described in Exhibit A to demonstrate
the ability of the applicable equipment and systems within each Unit and the
Facility to meet the requirements specified in Exhibit A.
"Test Procedures" shall mean Contractor's written procedure for the
performance of the Acceptance Tests that is approved by Owner and the
Independent Engineer and that is developed in accordance with the Acceptance
Test procedures requirements for the Test Procedures set forth in Exhibit A.
"Unit" shall mean each of the three (3) combined cycle trains to be
provided hereunder as part of the Scope of Work.
"Unit 1" shall mean the first Unit to achieve Substantial
Completion.
"Unit 2" shall mean the second Unit to achieve Substantial
Completion.
"Unit 3" shall mean the third Unit to achieve Substantial
Completion.
"Unit Heat Rate" shall mean, with respect to a Unit, the ratio of
the rate of fuel energy conversion based upon higher heating value fuel to
electrical energy output at the high side of the main transformer.
"Unit Heat Rate Guarantee" shall mean the performance criteria for
Unit Heat Rate set forth in Exhibit A for each Unit.
"Unit Heat Rate Test" shall mean the test described in Exhibit A to
demonstrate and verify compliance of each Unit with the Unit Heat Rate
Guarantee.
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"Unit Power Output" shall mean the net electric output in kW
measured on the meter on the utility (high) side of the generator step-up
transformer(s).
"Unit Power Output Guarantee" shall mean the "Unit Power Output"
performance criteria for each Unit set forth in Exhibit A.
"Unit Power Output Test" shall mean the test described in Exhibit A
to demonstrate and verify compliance of each Unit with the Unit Power Output
Guarantee.
"Vendor" shall mean any supplier of Equipment to Contractor,
including those retained by Owner under Section 3.16(b) hereof.
"Work" shall mean all obligations, duties, and responsibilities
assigned to or undertaken by Contractor and Subcontractors pursuant to this
Agreement, including, without limitation, the furnishing of all Equipment and
the provision of all design, engineering, procurement (including transportation
and also including the procurement of all Owner Purchases), construction,
start-up, performance testing and other services to be performed by Contractor
in order to satisfy its obligations, duties, and responsibilities under this
Agreement to procure, construct, install, start-up, test, guarantee and warrant
the timely completion and proper construction and installation of the Facility
for the Maximum Price in accordance with this Agreement.
"Year 2000 Compliant" shall mean with respect to the Work, including
without limitation any computer hardware, software and firmware supplied by
Contractor or its Subcontractors, that such Work, without any operator
intervention, will operate accurately and, without interruption, accept, process
and in all manner retain full functionality when referring to, or involving, any
year or date in the twentieth or twenty-first centuries.
ARTICLE 2.
RELATIONSHIP OF OWNER, CONTRACTOR AND SUBCONTRACTORS
2.1. Status of Contractor. Contractor shall perform and execute the
provisions of this Agreement as an independent contractor and shall not be an
agent or employee of Owner.
2.2. Subcontractors. Contractor shall have the right to have any of
the Work accomplished by Subcontractors pursuant to written subcontracts between
Contractor and such Subcontractors or between Owner and such Subcontractors
under Section 3.16(b); provided, however, that Owner shall have the right to
approve any direct Subcontractor contracting to do Work in excess of $250,000,
provided, further, that such approval by Owner shall not relieve Contractor of
any obligation or liability under this Agreement. Exhibit P sets forth a list of
Subcontractors which have been approved by Owner as of the Effective Date. If
Contractor wishes to subcontract Work for which Owner approval is required to a
Subcontractor which is not listed in Exhibit P, then Contractor shall submit a
list of proposed Subcontractors to Owner. Owner shall have ten (10) Days from
receipt thereof to approve and return such list to Contractor
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with any additions or deletions thereto that Owner deems appropriate in its sole
discretion. Contractor's list of proposed subcontractors shall be deemed
approved if Owner fails to return such list within ten (10) Days from receipt.
Thereafter, Contractor shall choose the actual Subcontractors from Exhibit P and
from the list as returned by Owner, taking into consideration the warranty,
payment requirements, termination or cancellation charges and retention
liability agreeable to the Subcontractor, among other factors, in choosing each
Subcontractor. The foregoing procedure shall be followed whenever Contractor
desires to retain, or to have Owner retain under Section 3.16(b), additional
Subcontractors following the Effective Date. Contractor shall, at all times,
maintain a list of all selected Subcontractors and provide such list to Owner
upon request. Except as contemplated by Section 3.16(b), no contractual
relationship shall exist between Owner and any Subcontractor with respect to the
Work to be performed hereunder. No Subcontractor is intended to be or shall be
deemed a third-party beneficiary of this Agreement, unless otherwise expressly
stated herein with respect to limitations of liability. Each subcontract shall
include provisions under which such Subcontractor will agree to the collateral
assignment of such subcontract to Owner and by Owner to the Lender as security
for the Construction Financing.
2.3. Data From Subcontractors. Contractor shall provide to Owner
copies of purchase orders and subcontracts (including performance guarantee
data) from all direct Subcontractors and copies of all shop and field
performance test reports; provided, however, that in providing such documents,
Contractor may redact pricing information set forth therein; provided further
that for so long as Contractor is not in default under this Agreement, Owner
shall not use such documents for the purpose of enforcing guarantees provided by
such Subcontractors therein. Nothing in such purchase orders and subcontracts
shall enlarge or diminish Contractor's obligations to Owner under this
Agreement.
ARTICLE 3.
CONTRACTOR'S RESPONSIBILITIES
3.1. Facility Design and Construction. Contractor, directly and
through Subcontractors, shall design, engineer, procure, construct and test the
Facility such that the Facility will be:
(a) consistent with the description of the Site and the
actual, existing conditions at the Site;
(b) consistent with the Scope of Work, and in accordance with
all other terms of this Agreement;
(c) in conformance with the requirements of the Project
Agreement Technical Requirements;
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(d) sufficient, complete and adequate in all respects
necessary to enable the Facility to achieve Substantial Completion of the
Facility by the Guaranteed Completion Date;
(e) in conformance with Prudent Utility Practice;
(f) in conformance with all applicable Laws and required
permits and all applicable national, state, and local engineering,
environmental, construction, safety, and electrical generation codes and
standards as such codes and standards exist on Effective Date and as such Laws,
permits, codes and standards may change from time to time; provided, that
Contractor and Owner acknowledge and agree that the Laws and permits in
existence as of the Effective Date regarding sound level emissions and air
emissions from the Facility shall be deemed to refer to those limits set forth
in Sections 2.5 and 2.7 of Exhibit A. Notwithstanding the foregoing, Contractor
shall not be obligated to make any design changes in response to a Change in Law
unless Contractor has received an approved Change Order from Owner. Contractor
shall have the right to request a Change Order for design changes proposed to be
made in response to such Changes in Law in accordance with Section 6.3, provided
that Contractor shall use reasonable efforts to minimize the impact thereof on
the Project Schedule, the Guaranteed Completion Date, the Maximum Price and the
other matters contained therein; and
(g) Year 2000 Compliant.
3.2. Subcontractors. Contractor shall be solely responsible for the
engagement (except as provided in Section 3.16(b)) and management of
Subcontractors in the performance of the Work, for all Work performed by
Subcontractors and for all acts and omissions of Subcontractors.
3.3. Control of the Work. Contractor shall be solely responsible for
all construction means, methods, techniques, sequences, procedures, safety and
security programs, training and startup, in connection with the performance of
the Work.
3.4. Related Costs. Except as contemplated by Section 3.16 and
provided in Article 4 hereof, Contractor shall provide and pay for all labor,
utilities, supervision, inspection and Equipment and all other goods and
services as may be necessary to complete performance of the Work, whether by
Contractor or its Subcontractors.
3.5. Operator Orientation. Contractor shall provide for the initial
orientation of personnel associated with and required for the operation and
maintenance of the Facility as set forth in Exhibit Q. Contractor shall submit
the training program referred to in Exhibit Q to Owner and Operator at least six
(6) months prior to the scheduled Substantial Completion of the First Unit.
Owner, with the assistance of Operator, shall have the right to review and
approve such training program.
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3.6. Clean-up. Contractor shall at all times keep the Site free from
waste materials or rubbish resulting from the performance of any Work. As soon
as practicable after the completion of the Punchlist Items, Contractor shall
remove all of its equipment and materials and complete removal of all waste
material and rubbish resulting from the performance of any Work from and around
the Site.
3.7. Safety. Contractor shall initiate and, until Substantial
Completion of the Facility, maintain safety precautions and programs to conform
with applicable provisions of federal, state, and local safety and health Laws,
or other requirements designed to prevent injury to persons or damage to
property on the Site and shall incorporate all such safety precautions and
programs in a written safety program manual. Until Substantial Completion of the
Facility, Contractor shall erect and maintain safeguards for the protection of
workers. Until Substantial Completion of the Facility, Contractor shall
eliminate or abate all reasonably foreseeable safety hazards created by or
otherwise resulting from performance of the Work. In connection with the
performance of any Work following Substantial Completion of any Unit or the
Facility, Contractor shall comply with all safety precautions and procedures
provided by Owner.
3.8. Reasonable Access. Subject to the provisions of Section 3.15,
Contractor shall permit representatives of Owner, Lender, the Independent
Engineer, the Local Government, Power Purchaser and Operator to enter onto the
Site, with reasonable, unescorted access to the Work; provided, however, that
such representatives shall comply with any safety measures that Contractor
reasonably deems necessary or advisable.
3.9. Emergencies. In the event of any emergency endangering life or
property, Contractor shall take such action as may be necessary to prevent,
avoid or mitigate injury, damage or loss and shall immediately report any such
incidents, including Contractor's response thereto, to Owner. Whenever, in the
reasonable opinion of Owner, Contractor has not taken prompt or reasonable
precautions for the safety of the public or the protection of the Work or of
structures or property on or adjacent to the Site, creating an emergency
requiring immediate action, then Owner, with prior notice to Contractor (unless
the delay required to give Contractor such notice could further endanger
personnel or property), may, but shall be under no obligation to, provide
reasonable protection by causing the requisite Work to be performed and
Equipment to be furnished or by undertaking the necessary safety or
precautionary measures; provided, however, that the taking of such action by
Owner or Owner's failure to do so shall not limit Contractor's liability.
Performance of such Work or furnishing of such Equipment by Owner or its agents
or employees shall be for the account of Contractor. Contractor shall promptly
reimburse Owner for the performance of any such work or furnishing of any such
Equipment or the taking of such safety measures in an amount equal to the costs
incurred by Owner in such performance or furnishing of Equipment or taking such
measures.
3.10. License. Contractor further agrees to grant and hereby grants
to Owner (and shall procure for Owner from Subcontractors) an irrevocable,
royalty-free, nonexclusive license under all patents owned or controlled by
Contractor and its Subcontractors to the extent necessary for the operation,
maintenance, repair or alteration (it being understood that obtaining
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such license for repairs or alterations may be difficult and the parties thus
agree that, solely with respect to such repairs or alterations, Contractor shall
only be required to use commercially reasonable efforts to obtain such license)
(other than improvements affecting basic design) of the Facility or any unit or
component thereof designed, specified or constructed by Contractor under this
Agreement.
3.11. Approvals, Certificates, Permits, and Licenses. Contractor
shall secure in a timely fashion and pay for the acquisition of all approvals,
certificates, permits and licenses that are required for Contractor to build and
construct the Facility and perform all activities that are contemplated by this
Agreement regardless of whether such approvals, certificates, permits and
licenses are specifically identified in the Scope of Work, except for permits
that Owner is required to obtain pursuant to Section 4.4. Contractor shall
deliver to Owner certified copies of all such approvals, certificates, permits,
and licenses promptly upon receipt thereof. Where appropriate, such permits,
licenses, certificates and approvals shall be obtained in the name of Owner.
3.12. Compliance with Laws. Contractor shall comply with all Laws.
Contractor agrees to indemnify, defend and hold Owner harmless from and against
all fines, penalties, costs and expenses (including attorney's fees)
attributable to any failure of Contractor to comply with such Laws.
3.13. Status Reports. Contractor shall prepare and submit to Owner
written monthly progress reports in the form satisfactory to Owner and Lender,
as further described in Exhibit Q (each such report, a "Progress Report").
Contractor shall also promptly provide other information reasonably requested by
Owner, Lender, the Independent Engineer, Power Purchaser, Operator, Authority,
Local Government, or any of their authorized representatives.
3.14. Taxes. Contractor shall pay all taxes levied in connection
with the performance of the Work (other than those for which Owner is
responsible under Section 4.5) including without limitation, occupational,
excise, unemployment, FICA and income taxes, customs duties on imported
Equipment or materials and any and all other taxes on any item or service that
is part of the Work or the Facility. Any property, sales, use, contractor's,
gross receipts, value added, excise or local taxes or fees paid by Contractor
shall be reimbursed by Owner to the extent provided and in accordance with
Section 4.5 and Article 7. Contractor shall provide Owner assistance, as
reasonably requested by Owner, in demonstrating eligibility for sales and use
tax exemptions (and any other exemptions) to the relevant governmental agencies.
Within thirty (30) Days of a request therefor, Contractor shall provide Owner
with any information regarding quantities, descriptions, and costs of property
installed at the Facility which Owner shall deem necessary in connection with
the preparation of its tax returns.
3.15. Owner's Right to Inspect; Correction of Defects. (a) Owner,
Operator, Power Purchaser, and any of their authorized representatives,
including without limitation the Lender and the Independent Engineer, and, with
respect to the Infrastructure Equipment, the Authority and Local Government,
shall have the right to inspect the Work at all
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reasonable times, whether located on or off-Site, and to observe the Acceptance
Tests; provided, however, that Contractor will not allow Lender or Independent
Engineer to so inspect the Work without either having an authorized
representative of Owner present or the prior written approval of Owner.
Contractor shall make arrangements and provide access for such inspections and
observation of such tests. Owner's inspection of (or waiver or failure to
inspect) any part of the Work shall in no way affect Contractor's obligations to
perform the Work in accordance with the Scope of Work and all other terms of
this Agreement. Owner shall use reasonable efforts to inspect the Work hereunder
in such a manner so as not to materially interfere with or hinder Contractor's
operations.
(b) In connection with the foregoing inspections, Owner shall
advise Contractor of any defects, deficiencies and/or discrepancies it
determines or of which it is advised by the Authority or Local Government
between installed equipment, materials and workmanship and such equipment,
materials and workmanship as represented in Exhibit Q; provided that Owner's
failure to so advise Contractor shall not be deemed to relieve Contractor of any
duty or obligation under this Agreement. Contractor shall thereafter promptly
correct any such defect, deficiency or discrepancy, regardless of the stage of
completion or the time or place of discovery, and regardless of whether Owner
has previously accepted such Work through oversight or otherwise.
3.16. Procurement. (a) Contractor shall arrange for the procurement
and handling of all services, materials, Equipment and construction equipment
needed for the Work by Contractor or Subcontractors, including (but not limited
to) locating, negotiating, inspection, expediting, shipping, unloading,
receiving, verifying, customs clearance and claims.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the parties understand that the Owner Purchases shall be made and
procured pursuant to the following procedures. Contractor shall identify by
manufacturer, Vendor or supplier by proper description all such Owner Purchases
for the Facility, in accordance with the Facility specifications, which
Contractor requires or deems necessary for the Facility. Contractor shall be
responsible for completing the details of all purchase orders for such Owner
Purchases, with such purchase orders to be in form and substance reasonably
satisfactory to Owner. Upon presentation of such purchase orders to Owner by
Contractor, an employee or other duly authorized representative (other than an
employee of Contractor) of Owner will execute such purchase orders for such
Owner Purchases for the Facility or authorize Contractor in writing to make such
purchases directly. All such Owner Purchases shall be shipped to Owner in care
of Contractor at the Site and shall be received, unloaded, inspected, and
verified by Contractor. All invoices, bills, statements and similar
documentation for such Owner Purchases shall be forwarded to Owner in care of
Contractor at Contractor's address by the manufacturer, Vendor or supplier and
shall be returned by Contractor to the manufacturer, Vendor or supplier for
resubmission if initially forwarded to Contractor in the name of Contractor
instead of being forwarded to Owner in care of Contractor. All such invoices,
bills, statements, and similar documentation shall be reviewed, verified and
approved by Contractor prior to submission thereof by Contractor to Owner for
payment by Owner, and Contractor shall provide written
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authorization to Owner to make payment for such Owner Purchases. Such Owner
Purchases by Owner shall be paid for only by Owner, and payment therefor shall
be made only by wire transfer or with checks of Owner; provided, if such
payments are made with checks of Owner, Contractor shall be responsible for
completing the details of all such checks of Owner to be drawn on a special bank
account of Owner established and periodically funded for such purpose and for
presentation of such completed checks to Owner for signature but with such
checks of Owner being signed only by an employee or other duly authorized
representative (other than an employee of Contractor) of Owner. Subject to
Owner's right to set-off set forth in Section 12.5, Owner shall pay to
Contractor any payments received by Owner in connection with Owner Purchases
within ten (10) Business Days after receipt thereof. In the event any service
provider, supplier, manufacturer or Vendor fails to deliver for any reason as
required under such purchase orders, Contractor shall be obligated to procure a
satisfactory substitute or substitutes therefor in accordance with these
procurement procedures. Nothing in these procurement procedures shall be
construed to relieve Contractor from any of its obligations under this Agreement
with respect to the Owner Purchases, the Work, the Equipment in connection with
the Owner Purchases, the Subcontractors or other service providers, suppliers,
manufacturers, or Vendors supplying such Owner Purchases, or otherwise,
including without limitation, under all indemnity, warranty and risk of loss
provisions contained herein.
(c) Notwithstanding anything to the contrary in this
Agreement, the parties understand that the purchase of the engineering and
design services relating to the Infrastructure Equipment shall be made and
procured pursuant to the procedures set forth in and to be developed under
Article 20.
3.17. Assistance. Prior to Final Completion, Contractor shall
provide such assistance as is reasonably requested by Owner in dealing with
Power Purchaser in any and all matters relating to the Work and the Facility
(including any interconnection facilities).
3.18. Publicity. Contractor shall obtain Owner's prior written
approval of the text of any announcement, publication, photograph, or other type
of communication concerning the Work prior to the dissemination or release of
same by Contractor or its Subcontractors.
3.19. Personnel - General. Contractor shall provide and employ in
connection with the Work:
(a) professional and technically competent personnel;
(b) qualified, skilled, and experienced supervising engineers
and technical assistants to give direct supervision; and
(c) such other skilled, semi-skilled, and unskilled labor as
may be necessary for the proper and timely execution of the Work.
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Whenever required by Law or Prudent Utility Practice, Contractor
agrees to employ or furnish only licensed personnel as appropriate to perform
engineering, design, architectural or other professional services in the
performance of the Work.
Contractor shall, if requested to do so by Owner in the exercise of
Owner's sole discretion and at Contractor's own expense, remove from the Site
any incompetent, negligent, dishonest, or disruptive personnel. Such personnel
shall not be again employed at the Site unless by the prior written permission
of Owner.
Contractor shall maintain harmonious labor relations which will
permit Work to be performed efficiently and without disruption at the Site.
3.20. Project Executive. Upon execution of this Agreement,
Contractor shall, subject to Owner's approval, designate a competent and
experienced person to serve as Contractor's representative ("Project Executive")
who will have full responsibility for administering the Work and will act as the
single point of contact with respect to all matters on behalf of Contractor. All
notices, approvals and consents given to or received from the Project Executive
shall have the same effect as if given to or received from Contractor.
3.21. Approval of Key Personnel. (a) Before the assignment of any
Key Personnel, Contractor shall provide Owner with resumes detailing the
experience of each of such personnel, and the prior approval of Owner shall be
required for each such assignment. Owner agrees to approve or disapprove any
such personnel within ten (10) Business Days of the receipt of the resume,
provided that before the expiration of such ten (10) Business Day period, Owner
may request supplemental information regarding such personnel. If supplemental
information is requested, Contractor shall supply the requested information
within five (5) Business Days and Owner shall have five (5) Business Days after
receipt of such information to approve or disapprove the relevant personnel. If
any such personnel proposed by Contractor are disapproved by Owner, Contractor
shall promptly provide Owner with the resumes of one or more alternative
persons, and the procedures set forth above shall apply. If Owner fails to
respond within ten (10) Business Days after receipt of the resume or within five
(5) Business Days after receipt of supplemental information, as the case may be,
then such personnel shall be deemed approved.
(b) Key Personnel may be terminated, transferred, replaced,
removed or changed by Contractor provided that Owner has approved Contractor's
proposed replacement for any such Key Personnel in accordance with the
procedures set forth in Section 3.21(a). If the performance of any Key Personnel
is deemed by Owner to be unsatisfactory, Owner shall have the right to request
that Contractor replace any of the same.
3.22. Spare Parts. As soon as is practicable, but no later than six
(6) months prior to scheduled Mechanical Completion of the First Unit,
Contractor shall provide a list of Vendor recommended spare parts and expendable
materials for all major Equipment supplied under this Agreement for purchase by
Owner. Such spare parts will be recommended for the
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purpose of minimizing the length of unscheduled outages due to wear or
breakdown, taking into consideration factors such as (a) first cost and carry
cost to Owner, (b) fabrication and delivery time to obtain special parts, (c)
probability of part failures and (d) availability of common parts carried in
stock by manufacturers and Vendors. Owner (in consultation with Operator) shall
have the right to timely review, comment on and approve the list of spare parts
and expendable materials. Such list shall be updated by Contractor within sixty
(60) Days after the Final Completion Date.
3.23. Final Manuals and Record Drawings. At least three (3) months
prior to the scheduled date of Substantial Completion for the First Unit,
Contractor shall provide Owner with three (3) copies of the draft operations and
maintenance manuals for the Facility, the construction drawings, and other
preliminary documents or data reasonably necessary for the operation and
maintenance of the Facility, including, without limitation, those manuals,
drawings, documents and data set forth in Exhibit Q. Such manuals shall set
forth the proper nomenclature for the Equipment, recommended procedures for
Equipment operation, inspection and maintenance, and contain arrangement
drawings. Prior to Final Completion Date, Contractor shall deliver to Owner ten
(10) copies of the final versions of such documents and data, including "as
built" drawings.
3.24. Interconnection. Contractor will be responsible for ensuring
that the interconnection facilities within the Scope of Work for a Unit are
ready by the start of the Acceptance Tests for such Unit.
3.25. Contractor Consumables. Except as provided in Section 4.1,
Contractor shall pay for and provide construction power and all other
Consumables required in connection with construction activities at the Site.
3.26. Fire Prevention. Contractor shall take measures prior to
Substantial Completion of the Facility to prevent fire from occurring at the
Site, and shall execute the Work and conduct its operations at the Site in
compliance with its plan for fire prevention and protection. Contractor shall
submit such plan to Owner for its review at the same time Contractor submits
such plans in support of Contractor's construction permit application. Such
submission shall not be construed as limiting in any manner Contractor's
obligations to undertake all actions necessary to assuring fire-safe working
conditions at the Site, nor be construed as imposing upon Owner responsibility
to review, or for the adequacy of, the plan. Following Substantial Completion of
the Facility, Contractor shall comply with all fire safety and prevention
procedures provided by Owner.
3.27. First Aid Facilities. From commencement of construction at the
Site until Substantial Completion of the Facility, Contractor shall, at its
expense, provide first aid facilities on the Site and shall make those
facilities available for the treatment of its and its subcontractors' workers
who may be injured or become ill.
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3.28. Environmental Conditions. From commencement of construction at
the Site until Substantial Completion of the Facility, Contractor shall provide
dust control of all excavations, material sites, roads and disposal areas within
its assigned areas of responsibility and suitable equipment, facilities, and
precautions to limit the discharge of contaminants to the levels prescribed by
Law. Following Substantial Completion of the Facility, Contractor shall comply
with all requirements and procedures provided by Owner to limit the discharge of
contaminants. Contractor shall immediately notify Owner in the event the
presence of Hazardous Materials is detected or suspected and shall be
responsible for encapsulating, removing and disposing off-Site all Hazardous
Materials that Contractor or any Subcontractor or their respective agents
brought onto the Site or permitted to be introduced to the Site.
3.29. Site Conditions. (a) Contractor shall be responsible for all
Site preparation necessary to perform the Work. In that regard, Contractor
acknowledges (i) that it has ascertained and accepted as satisfactory the nature
and location of the Site, the character and accessibility of the Site, any
existence of surface or subsurface obstacles to construction, the availability
of facilities and utilities, the location and character of existing or adjacent
work or structures, and other general and local conditions (including labor)
which might affect its performance of the Work and (ii) that the Maximum Price,
Project Schedule and Guaranteed Completion Date are each based on and fully
reflect the existence of such conditions and that no adjustments shall be made
to any of such terms as a result of the existence of such conditions.
(b) In the event there is a discovery of pre-existing
Hazardous Materials or archaeological remains or artifacts on the Site,
Contractor shall have no obligation under this Agreement for removal, handling,
transportation or disposing of such pre-existing items and shall have the right
to request a Change Order in accordance with Section 6.3 to the extent the Work
is materially impacted by such pre-existing items.
3.30. Owner's Field Office. Contractor shall provide Owner with a
field office with heat, air conditioning, offices, office furniture, lights and
phone service for three people and a conference room, a workroom and toilet
facilities.
3.31. Responsibility for Work, Security and Property. Contractor
shall at all times conduct its operations in a manner to minimize the risk of
loss, theft, or damage by vandalism, sabotage, or any other means. With respect
to a Unit, prior to Substantial Completion of such Unit, Contractor shall
continuously inspect all Work, materials and Equipment to discover and determine
any conditions that might involve such risks and shall be solely responsible for
discovery, determination, and correction of any such conditions. Contractor
shall establish and implement a project security program and shall cooperate
with Owner on all security matters. In addition, Contractor shall furnish and
erect a permanent security fence in accordance with the Scope of Work which
shall be turned over to Owner at completion of the Facility. Contractor shall
plan and conduct its operations, including, without limitation, the operation of
equipment or stockpiling of materials, so as not to (i) enter upon lands, other
than the Site, in their natural state unless authorized by Owner, (ii) damage,
close, or obstruct any utility installation, highway, road, or other property
until permits therefor have been obtained,
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(iii) disrupt or otherwise interfere with the operation of any pipeline,
telephone or electric transmission line, ditch, or structure unless otherwise
specifically authorized by this Agreement or (iv) damage or destroy cultivated
and planted areas and vegetation, such as trees, plants, shrubs and grass
adjacent to the Site which, as determined by Owner, do not interfere with the
performance of the Agreement.
3.32. Commercial Activities. Contractor shall not establish any
commercial activity or issue concessions or permits of any kind to third parties
for establishing commercial activities on land owned or controlled by Owner.
Contractor shall not allow its employees to engage in any commercial activity on
the Site.
3.33. Illumination. When any Work is performed at night or where
daylight is obscured, Contractor shall, at its expense, provide artificial light
sufficient to permit Work to be carried on without disruption to residents near
the Site.
3.34. Explosives. The use of explosives by Contractor is expressly
prohibited without prior notification of Owner. Contractor shall be responsible
for the proper handling, transporting, storage, and use of explosives and shall,
at its expense, repair any damage caused by its handling, transporting, storage,
and use, and shall be responsible for obtaining required permits for blasting as
applicable.
3.35. Consumables Assistance. Contractor shall cooperate with Owner
in developing and implementing a start-up sequence for the Facility which
reasonably minimizes the cost of Consumables.
3.36. Coordination of Final Acceptance Tests. Contractor
acknowledges that the Facility will be in commercial operation during the
performance of the Availability Test, the Emissions Test, the Sound Level Test
and the Final Completion Capability Tests and agrees that such Acceptance Tests
shall only be scheduled in a manner which (a) will not adversely affect Owner's
ability to perform under the Power Purchase Agreement or the fuel supply or
transportation agreements and (b) will not cause a loss to Owner (either through
lost revenues, additional interest or debt obligations or otherwise). Contractor
shall notify Owner of its desire to commence any such Acceptance Tests in
accordance with the Test Procedures. Owner will schedule and conduct such tests
at the direction of Contractor in the manner and at the times requested by
Contractor to the extent that Owner reasonably determines that Contractor's
request is consistent with the limitations set forth in the foregoing clauses
(a) and (b) and, to the extent that Owner reasonably determines that such
request is inconsistent with such limitations, Owner shall cooperate with
Contractor to schedule and conduct such tests at a mutually acceptable time
which is consistent with the limitations set forth in the foregoing clauses (a)
and (b).
3.37. Coordination of Early Substantial Completion. Contractor
acknowledges that in the event that Contractor achieves, and Owner accepts,
Substantial Completion with respect to a Unit prior to the Substantial
Completion of the remainder of the Facility, and Contractor agrees that such
Unit will be deemed to be in commercial operation during the
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construction and completion of the remainder of the Facility. Contractor further
agrees to schedule and perform the remainder of the Work in a manner so as not
to interfere with, damage or otherwise hinder Owner's operation of such Unit and
in a manner which will not adversely affect Owner's ability to satisfy its
dispatchability and power availability and output obligations under the Power
Purchase Agreement or its scheduling, notification and fuel usage obligations
under fuel supply or transportation agreements. In furtherance of the foregoing,
Contractor acknowledges and agrees that the Facility will be designed such that
the interconnection of any subsequent Unit to the Common Facilities will be
capable of being accomplished without requiring the shut-down (in whole or in
part) or outage of any other Unit which had previously achieved Substantial
Completion.
ARTICLE 4.
OWNER'S RESPONSIBILITIES
4.1. Owner Consumables. Owner shall provide and except as otherwise
set forth in this Section 4.1, pay for all fuel, water, electricity and other
utilities, chemicals, lubricants and consumable items (collectively,
"Consumables") that are required for commissioning and operation of the
Facility, including performance of the Acceptance Tests. Contractor estimates
that certain of the Consumables will be required at times set forth in the
schedule in Exhibit R and Owner agrees to so provide such Consumables on or
prior to the times set forth in such schedule; provided, that Contractor agrees
to update such schedule at the times and in the manner that the Project Schedule
is updated to reflect any delays in such estimated times based upon the actual
progress of the Work. Notwithstanding the foregoing, Contractor shall pay for
all fuel used in connection with Acceptance Tests and any re-runs thereof
required to achieve Substantial Completion of each Unit in excess of the
Guaranteed Test Fuel Quantity (the period of such performance of Acceptance
Tests and any re-runs thereof, the "Excess Fuel Period"); provided, however,
that during such Excess Fuel Period, the gross revenue actually received from
the sale of test energy during a run or re-run of an Acceptance Test shall be
credited to the account of Contractor up to the aggregate cost incurred or
payable by Contractor for such test fuel. Fuel and water shall have at least the
minimum characteristics as agreed to by the parties and as required for the
proper operation of the Facility, as further set forth on Exhibit I.
4.2. Payment. Owner shall pay the Contract Price and other sums
required to be paid by it to Contractor pursuant to the terms of this Agreement
in accordance with the provisions of Article 7 hereof.
4.3. Access to Site. Owner shall provide Contractor and
Subcontractors with reasonably unrestricted access to the Site until the Final
Completion Date (including without limitation, access to roads, and any staging
areas). Thereafter, Owner may impose reasonable restrictions on access to the
Site by Contractor subject to a schedule agreed upon by Owner and Contractor.
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4.4. Owner Approvals, Certificates, Permits, and Licenses. Owner
shall secure, maintain and pay for all approvals, certificates, permits and
licenses for which Owner is responsible, as listed on Part 1 of Exhibit M
attached hereto.
4.5. Owner Taxes. Owner shall pay any and all state, federal, and
local sales and use taxes which may be assessed for the Owner Purchases, any
taxes associated with income generated by the Facility, and, as between Owner
and Contractor, any real property taxes on the Facility and/or the Site.
Further, any property, sales, use, contractor's , gross receipts, value added,
excise or local taxes paid by Contractor or Subcontractor shall, in accordance
with Section 3.14 and Article 7, be reimbursed to Contractor or Subcontractor by
Owner in addition to the payment of the Contract Price by Owner to Contractor
pursuant to Article 7.
4.6. Owner Operating Personnel. Owner shall provide or cause to be
provided qualified, skilled and experienced operating and maintenance personnel
to be trained by Contractor pursuant to Section 3.5 which personnel shall
operate the Facility during start-up and perform the Acceptance Tests under
Contractor's direction (subject to Section 3.36). Owner assumes no liability for
the actions of such personnel in accordance with Contractor's direction during
start-up and the performance of Acceptance Tests with respect to a Unit or the
Common Facilities prior to Substantial Completion of such Unit or Common
Facilities except to the extent such actions are due to gross negligence or
willful misconduct or willful failure to act in accordance with Contractor's
direction.
4.7. Interconnection. Owner will be responsible for ensuring that
the completed electrical and other utility interconnection facilities that are
not within the Scope of Work are available by the dates set forth in Exhibit H
and, subject to the following sentence, Exhibit R. Contractor estimates that
certain of the utility interconnections will be required at times set forth in
the schedule in Exhibit R and Owner agrees to so provide for such utility
interconnections on or prior to the times set forth in such schedule; provided,
that Contractor agrees to update such schedule at the times and in the manner
that the Project Schedule is updated to reflect any delays in such estimated
times based upon the actual progress of the Work.
4.8. Approval of Engineering Drawing. Owner shall have the right to
review and approve, Lender, Independent Engineer, Operator and Power Purchaser
shall have the right to review, and, with respect to the Infrastructure
Equipment, the Authority and the Local Government, shall have the right to
review and approve those plans, calculations, specifications and drawings with
respect to the Facility identified in Exhibit Q. Upon Owner's request,
Contractor shall provide copies of all such plans, calculations, specifications
and drawings to the aforementioned parties at no cost to Owner. Owner's approval
of or objection (or failure to approve or object) to such plans, calculations,
specifications and/or drawings shall not relieve Contractor of any of its
obligations or liabilities hereunder, and Owner assumes no responsibility for
such obligations or liabilities as a result of its approval or disapproval. Such
review and approval by Owner shall be completed no later than ten (10) Business
Days after receipt or within such other specific time requested in writing by
Contractor and agreed by Owner (minimum of five (5) Business Days). If Owner
requires additional time for such reviews,
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Owner may notify Contractor and request additional time, consent to which
Contractor shall not unreasonably withhold. In the event Owner has not responded
within such time period, Owner shall be deemed to have approved the matter in
question. Comments and amplifications to the plans, specifications, calculations
and drawings that do not materially change Contractor's cost or schedule of
performance of the Work will not result in any change to the Maximum Price.
4.9. Owner's Project Manager. Upon execution of this Agreement,
Owner shall designate a competent and experienced person to serve as Owner's
representative ("Owner's Project Manager") who (unless Owner shall notify
Contractor otherwise pursuant to the terms hereof) will act as the single point
of contact with respect to all matters on behalf of Owner. All notices,
approvals and consents given to or received from the Owner's Project Manager
shall have the same effect as if given to or received from Owner.
4.10. Waste Disposal. Owner shall arrange, pay for and be
responsible for the removal, transportation and disposal, in accordance with
Law, of all waste products produced or generated solely due to the operation of
the Facility. Contractor estimates that certain of the waste disposal services
will be required at times set forth in the schedule in Exhibit R and Owner
agrees to so provide such waste disposal services on or prior to the times set
forth in such schedule; provided, that Contractor agrees to update such schedule
at the times and in the manner that the Project Schedule is updated to reflect
any delays in such estimated times based upon the actual progress of the Work.
4.11. Spare Parts. Owner shall use reasonable efforts to purchase
and deliver the spare parts inventory prior to the scheduled date of Mechanical
Completion of the First Unit. Contractor may use, to the extent available,
Owner's spare parts in the performance of the Work and Contractor shall
promptly, and in any event prior to Final Completion, replace the same at
Contractor's expense.
4.12. Acceptance of Electricity. Owner shall notify the applicable
Power Purchaser of the planned date of initial synchronization and shall cause
Power Purchaser to accept electricity generated by a Unit or the Facility when
requested by Contractor as necessary pursuant to its obligations under this
Agreement. Contractor estimates that certain of the acceptance of electricity
will be required at times set forth in the schedule in Exhibit R and Owner
agrees to so provide for the acceptance of electricity on or prior to the times
set forth in such schedule; provided, that Contractor agrees to update such
schedule at the times and in the manner that the Project Schedule is updated to
reflect any delays in such estimated times based upon the actual progress of the
Work.
4.13. Cooperation in Purchase Order Administration.
Owner shall cooperate with Contractor and shall provide such
assistance as is reasonably requested by Contractor in the preparation and
administration of the purchase orders in connection with the Owner Purchases
made pursuant to Section 3.16(b). Should Contractor advise Owner that actions
related to Owner Purchases other than as set forth in Section 3.16(b)
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are required, then Owner shall take such
actions as are reasonably authorized and directed by Contractor, including but
not limited to issuing letters of intent prior to award of a purchase order,
backcharging Subcontractors, issuing change orders to purchase orders, and
taking legal actions against Subcontractors.
ARTICLE 5.
COMMENCEMENT OF WORK
5.1. Commencement of Work. Contractor shall diligently commence
performance of the Work in accordance with this Agreement upon the issuance of
the Notice to Proceed. The issuance of the Notice to Proceed shall be subject to
Owner's accomplishment of all tasks necessary to authorization of the
commencement of Work.
5.2. Schedule. Contractor shall perform the Work in substantial
compliance with the Project Schedule (which shall be adjusted periodically to
reflect actual progress of the Work) in order to achieve Substantial Completion
of the Facility by the Guaranteed Completion Date. Contractor shall provide the
reports contemplated by Section 3.13 hereof, and provide any further information
and attend such meetings as Owner, the Authority, the Local Government or Lender
may reasonably request to verify actual progress and predict future progress.
Contractor shall promptly notify Owner in writing of any anticipated departure
from the Project Schedule. If at any time Contractor believes that the
Guaranteed Completion Date may not be met, Contractor will promptly notify Owner
in writing and will specify in said notice the corrective action planned by
Contractor; provided, however, that such notice shall not relieve Contractor of
any of its obligations under this Agreement.
5.3. Limited Notice to Proceed. Notwithstanding the foregoing, prior
to the issuance of the Notice to Proceed, Owner shall have the right to issue
one or more Limited Notices to Proceed directing Contractor to commence and
complete any portion of the Work specified in any such Limited Notice to
Proceed. Except as may otherwise specifically be provided in a Limited Notice to
Proceed, Work performed by Contractor pursuant to the Limited Notice to Proceed
shall be subject to and governed by the terms of this Agreement.
ARTICLE 6.
CHANGE ORDERS; FORCE MAJEURE
6.1. Change Orders. No changes to the Work (including but not
limited to changes in the Scope of Work, Guaranteed Completion Date or Maximum
Price) shall be made except in accordance with a duly issued Change Order
executed by both parties authorizing such changes and approved by Lender, as
required.
6.2. Owner may submit a written request to Contractor to alter, add
to or deduct from the Scope of Work. Within ten (10) Days following receipt of
such request, or, if such ten (10) Day period shall prove impracticable, as soon
as practicable
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thereafter undertaking diligent efforts, Contractor shall submit to Owner a
detailed written estimate of the adjustment to the Scope of Work, Guaranteed
Values, Payment Schedule, Guaranteed Completion Date, Maximum Price or other
terms and conditions of this Agreement, if any, that would result from the
changed Work. Contractor shall furnish such additional information as Owner may
request in support of such estimate. If Owner then elects to proceed with the
changed Work, it shall issue a Change Order to Contractor authorizing such
modification to the Scope of Work, Guaranteed Values, Payment Schedule,
Guaranteed Completion Date, Maximum Price or other terms and conditions of this
Agreement as shall have been agreed to by Owner and Contractor and approved by
the Lender, if required.
6.3. Request By Contractor. Contractor shall provide Owner written
notice of any condition or event (other than a Force Majeure event, which shall
be governed by Section 6.5 below) which gives rise to a request for a Change
Order with respect to a Change in Law (including with respect to Section
3.1(f)), an Owner Delay, or pursuant to Section 3.29(b), that Contractor is
aware of and reasonably believes will require any modification in or change to
the Scope of Work, Guaranteed Completion Date, Payment Schedule, Maximum Price,
or any other obligation of Contractor under this Agreement. Such notice must be
issued within ten (10) Days following actual knowledge of such condition by
Contractor and such notice shall describe such condition or event in detail.
Within ten (10) Days following delivery of such notice, or, if such ten (10) Day
period shall prove impracticable, as soon as practicable thereafter undertaking
diligent efforts, Contractor shall specify the adjustment to the Scope of Work,
Guaranteed Completion Date, Payment Schedule, Maximum Price, or any other
obligation of Contractor under this Agreement so requested. Following receipt of
such notice, Owner shall determine whether any changes to the Work, Guaranteed
Completion Date, Payment Schedule, Maximum Price, or any other obligation of
Contractor under this Agreement shall be affected and, if so, shall issue a
Change Order with respect to such change. If Owner elects not to approve any
such changes, Contractor shall not be relieved of any of its obligations under
this Agreement and shall not effect any change to the Work. If a Change Order is
issued to reflect any changed or new criteria under any applicable approval,
license, certificate or permit which is less stringent than those specifically
quantified in this Agreement, then Owner shall be entitled to a reduction in the
Maximum Price to the extent of any net cost savings actually achieved by
Contractor from the application of such less stringent criteria.
6.4. Price and Schedule Adjustments for Change Order Work. The
price of any Work ordered by a Non-Significant Change Order shall be quoted
as a lump sum fixed price calculated on the basis of Parts I and II of
Exhibit N. The price of any Work ordered by all other Change Orders shall be
quoted as a lump sum fixed price calculated on the basis of Part III of
Exhibit N. In the event the parties are unable to agree on the adjustment to
the Maximum Price applicable to a Change Order, but Owner nevertheless
desires Contractor to proceed with the Work that is the subject of the Change
Order, Contractor shall be paid costs incurred in performing the Change Order
in accordance with Parts I and II of Exhibit N with respect to
Non-Significant Change Orders and Part III of Exhibit N with respect to all
other Change Orders until such agreement can be reached, or until the
disagreement has been resolved in accordance with Article 18; provided, as
requested by Owner, Contractor shall furnish invoices, time sheets and
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other information reasonably requested to support such costs. The price of Work
covered by a Change Order shall be added to or subtracted from, as may be
appropriate, the Maximum Price. Any increase in the Maximum Price shall be paid
in progress payments in accordance with Section 7.2. Each Maximum Price
adjustment shall be accompanied by a modified Payment Schedule reflecting such
adjustment. Owner shall have the right to audit any direct costs billed on a
cost reimbursable basis.
6.5. Force Majeure. Contractor shall give written notice to Owner
within twenty-four (24) hours after Contractor has actual knowledge of the
occurrence of any Force Majeure event, which notice shall describe such event
and, if reasonably determinable, the effect thereof, including without
limitation, the anticipated length of delay in the Project Schedule and any
anticipated additional costs, if any, occasioned by reason of such event and
shall substantiate same in a detailed manner to the satisfaction of Owner. In
the event that it is impracticable to specify the length of such delay, the
amount of such additional costs, or such other effects of the Force Majeure
event at the time the notice referred to in the preceding sentence is delivered
or if the circumstances of the Force Majeure event materially change, Contractor
shall provide Owner with periodic supplemental detailed written notices during
the period the Force Majeure event continues which include such information, as
practicable. Such supplemental notices shall include all other relevant
information concerning the Force Majeure event. Within ten (10) Days following
Owner's receipt of a notice which specifies the anticipated length of delay in
the Project Schedule or any additional costs occasioned by the Force Majeure
event, Owner shall issue a Change Order for the increased costs of performance
and/or extension of time for performance resulting from the Force Majeure event.
In the event Owner does not accept Contractor's Force Majeure finding, the
propriety of a Change Order occasioned by the Force Majeure event may be
submitted to dispute resolution under Article 18 hereof. Notwithstanding the
foregoing, Contractor shall use all reasonable efforts to minimize the delay
caused by any Force Majeure event and shall diligently proceed with such
portions of the Work that are not affected by the Force Majeure event.
ARTICLE 7.
MAXIMUM PRICE; CONTRACT PRICE; PAYMENTS TO CONTRACTOR
7.1. Maximum Price; Contract Price. With the exception of the
reimbursements for taxes to be made by Owner to Contractor pursuant to Section
4.5, Contractor agrees to perform the Work (including the Preliminary Work) for
the Maximum Price. Payments of the Contract Price shall be paid or shall be
caused to be paid by Owner directly to Contractor in accordance with the
provisions of this Article 7. With the exception of the reimbursement for taxes
to be made by Owner to Contractor pursuant to Section 4.5, the Contract Price is
Contractor's complete compensation for the Work and includes, without
limitation, (i) all Equipment, materials, rentals, tools, labor, transportation,
insurance and other machinery, equipment, and services (including intellectual
property rights) to be provided hereunder, excluding Owner Purchases; (ii) all
federal, state, and local taxes except those for which Owner is responsible
under Section 4.5; and (iii) any duties, fees, and royalties imposed with
respect to
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any Equipment, materials, rentals, tools, labor or other machinery, equipment,
or services, excluding Owner Purchases.
7.2. Progress Payments. Exhibit F-1 to this Agreement includes a
Schedule of Values which allocates the Maximum Price to various portions of the
Work. Owner and Contractor agree that the amounts allocated to each Schedule of
Values activity are for purposes of progress payments only and that there may
not be a specific correlation between the cost of completion of a particular
activity and the dollar amount allocated thereto. The Schedule of Values shall
be used as the basis for the preparation of Progress Invoices.
Upon the Notice to Proceed, Owner shall pay to Contractor and/or to
persons authorized by Contractor for Owner Purchases in current funds in an
amount equal to (i) $8,102,500 less (ii) the sum of all payments made by Owner
under any Limited Notice to Proceed. On or before August 31, 1998, Owner shall
pay to Contractor and/or to persons authorized by Contractor for Owner Purchases
in current funds the sum of $3,806,000. Thereafter, on or before the first (1st)
Day of each calendar month during the performance of the Work, commencing with
the calendar month of September, 1998 Contractor shall submit to Owner and
Independent Engineer a completed Progress Invoice. The Progress Invoice shall
reflect the progress achieved toward the Schedule of Values activities through
the last day of the previous (or, if the Progress Invoice is delivered prior to
the first day of the month, the current) month (the "Invoice Month"). The
Progress Invoice shall separately state the amount of taxes, duties and fees to
be reimbursed to Contractor under Section 3.14. No Retainage shall be withheld
from such taxes, duties and fees. Further, each Progress Invoice shall contain a
certification by Contractor that (i) the stated progress has been achieved, (ii)
the quality of all Work for which payment is requested is in accordance with the
terms of this Agreement, (iii) Contractor is entitled to payment of the amount
invoiced, (iv) title to all materials and equipment invoiced has passed or will
pass in accordance with the terms of this Agreement, (v) Contractor has paid in
full or will pay all of its direct Subcontracts in accordance with the terms of
their subcontracts for the proceeds of the amount invoiced and has received
certification from each of its Subcontractors that all of their respective
Subcontractors have been paid in full or will be paid in accordance with the
terms of their subcontracts for the proceeds of the amount invoiced, and (vi)
upon receipt of the amount invoiced, (a) the Facility will be free of
Subcontractor's liens for the Work invoiced (or all Subcontractor's liens have
been secured or removed in a manner satisfactory to Owner and Lender) and (b),
Contractor waives its right to a lien for any Work furnished or performed
through the date of the invoice to the extent of such amount. Owner and
Independent Engineer shall review each such Progress Invoice and Owner shall pay
to Contractor and/or to persons authorized by Contractor for Owner Purchases in
current funds by the last day of the Invoice Month, the amount specified therein
which is undisputed, less Retainage, by wire transfer to the account specified
in writing by Contractor or by such other means mutually agreed by the parties.
Contractor agrees that it shall not (i) submit an invoice for an amount in
excess of one hundred and five percent (105%) of the cumulative amount set forth
in the estimated cash flow included in Exhibit F-2 or (ii) include in any
Progress Invoice sums attributable to Work which Owner or Contractor has
rejected.
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7.3. Final Acceptance Test Completion Payment. Upon the later to
occur of (a) Substantial Completion of the Facility, (b) Final Acceptance Test
Completion and (c) the completion or expiration of the Remedial Plan and the
payment of any Liquidated Damages due in connection therewith pursuant to
Section 12.4(b)(iv), Owner shall pay Contractor the Retainage less an amount
equal to two (2) times the estimated costs to complete the Punchlist Items and
less any Delay Liquidated Amounts due to Owner under Section 17.6. Contractor
shall be paid quarterly for amounts retained for Punchlist Items as such items
are completed.
7.4. Final Completion Payment. (a) Upon Final Completion, Contractor
shall submit a Final Completion Certificate together with a statement
summarizing and reconciling all previous invoices, payments, and Change Orders,
and an affidavit that all payrolls, payroll taxes, liens, charges, claims,
demands, judgments, security interests, bills for materials and equipment, and
any indebtedness connected with the Work for which Contractor may in any way be
responsible, have been paid or otherwise secured in a manner acceptable to
Owner, accompanied by releases and waivers of liens from Contractor and all
Subcontractors to be paid with proceeds of the final payment, and such other
data as Owner or Lender may reasonably request establishing payment of or surety
for payment of all such obligations. Subject to subsections (b) and (c) below,
within thirty (30) Days of the receipt of such statements, Owner shall pay
Contractor all remaining amounts due. Acceptance by Contractor of the payment
upon Final Completion shall constitute a release of Owner from all liens
(whether statutory or otherwise and including mechanic's or suppliers' liens) or
claims for additional compensation hereunder with respect to any Work performed
or furnished in connection with this Agreement except for any claims made in
writing and provided to Owner by Contractor prior to Final Completion which
remain unsettled. No payment by Owner shall be deemed a waiver by Owner of any
obligation of Contractor under this Agreement.
(b) Upon Final Completion, Owner shall pay Contractor any
remaining Retainage less (to the extent Owner has completed any Punchlist Item
pursuant to Section 10.3) an amount equal to the aggregate of Owner's
demonstrable costs to complete each such Punchlist Item and less any Delay
Liquidated Damages amounts due to Owner under Section 17.6.
(c) The final payment shall be subject to Owner's and Lender's
verification during the aforementioned thirty (30) Day period that Final
Completion has occurred; provided, however, that the payment shall not
constitute a waiver of any claim or right Owner may have at that time or
thereafter including, without limitation, unsettled liens, warranty rights and
indemnification obligations of Contractor. Any disputes regarding the final
payment shall be handled in accordance with the procedure set forth in Article
18.
7.5. Payments Not Acceptance of Work. No payment made hereunder
shall be considered as approval or acceptance of any Work. All payments shall be
subject to correction or adjustment in subsequent progress reviews and payments.
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7.6. Payments Withheld. Owner may withhold payment on an invoice or
a portion thereof in an amount and to such extent as may be reasonably
necessary, subject to the dispute resolution provision of Article 18, because
of:
(a) defective work not remedied pursuant to Section 3.15,
Section 10.1 or the warranty provisions of Article 11;
(b) liens or claims for which Contractor is liable under this
Agreement, other than third party claims provided for by insurance and for which
the insurance company has accepted responsibility, made on or filed with Owner
and not cleared by Contractor by payment, bond or otherwise within thirty (30)
Days after receipt by Contractor of written notice from Owner requesting such
action;
(c) uninsured damage to Owner or the Facility or any
Subcontractor which results solely from Contractor's failure to obtain or
maintain insurance required by the provisions of Article 9;
(d) a default by Contractor in its material obligations under
this Agreement;
(e) overpayment in a previous invoice; or
(f) a good faith dispute.
7.7. Payment of Subcontractors. Contractor shall promptly pay each
direct Subcontractor when due the amount to which said Subcontractor is
entitled. Contractor shall, by an appropriate agreement with each direct
Subcontractor, require each Subcontractor to make payments to its subcontractors
in a similar manner.
7.8. Liens. As a condition precedent to the making of any payment
hereunder, Contractor shall be required to supply Owner with a waiver and
release of liens and security interests to the extent of such payment as
applicable in a form reasonably acceptable to Owner, Contractor, Lender, and
title company duly executed and acknowledged by Contractor in order to assure an
effective release of mechanics' or materialmen's liens in accordance with the
laws of the State of Mississippi. Each waiver or release of lien shall provide
that, except for Retainage and amounts in dispute, all amounts that were due and
payable to the certifying party in connection with the Work as of such date have
been paid in full and that the certifying party waives, releases or relinquishes
any lien, security interest or claim for payment (whether for breach of
contract, pursuant to statute or otherwise) on account of the Work to which it
may be entitled by law, principles of equity or this Agreement.
Contractor shall indemnify and hold harmless Owner and Lender and
defend Owner and Lender from any and all liens filed in connection with the
Work, including all expenses and attorney's fees incurred in discharging any
liens or similar encumbrances. If a lien of any nature should at any time be
asserted or filed against the Work or the Equipment,
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Contractor shall promptly notify Owner and at Contractor's own expense,
immediately take any and all action necessary to cause any such lien to be
released or discharged, or, if permitted by Law, secure and file a security bond
covering the amount of such lien, regardless of the action Contractor may then
be taking with respect to such claim. If Contractor shall fail to so discharge
such lien and is unable to post a security bond covering the same, it shall
promptly provide Owner with an irrevocable letter of credit or security bond in
favor of Owner in an amount equal to 200% of the amount of such Lien. Contractor
shall be responsible for the payment of any draw Owner may thereafter make upon
such letter of credit or security bond as required to cause such lien to be
released, discharged or secured, and to pay any and all losses, costs, damages,
and attorneys' fees and expenses incurred or suffered by Owner in connection
therewith. This paragraph shall not apply to liens which have been filed due to
Owner's breach of its payment obligations to Contractor and Subcontractors under
this Agreement (including liens of Contractor's Subcontractors if the reason
Contractor has not paid such Subcontractors is that Owner is in breach of its
payment obligations to Contractor).
7.9. Late Payments. Any payment not made when due, other than
disputed payments, shall accrue interest from the due date until paid at the
Prime Rate.
ARTICLE 8.
TITLE AND RISK OF LOSS
8.1. Clear Title. Contractor guarantees that legal title to and
ownership of the Work, materials and Equipment, whether incorporated in the Work
or not (including all calculations and drawings required for the operation and
maintenance of the Facility) shall have passed to Owner free and clear of any
and all liens, claims, security interests or other encumbrances (other than
those which have been secured or removed in a manner acceptable to Owner and
Lender), upon the making of the progress payment related to such Work, materials
or Equipment; provided however, that, except as provided in Section 3.10,
nothing herein is intended to convey to Owner intellectual property in the
Work).
8.2. Risk of Loss. Despite the passage of title as set forth in
Section 8.1, Contractor shall bear risk of loss and care, custody and control
pertaining thereto of any Equipment, Contractor's supplies and maintenance
equipment (including temporary materials, equipment, and supplies) on the Site
or located offsite, Owner Purchases or any other Work completed with respect to
a Unit, the Common Facilities or the Facility until the earlier of the
occurrence of Substantial Completion with respect to such Unit, the Common
Facilities or the Facility pursuant to Section 10.2 or such time as this
Agreement is terminated. All Equipment in storage but not yet incorporated into
the Facility shall be stored in secured areas. During such time as Contractor
bears risk of loss, Contractor shall bear the responsibility of preserving,
safeguarding and maintaining such Equipment, Owner Purchases and any other Work
completed. Any Equipment, Owner Purchases or any Work lost, damaged, stolen or
impaired before the occurrence of Substantial Completion of a Unit, the Common
Facilities or the Facility pursuant to Section 10.2 (other than as a result of
Owner's negligence or willful misconduct) and not
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covered by insurance, shall be replaced promptly by Contractor at its own
expense. Upon the occurrence of Substantial Completion with respect to a Unit,
the Common Facilities or the Facility, Owner shall assume risk of loss and care,
custody and control of such Unit, the Common Facilities and/or the Facility.
ARTICLE 9.
INSURANCE
Prior to the start of the Work, Contractor will or will cause its
Subcontractors to procure and maintain the insurance with insurance carriers
approved by Owner and licensed to do business in the State of Mississippi
meeting all of the requirements set forth in and Contractor will comply, or will
cause its Subcontractors to comply with, the other requirements set forth in
Parts I, II and III of Exhibit O. Prior to the start of the Work, Owner will
procure and maintain the insurance with insurance carriers approved by
Contractor and licensed to do business in the State of Mississippi meeting all
of the requirements set forth in and will comply with the other requirements set
forth in Parts II and III of Exhibit O.
ARTICLE 10.
COMPLETION
10.1. Mechanical Completion; Substantial Completion; Final
Acceptance Test Completion. (a) Not less than ten (10) Days prior to the date
that (i) with respect to the First Unit, that such First Unit together with the
Common Facilities is ready for Mechanical Completion and (ii) with respect to
any other Unit, that such Unit is ready for Mechanical Completion, Contractor
shall so notify Owner and the Independent Engineer. Owner and the Independent
Engineer shall then have the right to inspect such Unit and the Common
Facilities and thereafter advise Contractor of any defects, deficiencies and/or
discrepancies it determines between installed equipment, materials and
workmanship and such equipment, materials and workmanship as represented by
Scope of Work that must be corrected as a condition of Mechanical Completion
with respect to such Unit and/or Common Facilities; provided that nothing in
this Section 10.1 shall be deemed to relieve Contractor of any duty or
obligation under this Agreement. Contractor shall then perform corrective
measures to remove such defects, deficiencies, and/or discrepancies and shall
again notify Owner in writing when the Work is deemed ready for Mechanical
Completion. Owner and the Independent Engineer shall have five (5) Days after
each subsequent notification to advise Contractor, in writing, of any additional
or remaining defects, deficiencies and/or discrepancies which must be corrected
by Contractor as a condition to Mechanical Completion of such Unit and/or Common
Facilities. Thereafter, Contractor shall notify Owner of its intention to
commence Acceptance Tests with respect to such Unit in accordance with the terms
and procedures specified in Section 12.4. All Acceptance Tests conducted by
Contractor shall be in accordance with the Test Procedures. The cost of all such
testing shall be borne by Contractor except that Owner shall provide, at no cost
to
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Contractor, the Consumables referred to in Section 4.1 and the operating
personnel referred to in Section 4.6.
(b) Substantial Completion shall mean each of the following
requirements shall have been satisfied:
(I) with respect to the First Unit,
(i) Mechanical Completion of the Common Facilities has
occurred;
(ii) all Work with respect to the Common Facilities,
except for Punchlist Items, shall be substantially completed in accordance with
the terms of this Agreement, and Contractor shall have delivered the Punchlist
to Owner and Independent Engineer, which Punchlist shall have been approved (on
or after the date of delivery of the Certificate of Substantial Completion) by
Owner and Independent Engineer, all in accordance with Section 10.3;
(iii) Owner has received from Contractor all permits,
licenses, and approvals for operation of the Common Facilities required to be
obtained by Contractor hereunder as set forth on Part 2 of Exhibit M;
(iv) Owner has received all drawings and all
specifications (except as-built drawings of the Common Facilities), test data,
and other technical information required hereunder for Owner to start-up,
operate and maintain the Common Facilities;
(v) Owner has received all manuals and instruction books
necessary to operate the Common Facilities in a safe, efficient and effective
manner;
(vi) All special tools with respect to the Common
Facilities required to be purchased by Contractor for Owner as provided herein
have been delivered to Owner;
(vii) Owner has received from Contractor any waivers of
liens relating to the Work which were not previously delivered by Contractor in
accordance with Section 7.8 (or has secured or removed existing liens in a
manner acceptable to Owner and Lender);
(viii) All conditions to Substantial Completion set
forth in Section 10.1(b)(II) with respect to the First Unit shall be satisfied;
and
(ix) Owner and the Independent Engineer have received
and accepted the Certificate of Substantial Completion with respect to the First
Unit and the Common Facilities pursuant to Section 10.2.
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(II) with respect to any Unit (including the First Unit),
(i) Mechanical Completion of such Unit has occurred;
(ii) all Work with respect to such Unit, except for
Punchlist Items, shall be substantially completed in accordance with the terms
of this Agreement, and Contractor shall have delivered the Punchlist to Owner
and Independent Engineer, which Punchlist shall have been approved (on or after
the date of delivery of the Certificate of Substantial Completion) by Owner and
Independent Engineer, all in accordance with Section 10.3;
(iii) with respect to such Unit, (A) Owner has received
results demonstrating that (1) Contractor has successfully completed all of the
Unit Power Output Test, the Maximum Unit Power Output Test, the Unit Heat Rate
Test, the Reliability Test, the Start-up Test and the Substantial Completion
Capability Tests and (2) all stack and other emissions from the Facility were in
compliance with the Emissions Guarantees at all times during such tests and (B)
Contractor has achieved (1) the Performance Minimums (and has otherwise
satisfied the requirements of Section 12.4(b) and/or Section 12.4(c)) and (2)
the Reliability Guarantee and the Start-up Guarantees;
(iv) such Unit and the Common Facilities related thereto
operate as a single, integrated and independent unit;
(v) the turbine generators for such Unit are
synchronized with the utility transmission system(s);
(vi) Owner has received from Contractor all permits,
licenses, and approvals for operation of the Unit required to be obtained by
Contractor hereunder as set forth on Part 2 of Exhibit M;
(vii) Owner has received all drawings and all
specifications (except as-built drawings of the Unit), test data, and other
technical information required hereunder for Owner to start-up, operate and
maintain such Unit;
(viii) Owner has received all manuals and instruction
books necessary to operate such Unit in a safe, efficient and effective manner;
(ix) All special tools with respect to such Unit
required to be purchased by Contractor for Owner as provided herein have been
delivered to Owner;
(x) Owner has received from Contractor any waivers of
liens relating to the Work which were not previously delivered by Contractor in
accordance with Section 7.8 (or has secured or removed existing liens in a
manner acceptable to Owner and Lender); and
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(xi) Owner and the Independent Engineer have received
and accepted the Certificate of Substantial Completion with respect to such Unit
pursuant to Section 10.2.
(III) with respect to the Facility,
(i) Mechanical Completion and Substantial Completion
with respect to each Unit and the Common Facilities has occurred;
(ii) all Work, except for Punchlist Items, shall be
substantially completed in accordance with the terms of this Agreement, and
Contractor shall have delivered the Punchlist to Owner and Independent Engineer,
which Punchlist shall have been approved (on or after the date of delivery of
the Certificate of Substantial Completion) by Owner and Independent Engineer,
all in accordance with Section 10.3;
(iii) with respect to the Facility, (A) Owner has
received results demonstrating that (1) Contractor has successfully completed
all of the Auxiliary Load Test, the Maximum Auxiliary Load Test and the Cooling
Tower Performance Test and (2) all stack and other emissions from the Facility
were in compliance with the Emissions Guarantees at all times during such tests
and (B) Contractor has achieved the Auxiliary Load Guarantee, the Maximum
Auxiliary Load Guarantee and the Cooling Tower Performance Guarantee (or has
otherwise satisfied the requirements of Section 12.4 (b) and/or Section
12.4(c));
(iv) all Facility systems operate as a single,
integrated unit;
(v) Owner has received from Contractor all permits,
licenses, and approvals for operation of the Facility required to be obtained by
Contractor hereunder as set forth on Part 2 of Exhibit M;
(vi) Owner has received all drawings and all
specifications (except as-built drawings of the Facility), test data, and other
technical information required hereunder for Owner to start-up, operate and
maintain such Unit;
(vii) Owner has received all manuals and instruction
books necessary to operate such Unit in a safe, efficient and effective manner;
(viii) All special tools required to be purchased by
Contractor for Owner as provided herein have been delivered to Owner;
(ix) Owner has received from Contractor any waivers of
liens relating to the Work which were not previously delivered by Contractor in
accordance with Section 7.8 (or has secured or removed existing liens in a
manner acceptable to Owner and Lender) ); and
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(x) Owner and the Independent Engineer have received and
accepted the Certificate of Substantial Completion with respect to the Facility
pursuant to Section 10.2.
(c) Final Acceptance Test Completion shall be deemed to occur
upon the last to occur of the following requirements: (i) Owner has received
results demonstrating that Contractor has successfully completed all of the
Availability Test, the Emissions Test, the Sound Level Test and the Final
Completion Capability Tests, (ii) Contractor has achieved the Availability
Guarantee, the Emissions Guarantee and the Sound Level Guarantee and (iii) Owner
and the Independent Engineer have received and accepted the Certificate of Final
Acceptance Test Completion pursuant to Section 10.4.
10.2. Notice of Substantial Completion. Once Contractor believes
that it has satisfied all of the requirements set forth in Section
10.1(b)(I)(I)-(viii), (II)(I)-(x) or (III)(i)-(ix) hereof, Contractor shall so
certify to Owner by submitting a Certificate of Substantial Completion to Owner
and providing a copy thereof to the Independent Engineer. Within ten (10) Days
following receipt of any such Certificate of Substantial Completion, Owner and
the Independent Engineer shall notify Contractor in writing whether, to Owner's
or Independent Engineer's knowledge, Contractor has met the requirements of
Section 10.1(b) and, if not, the reason therefor, including engineering
substantiation. Any such notification shall not be deemed to waive any rights of
Owner against Contractor under this Agreement. Substantial Completion with
respect to Unit or the Facility, if accepted by Owner and the Independent
Engineer, shall relate back to the date of the applicable Certificate of
Substantial Completion. If Owner or Independent Engineer determines that
Contractor has not met Substantial Completion as stated in its written notice to
Contractor in accordance with this Section 10.2, Substantial Completion shall
not be deemed to have occurred with respect to the applicable Unit or the
Facility. Any dispute regarding such notice shall be resolved in accordance with
the procedure set forth in Article 18.
10.3. Punchlist. Concurrent with the submission of any Certificate
of Substantial Completion by Contractor, Contractor shall submit to Owner and
the Independent Engineer a list of Punchlist Items (the "Punchlist") along with
an estimate of the cost to complete each Punchlist Item. Within ten (10) Days
following receipt of the Punchlist, Owner and the Independent Engineer shall
notify Contractor in writing either that it accepts the Punchlist or Owner and
Independent Engineer shall state its reasons for disagreement with the Punchlist
in reasonable detail; provided, however, that Owner's or Independent Engineer's
acceptance or rejection of the Punchlist (including the estimate of costs
therefor) shall not relieve Contractor of its liability to complete the
Punchlist Items. Any dispute regarding the Punchlist shall be resolved in
accordance with the procedure set forth in Article 18; provided, however, that
if Contractor does not promptly complete any remaining Punchlist Item, Owner
shall have the right to complete such item and backcharge Contractor's account.
Notwithstanding any other provision of this Agreement to the contrary, if the
completion of any Punchlist Items requires that the Unit or the Facility be shut
down or its output curtailed, and Contractor and Owner are unable to schedule a
mutually agreeable time for such shutdown or curtailment, Owner shall have the
option of
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completing such Punch List Items itself, and may retain a portion of the
Contract Price equal to the cost of completing such Punch List Items by treating
the cost of such item as an Extra-Contractual Cost.
10.4. Notice of Final Acceptance Test Completion. Once Contractor
has performed all of the requirements set forth in Section 10.1(c) hereof,
Contractor shall so certify to Owner by submitting a Certificate of Final
Acceptance Test Completion to Owner and providing a copy thereof to the
Independent Engineer. Within ten (10) Days following receipt of any such
Certificate of Final Acceptance Test Completion, Owner and the Independent
Engineer shall notify Contractor in writing whether, to Owner's or Independent
Engineer's knowledge, Contractor has met the requirements of Section 10.1(c)(i)
and, if not, the reason therefor, including engineering substantiation. Any such
notification shall not be deemed to waive any rights of Owner against Contractor
under this Agreement. If Owner or the Independent Engineer determines that
Contractor has not met Final Acceptance Test Completion as stated in its written
notice to Contractor in accordance with this Section 10.4, Final Acceptance Test
Completion shall not be deemed to have occurred with respect to the applicable
Unit or the Facility. Any dispute regarding such notice shall be resolved in
accordance with the procedure set forth in Article 18.
10.5. Final Completion. Final Completion shall be deemed to occur
upon the last to occur of the following requirements: (i) Substantial Completion
of the Facility; (ii) Final Acceptance Test Completion, (iii) Owner and the
Independent Engineer has received and accepted the Final Completion Certificate,
the final "as-built" drawings and the Final Test Report; (iv) Owner has received
from Contractor a final certificate of Contractor certifying that all requested
waivers of all liens by Contractor and Subcontractors relating to the Work have
been obtained by Contractor and delivered to Owner (or Contractor has secured
all liens in a manner acceptable to Owner); (v) Contractor has removed all of
its equipment and materials and completed removal of all waste and rubbish from
around the Site; (vi) completion of all Punchlist Items; and (vii) Contractor
has performed all other provisions of and delivered all items required by this
Agreement then to be performed or delivered in a manner satisfactory to Owner.
10.6. Right of Waiver. Owner, with Lender's approval, shall have the
right, but shall have no obligation, to waive, defer or reduce any of the
requirements stated in Section 10.1 hereof at any time by written notice. Any
such waiver, deferral or reduction must specifically refer to this Section 10.5
in order to bind Owner. Owner's exercise of any rights hereunder shall apply
only to such requirements as Owner may waive and shall in no event relieve
Contractor of any requirements or other obligations not so specified.
10.7. Long-Term Obligations. It is expressly understood and agreed
by the parties that nothing in this Article 10 shall in any way modify or alter
Contractor's obligations under Article 11 and 12 hereof.
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10.8. Operating Revenues. It is expressly understood and agreed by
the parties that any and all revenues generated by the operation of the Facility
at any time shall be solely for the account of Owner, except to the extent set
forth in Section 4.1.
ARTICLE 11.
WARRANTY AND GUARANTY
11.1. Contractor's Warranty. Contractor warrants for a period (a)
with respect to a Unit, commencing on the date of Substantial Completion of such
Unit and ending on the date one (1) year after the date of Substantial
Completion of such Unit and (b) with respect to the Common Facilities,
commencing on the date of Substantial Completion of the Facility and ending on
the date one (1) year after the date of Substantial Completion of the Facility
(or in each case an equivalent date applicable to the replacement contractor, in
the event this Agreement has been terminated prior to the applicable date of
Substantial Completion) (the "Primary Warranty Period") (i) that the Work and
the Equipment shall be new when installed (unless otherwise specified by Owner)
and free from defects or deficiencies in materials, workmanship, title or
otherwise, (ii) that each Unit and the Facility will be designed and the Work
performed in accordance with the requirements of this Agreement, the Scope of
Work and Prudent Utility Practices, (iii) that the installation of any and all
material and Equipment shall be in substantial accordance with the
manufacturer's requirements, (iv) that the Work will be Year 2000 Compliant and
will be adequately tested by Contractor to determine whether it is Year 2000
Compliant, and (v) that all Work shall be performed in accordance with all Laws,
and, on the date of Substantial Completion, the respective Unit and/or the
Facility shall meet and be capable of operating in compliance with, all Laws.
Owner has the option to extend the Primary Warranty Period, as it applies to the
three combustion turbines/generators for an additional one (1) year period
provided that Owner (A) provides notice of its intent to exercise such option to
Contractor within one hundred eighty (180) Days after the Substantial Completion
date and (B) thereafter executes a Change Order increasing the Maximum Price by
$1,539,000 .
11.2. Remedy. Except as provided in Section 11.3, if the warranty
set forth in Section 11.1 hereof is breached within the Primary Warranty Period
and Owner has provided notice to Contractor thereof, Contractor shall correct
the defective workmanship, material or design, as the case may be, immediately
on an expedited basis but at no cost to Owner (and at Contractor's sole cost),
and in any event Contractor shall provide a service engineer to begin corrective
action at the Facility within two (2) Days of receipt by Contractor of Owner's
notice. Contractor shall be directly responsible to Owner, at Contractor's
expense, for all corrective action notwithstanding any failure of a
Subcontractor or Vendor to provide or honor any warranty or guarantee. The
expense of refinishing, uncovering, or of removal and replacement, as the case
may be, and of making good other Work affected by such removal and replacement
shall be borne by Contractor and no extension of time or increase in the Maximum
Price will be allowed in connection therewith. Owner shall provide Contractor
with reasonable access to the Facility to perform its warranty obligations under
this Agreement, so long as such access does not interfere with operation of the
Facility. Contractor shall coordinate with Owner's schedule of
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operation to minimize any adverse effect on the Facility's operations; provided
however, such deferral of access shall not exceed thirty (30) Days after request
for access by Contractor. Any corrective work (including without limitation, any
repaired or replaced item) shall be similarly warranted for a period of one year
from the date such corrective work is completed but in no event shall any
warranty extend beyond two (2) years (or twenty-four (24) months) beyond the
date of Substantial Completion. If, after notification of such defect in
workmanship, materials, or design, Contractor shall unreasonably delay in
diligently commencing, continuing or completing corrective action, then,
following notice to Contractor, Owner may correct such defect(s) and Contractor
shall be liable for all necessary costs, charges and expenses incurred by Owner
in connection therewith and shall forthwith pay to Owner an amount equal to such
costs, charges and expenses within thirty (30) Days after receipt of verifiable
invoices certified by Owner. The obligation of Contractor to pay such invoices
hereunder shall, at Owner's election, be subject to set-off against any amounts
that are due and owing by Owner to Contractor. Any such payments by Contractor
to Owner shall be treated both as reductions in the Maximum Price and as refunds
of a portion of the Contract Price, and any such set-offs shall be treated both
as reductions in the Maximum Price and the Contract Price.
11.3. Vendor Warranties. Without in any way derogating Contractor's
own representations, warranties and guarantees with respect to all of the Work
and the Equipment, Contractor shall use commercially reasonable efforts to
obtain for the benefit of Owner long-term warranties against defects in
Equipment obtainable from Vendors without additional compensation to such Vendor
and hereby assigns to Owner all warranties and/or guarantees relating to the
Equipment that Contractor receives from any and all of the Vendors for the
benefit of Owner. Contractor will notify Owner of the availability of additional
warranties offered by Vendors at an additional cost. Owner may purchase these
additional warranties by Change Order. Contractor shall cooperate with Owner in
Owner's enforcement of such additional warranties.
11.4. Warranty Limitations. Notwithstanding the foregoing,
Contractor's obligations under this Article 11 shall not extend to defects or
deficiencies resulting from ordinary wear and tear, Owner's failure to operate
or maintain the Facility or the Equipment in accordance with operation and
maintenance manuals furnished by Contractor, or the negligence of Owner or
Owner's personnel, unless such negligence resulted from action or inaction that
was taken or not taken, as the case may be, in reliance on information or
instructions provided by Contractor.
ARTICLE 12.
ACCEPTANCE TESTING AND SCHEDULE AND PERFORMANCE GUARANTEES
12.1. Guarantee of Timely Completion. Contractor hereby guarantees
that Substantial Completion of the Facility shall occur not later than the
Guaranteed Completion Date.
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12.2. Delays Caused by Contractor. If Substantial Completion of a
Unit has not occurred on or prior to the Guaranteed Completion Date, then
Contractor shall pay to Owner liquidated damages for each full twenty-four (24)
hour period that Substantial Completion of such Unit is not attained beginning
at 12:01 A.M. on the second Day after the Guaranteed Completion Date (a) in an
amount equal to Forty-Three Thousand Three Hundred and Thirty-three dollars
($43,333) per Unit per day in the months of May through September and (b) in an
amount equal Thirty-Three Thousand Three Hundred and Thirty-three dollars
($33,333) per Unit per day during the months of October through April
(collectively, "Delay Liquidated Damages"). Accrued Delay Liquidated Damages
under this Section 12.2 shall be due and payable within five (5) Days of receipt
of Owner's request, which may be made by Owner at any time and from time to
time. Late payments of such amounts will bear interest at the Prime Rate. Owner
will have the right to offset any unpaid or accrued liability of Contractor
under this Section 12.2 against any amount due or to become due from Owner to
Contractor under this Agreement. Any such payments by Contractor to Owner shall
be treated both as a reduction in the Maximum Price and as refunds of portions
of the Contract Price, and any such set-offs shall be treated as reductions in
both the Maximum Price and the Contract Price. Except as provided in Section
16.1.2 or 16.1.3 hereof, payment of Delay Liquidated Damages shall be Owner's
sole and exclusive remedy for Contractor's unexcused failure to achieve
Substantial Completion of the Facility by the Guaranteed Completion Date.
12.3. Schedule Bonus. In the event Contractor attains Substantial
Completion of the three Units prior to the Guaranteed Completion Date, Owner
shall pay Contractor a bonus equal to Fifty thousand dollars ($50,000) for each
full twenty-four (24) hour period that Substantial Completion of the three Units
is attained prior to the Guaranteed Completion Date beginning at 12:01 A.M. on
the Day after the date of Substantial Completion of the three Units to but not
including the Guaranteed Completion Date. The bonus shall be payable by Owner
thirty (30) Days following the end of the calendar month during which such bonus
accrues. Any such bonus shall be treated as an increase in both the Maximum
Price and the Contract Price.
12.4. Acceptance Tests. (a) Contractor shall not commence the
Acceptance Tests for a Unit or the Facility until such Unit or the Facility has
achieved Mechanical Completion. Notwithstanding anything contained in the
immediately preceding sentence to the contrary, Contractor shall be permitted to
run tests on individual items of equipment for purposes of (i) verifying
Subcontractor requirements, (ii) satisfying emissions requirements; provided,
however, that (A) such equipment can be run without damage to the Facility or
any property and without injury to any other person and (B) Contractor shall
not, by virtue of performing such tests, be relieved of any of its obligations
under this Agreement, including without limitation, the obligations to
demonstrate that the Facility can be operated in compliance with all Laws. In
preparing for the performance of the Acceptance Tests, Contractor shall
reasonably cooperate with Power Purchaser, Operator and the natural gas
supplier(s) for purposes of scheduling, safety, coordination of activities and
similar matters. Contractor shall perform the Acceptance Tests at its sole
expense, with all costs thereof payable out of the Contract Price, except for
costs of Consumables provided by Owner pursuant to Section 4.1 and the operating
personnel provided by Owner pursuant to Section 4.6. Contractor shall provide a
Notice to Owner at least
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twenty (20) Days prior to the date that Contractor expects the Work to be ready
for each Acceptance Tests (the "Acceptance Testing Notice").
(b) (i) Contractor shall conduct the Performance Tests as
described in Exhibit A to verify compliance of each Unit with the Performance
Guarantees. If the Performance Tests demonstrate that the Performance Guarantees
have been met, Contractor shall tender such Unit to Owner, subject to the
satisfaction of the other requirements for Substantial Completion, and Owner
shall pay to Contractor the bonuses, if any, set forth in Section 12.4(c) within
thirty (30) Days of receiving a written invoice therefor from Contractor.
(ii) If the Performance Tests demonstrate that any of
the Performance Guarantees have not been met, Contractor shall diligently take
corrective action until subsequent Performance Tests demonstrate that all
Performance Guarantees have been met or Contractor has tendered the Unit
pursuant to clause (iii) below. During this period, Contractor may repeat the
Performance Tests as many times as necessary to achieve the Performance
Guarantees, subject to the limitations set forth in clause (iv) below. In any
event, Contractor shall continue to pay Delay Liquidated Damages, if applicable,
in accordance with Section 12.2.
(iii) If Contractor (A) causes a Unit to achieve a
performance level of at least (1) 96.25% of the Unit Power Output Guarantee on a
per Unit basis, (2) 94.25% of the Maximum Unit Power Output Guarantee on a per
Unit basis and (3) 104.25% of the Unit Heat Rate Guarantee on a per Unit basis
(the "Performance Minimums") and (B) has satisfied the other requirements for
Substantial Completion, Contractor may declare Substantial Completion.
Commercial Tolerance Bands shall not be applied to the measurements or
calculations regarding Performance Minimums.
(iv) If (x) Contractor causes a Unit to achieve the
Performance Minimums pursuant to clause (iii) above and Substantial Completion
has been achieved, and (y) the Date Certain has not yet occurred, Contractor
shall have an opportunity to prepare and present to Owner a plan to achieve the
Performance Guarantees, which plan shall be consistent with the operational
requirements of the Facility and in accordance with the requirements of the
Agreement (the "Remedial Plan"). The Remedial Plan shall be prepared in
consultation with Owner, shall be presented within 30 days after the achievement
of the Substantial Completion and shall detail the corrective measures which
Contractor proposes to take to achieve the Performance Guarantees, the manner in
which such corrective measures will be implemented, the proposed schedule for
the implementation of such corrective measures, including the required outage
duration ("Cure Outage"), and the proposed period of time (the "Plan Period")
necessary to effect such corrective measures (which period of time shall not in
any event extend beyond the date that is twelve (12) months after the Guaranteed
Completion Date, provided, however, in the event that:
(A) the time necessary for Contractor to prepare for the
implementation of the cure, despite the exercise of due diligence,
does not permit the implementation of such cure during a planned
outage prior to the expiration of such twelve (12) month period; or
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(B) the next available planned outage that Owner agrees to
permit Contractor to implement the cure occurs after the expiration
of such twelve (12) month period; or
(C) the outage utilized for implementation of the cure extends
beyond the expiration of such twelve (12) month period;
then the expiration of such twelve (12) month period shall be extended until the
completion of both the implementation of such cure and the required performance
testing.
Contractor agrees to schedule the Cure Outage during planned outages mutually
agreed upon by the Parties and Contractor agrees to take reasonable actions to
minimize the duration of any such Cure Outage. If the Unit is out of service on
an unscheduled basis, Contractor, subject to Owner's consent, such consent not
to be unreasonably withheld, may be given access to the Unit to implement such
cure. Owner shall provide Contractor the opportunity to make the necessary
corrections and to reperform such Performance Guarantee Tests, consistent with
the operational requirements of the Facility and the planned outage schedule. In
the event that the Cure Outage must be scheduled after the expiration of the
original twelve (12) month period described above, Owner agrees to pay
Contractor the unpaid balance of the Contractor Price upon the expiration of
such period and receipt of an irrevovable unconditional letter of credit in such
amount as Owner is entitled to retain under the terms of the Agreement.
Contractor shall proceed with due diligence to implement the Remedial Plan and
use reasonable efforts to achieve the Performance Guarantees. Contractor shall
review any material revisions to the Remedial Plan with the Owner. If any
revisions to the Remedial Plan require an extension of the outage beyond the
expiration of the Cure Outage, Contractor shall pay Owner Delay Liquidated
Damages at the rates and on the terms set forth in Section 12.2 for the period
of such extension. If Contractor elects not to attempt a cure, Contractor shall
so advise Owner and shall immediately pay the applicable Performance Liquidated
Damages in accordance with Section 12 4(c) hereof. At the end of the Plan
Period, Contractor shall pay the Performance Liquidated Damages calculated in
accordance with Section 12.4(c) hereof.
(v) Notwithstanding the foregoing, if Contractor has not
achieved the Performance Guarantees by the Date Certain, Contractor shall
immediately pay to Owner the Performance Liquidated Damages calculated in
accordance with Section 12.4(c) based upon the most recent Performance Test
results, provided that nothing contained herein shall limit Contractor's
obligation hereunder to achieve not less than the Performance Minimums.
(c) Liquidated damages and bonuses shall be payable to the
extent that the results of the Performance Tests differ, by a magnitude greater
than the Commercial Tolerance Band, from the Performance Guarantees set forth in
Exhibit A. Solely for the purpose of computing liquidated damages and bonuses
under this Section 12.4(c), the applicable Commercial Tolerance Band shall be
applied to the Unit Power Output (as adjusted to the Base
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Conditions for the Unit Power Output Test) and the Unit Power Output (as
adjusted to the Base Conditions for the Maximum Unit Power Output Test) and the
applicable Commercial Tolerance Band shall be applied to the adjusted Unit Heat
Rate (as adjusted to the Base Conditions for the Unit Heat Rate Test). The
liquidated damages and bonuses applicable to the results of the Performance
Tests regarding compliance of the Facility with the Performance Guarantees are
as follows, and are subject to Sections 13.1 and 13.2:
(1) Unit Power Output Guarantee. (A) To the
extent that the Unit Power Output Shortfall is greater than
zero (0), Contractor shall pay liquidated damages for a Unit
in an amount equal to the product of Eight Hundred Dollars
($800) per kW times by the Unit Power Output Shortfall where
(I) the Unit Power Output Shortfall for such Unit is equal to:
Unit Power = Unit Power - [Unit Power Output * (1 + Commercial)]
Output Shortfall Output Guarante Tolerance Band
and (II) the Unit Power Output for such Unit is adjusted to
Base Conditions for the Unit Power Output Test.
(B) Owner shall pay Contractor Two Hundred
Dollars ($200) per kW that the Unit Power Output for a Unit,
as adjusted to Base Conditions for the Unit Power Output Test,
exceeds the Unit Power Output Guarantee plus the Commercial
Tolerance Band.
(2) Maximum Unit Power Output Guarantee. To the
extent the Maximum Unit Power Output Shortfall is greater than
zero (0), Contractor shall pay liquidated damages for a Unit
in an amount equal to the product of Four Hundred Dollars
($400) per kW times the Maximum Unit Power Output Shortfall
where (I) the Maximum Unit Power Output Shortfall for such
Unit is equal to:
Maximum Unit = Maximum Unit - [Unit Power *(1 + Commercial)] - Unit Power
Power Output Power Output Output Tolerance Band Output
Shortfall Guarantee Shortfall
and (II) the Unit Power Output for the Maximum Unit Power
Output Test for such Unit is adjusted to Base Conditions for
the Maximum Unit Power Output Test.
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(3) Unit Heat Rate Guarantee. To the extent the
Unit Heat Rate Exceedance is greater than zero (0), Contractor
shall pay liquidated damages for a Unit in an amount equal to
the product of Sixty-Seven Thousand and Two Hundred Dollars
($67,200) per BTU per kWh times the Unit Heat Rate Exceedance
where the Unit Heat Rate Exceedance is equal to:
Unit Heat = Unit Heat Rate * (1 - Commercial ) - Unit Heat Rate
Rate Exceedance Tolerance Band Guarantee
(4) Auxiliary Load Guarantee. (A) To the extent
the Auxiliary Load kW Exceedance is greater than zero (0),
Contractor shall pay liquidated damages in an amount equal to
the product of Eight Hundred Dollars ($800) per kW times the
Auxiliary Load kW Exceedance where (I) the Auxiliary Load kW
Exceedance is equal to:
Auxiliary Load = Guaranteed Facility - [Facility Power Output + Facility Power]
kW Exceedance Power Output Output Shortfall
where:
<TABLE>
<S> <C>
Facility Power = [(Unit Power + Unit Power + Unit Power)*(1 + Commercial)] - Auxiliary
Output Output Output Output Tolerance Band Load
Unit 1 Unit 2 Unit 3
</TABLE>
Guaranteed Facility = ( 3 * Unit Power Output Guarantee) - Auxiliary Load
Power Output Guarantee
Facility Power = Unit Power + Unit Power + Unit Power
Output Shortfall Output Shortfall Output Shortfall Output Shortfall
Unit 1 Unit 2 Unit 3
and (II) the Auxiliary Load and the Unit Power Output for each
Unit is adjusted to Base Conditions for the Auxiliary Load
Test.
(B) To the extent the Auxiliary Load kW
Credit is greater than zero (0), Owner shall pay Contractor an
amount equal to the sum of (x) the product of Eight Hundred
Dollars ($800) per kW times the lesser of the Auxiliary Load
kW Credit and the Facility Power Output Shortfall plus (y) the
product of Two Hundred Dollars ($200) per kW times the
difference (to the extent such difference is greater than zero
(0)) between the Adjusted Auxiliary Load kW Credit minus the
Facility Power Output Shortfall where (I) the Auxiliary Load
kW Credit and the Adjusted Auxiliary Load kW Credit are equal
to:
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Auxiliary Load = [Facility Power Output + Facility Power] - Guaranteed Facility
kW Credit Output Shortfall Power Output
Adjusted Auxiliary = Auxiliary Load kW Credit * (1 - Commercial Tolerance Band)
Load kW Credit
and (II) the Auxiliary Load for each Unit is adjusted to Base
Conditions for the Auxiliary Load Test and the Unit Power
Output for each Unit is adjusted to Base Conditions for the
Unit Power Output Test.
(C) To the extent the Auxiliary Load HR
Exceedance is greater than zero (0), Contractor shall pay
liquidated damages in an amount equal to the product of Two
Hundred and One Thousand and Six Hundred Dollars ($201,600)
per BTU per kWh times the Auxiliary Load HR Exceedance where
the Auxiliary Load HR Exceedance is equal to:
Auxiliary Load = [Facility Heat Rate * (1 - Commercial) - Facility Heat Rate] -
HR Exceedance Tolerance Band Guarantee
Facility Heat Rate Exceedance
where:
Facility Heat = [(Unit Heat* Unit Power) Unit 1 + (Unit Heat* Unit Power) Unit 2
Rate Rate Output Rate Output
+ (Unit Heat* Unit Power) Unit 3] /
Rate Output
[(Unit Power + Unit Power + Unit Power) * (1 - Commercial)
Output Unit 1 Output Unit 2 Output Unit 3 Tolerance Band
- Auxiliary Load]
Facility Heat = [(Unit Heat Rate * Unit Power Output) *3] /
Rate Guarantee Guarantee Guarantee
[(Unit Power Output) * 3 - Auxiliary Load]
Guarantee Guarantee
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<TABLE>
<S> <C>
Facility Heat = [[(Unit Heat* Unit Power) Unit 1 + (Unit Heat* Unit Power) Unit 2
Rate Exceedance Rate Output Rate Output
</TABLE>
+ (Unit Heat* Unit Power) Unit 3] /
Rate Output
[(Unit Power + Unit Power + Unit Power) *(1 - Commercial) ]]
Output Unit 1 Output Unit 2 Output Unit 3 Tolerance Band
- Unit Heat Rate Guarantee
(D) To the extent the Auxiliary Load HR Credit is greater than
zero (0), Owner shall pay Contractor an amount equal to the
product of Two Hundred and One Thousand and Six Hundred
Dollars ($201,600) per BTU per kWh times the lesser of (x) the
Auxiliary Load HR Credit and (y) the Facility Heat Rate
Exceedance where the Auxiliary Load HR Credit is equal to:
Auxiliary Load = Facility Heat Rate Exceedance -
HR Credit
[Facility Heat Rate * ( 1 - Commercial ) - Facility Heat Rate]
Tolerance Band Guarantee
(5) Maximum Auxiliary Load Guarantee. (A) To the
extent the Maximum Auxiliary Load kW Exceedance is greater
than zero (0), Contractor shall pay liquidated damages in an
amount equal to the product of Four Hundred Dollars ($400) per
kW times the Maximum Auxiliary Load kW Exceedance where (I)
the Maximum Auxiliary Load kW Exceedance is equal to:
<TABLE>
<S> <C> <C> <C>
Maximum Maximum Maximum Auxiliary
Auxiliary Load = Guaranteed Facility - [ Facility Power + Load ]
kW Exceedance Power Output Output Exceedance
</TABLE>
where:
<TABLE>
<S> <C>
Maximum
Facility Power = [(Unit Power + Unit Power + Unit Power)*(1 + Commercial)] - Auxiliary
Output Output Unit 1 Output Unit 2 Output Unit 3 Tolerance Band Load
</TABLE>
<TABLE>
<S> <C>
Maximum
Guaranteed Facility = ( 3* Maximum Unit Power Output Guarantee) Maximum Auxiliary
Power Output Load Guarantee
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Adjusted Maximum Maximum Unit Power Maximum Unit Power
Power Output = [Power Output + Output ] Unit 1 + [ Power Output + Output ] Unit 2
Shortfall Shortfall Shortfall Shortfall Shortfall
</TABLE>
Maximum Unit Power
+ [ Power Output + Output ] Unit 3
Shortfall Shortfall
and (II) the Auxiliary Load for each Unit is adjusted to Base
Conditions for the Maximum Auxiliary Load Test and the Unit
Power Output (for the Maximum Unit Power Output Test) for each
Unit is adjusted to Base Conditions for the Maximum Unit Power
Output Test.
(B) To the extent the Maximum Auxiliary Load kW
Credit is greater than zero (0), Owner shall pay Contractor an
amount equal to Four Hundred Dollars ($400) per kW times the
lesser of (x) the Maximum Auxiliary Load kW Credit and (y) the
Facility Maximum Power Output Shortfall where the Maximum
Auxiliary Load kW Credit and the Maximum Facility Power Output
Shortfall are equal to:
Maximum Maximum Auxiliary Maximum
Auxiliary Load = [ Facility Power + Load ] - Guaranteed Facility
kW Credit Output Exceedance Power Output
<TABLE>
<S> <C>
Maximum Facility = Unit Power + Unit Power + Unit Power
Power Output Shortfall Output Shortfall Unit 1 Output Shortfall Unit 2 Output Shortfall Unit 3
</TABLE>
and (II) the Auxiliary Load and the Unit Power Output for each
Unit is adjusted to Base Conditions for the Maximum Auxiliary
Load Test.
(6) Cooling Tower Performance Guarantee. (A)
Contractor shall pay Eight Hundred Dollars ($800) per kW by
which the Unit Power Output, as adjusted to Base Conditions
for the Unit Power Output Test, is less than the Unit Power
Output Guarantee for such Unit due solely to the failure of
the cooling tower to achieve its guaranteed performance (any
such amount, the "Cooling Tower Performance Shortfall").
(B) Contractor shall pay Sixty-Seven Thousand and
Two Hundred Dollars ($67,200) per BTU per kWh by which the
Unit Heat Rate exceeds the Unit Heat Rate Guarantee for such
Unit due solely to the failure of the cooling tower to achieve
its guaranteed performance.
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(C) Contractor shall pay Four Hundred Dollars
($400) per kW by which (a) the amount by which the Unit Power
Output, as adjusted to Base Conditions for the Maximum Unit
Power Output Test, is less than the Maximum Unit Power Output
Guarantee for such Unit due solely to the failure of the
cooling tower to achieve its guaranteed performance exceeds
(b) the Cooling Tower Performance Shortfall.
Payment of liquidated damages on account of Performance
Tests shall be Owner's sole and exclusive remedy for Contractor's failure to
achieve and demonstrate the Performance Guarantees.
(d) Contractor shall also initiate and perform in accordance
with Exhibit A, the Availability Test, the Reliability Test, the Start-up Test,
the Capability Tests, the Sound Level Test and the Emissions Test.
12.5. Setoff; Payment of Liquidated Damages. The obligation of
Contractor to pay Liquidated Damages hereunder shall at Owner's election be
subject to setoff against any amounts that are due and owing by Owner to
Contractor. Any payments by Contractor to Owner of Liquidated Damages shall be
treated both as reductions in the Maximum Price and as partial refunds of the
Contract Price, and any set-offs by Owner of Liquidated Damages against amounts
due and owing to Contractor shall be treated as reductions in both the Maximum
Price and the Contract Price.
ARTICLE 13.
LIMITATIONS ON LIABILITY; BONUSES
13.1. Limitation of Liquidated Damages. The aggregate liability of
Contractor to pay Delay Liquidated Damages (other than Delay Liquidated Damages
due by Contractor pursuant to Sections 12.4(b)(iv) and 17.6) shall not exceed an
amount equal to five percent (5%) of the Maximum Price on account of any
individual Unit. The aggregate liability of Contractor to pay all Liquidated
Damages hereunder (including Delay Liquidated Damages due by Contractor pursuant
to Sections 12.4(b)(iv) and 17.6) shall not exceed an amount equal to thirty
percent (30%) of the Maximum Price (provided, that in no event shall the
aggregate liability on account of any individual Unit exceed fifteen percent
(15%) of the Maximum Price), plus the full amount received by Contractor in
respect of bonuses hereunder.
13.2. Limitations of Bonuses. The aggregate schedule bonus that
Contractor may earn under Article 12 shall not exceed an amount equal to Three
Million dollars ($3,000,000). The aggregate schedule and performance bonuses
that Contractor may earn under Article 12 shall not exceed an amount equal to
Five Million dollars ($5,000,000).
13.3. Maximum Liability. The aggregate liability of Contractor
pursuant to this Agreement, including its maximum liability for Liquidated
Damages set forth in Section 13.1, whether arising out of contract, tort
(including negligence), strict liability, or any other cause of
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action shall not exceed an amount equal to one hundred percent (100%) of the
Maximum Price; provided that expenditures by Contractor which are reimbursed or
paid from the proceeds of Owner's "All-Risk" insurance policy shall not be
credited towards the maximum liability under this Section 13.3.
13.4. Consequential Damages. Except for Liquidated Damages payable
by Contractor, neither party shall be liable to the other whether in contract,
tort, equity or otherwise (including negligence, warranty, strict liability, or
otherwise) for any losses or damages caused by reason of unavailability of the
Facility, shutdowns or service interruptions of the Facility, loss of use, loss
of production, cost of replacement or purchased power, loss of profits or
revenue; cost of capital; claims of the other party's customers; or any
punitive, exemplary, special, indirect, incidental, or consequential damages and
each party expressly waives the right to claim, seek or collect any of the
foregoing damages.
13.5. Releases Valid in All Events. To the extent permitted by
applicable Law, and except as otherwise expressly provided herein, all releases,
disclaimers, waivers, indemnities and limitations and apportionments of
liability and exclusive remedy provisions expressed herein shall apply even in
the event of the negligence, strict liability, fault or breach of contract
(including other legal bases of responsibility such as fundamental breach) of
the party whose liability is released, disclaimed, waived, apportioned or
limited or fixed by such exclusive remedy provision or who is indemnified and
shall also extend to such party's Affiliates and subcontractors of every tier.
13.6. Liquidated Damages Not Penalty. The parties acknowledge and
agree that because of the unique nature of the Facility and the unavailability
of a substitute facility, it is difficult or impossible to determine with
precision the amount of damages that would or might be incurred by Owner as a
result of Contractor's failure to cause the Facility to achieve Substantial
Completion by the Guaranteed Completion Date or to satisfy the Performance
Guarantees. It is understood and agreed by the parties that if Owner shall be
damaged by failure of Contractor to meet such obligations (a) it would be
impracticable or extremely difficult to fix the actual damages resulting
therefrom, (b) any sums which would be payable under Article 12, are in the
nature of liquidated damages, and not a penalty, and are fair and reasonable and
(c) such payment represents a reasonable estimate of fair compensation for the
losses that may reasonably be anticipated from such failure.
13.7. No Implied Warranties. THE EXPRESS WARRANTIES AND REMEDIES SET
FORTH IN THIS AGREEMENT EXPRESS THE ONLY WARRANTIES OF CONTRACTOR FOR THE WORK,
AND NO OTHER WARRANTIES OR REMEDIES OF ANY KIND, WHETHER STATUTORY, WRITTEN,
ORAL OR IMPLIED (INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OF
MERCHANTABILITY), SHALL APPLY. THE REMEDIES SET FORTH HEREIN SHALL BE OWNER'S
SOLE AND EXCLUSIVE REMEDIES FOR DEFECTS IN THE WORK AND BREACH OF THE WARRANTIES
AND GUARANTEES STATED HEREIN AND CONTRACTOR IS HEREBY RELEASED FROM ANY
LIABILITY IN EXCESS THEREOF.
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ARTICLE 14.
CONTRACTOR'S REPRESENTATIONS
Contractor represents and warrants that:
14.1. Corporate Standing. It is a joint venture duly organized,
validly existing and in good standing under the laws of the State of Mississippi
and, along with each of its joint venturers, is qualified to do business in the
State of Mississippi and all other jurisdictions in which the nature of the
business conducted by it makes such qualification necessary.
14.2. No Violation of Law; Litigation. It is not in violation of any
applicable Law promulgated, or judgment entered by any federal, state, local or
governmental authority which violations, individually or in the aggregate, would
affect its performance of any obligations under this Agreement. There are no
legal or arbitration proceedings or any proceeding by or before any governmental
or regulatory authority or agency, now pending or (to the best knowledge of
Contractor) threatened against Contractor which, if adversely determined, could
have a material adverse effect on the financial condition, operations, prospects
or business, as a whole, of Contractor, or its ability to perform under this
Agreement.
14.3. Consents; Licenses. It is the holder of all federal, state,
local or other governmental consents, licenses, permits, or other authorizations
required to permit it to operate or conduct its business now and as contemplated
by this Agreement.
14.4. No Breach. None of the execution and delivery of this
Agreement or any documents executed or delivered in connection herewith, the
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under, the organizational documents of Contractor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court, or any agreement or instrument to which Contractor is a party or by which
it is bound or to which it is subject, or constitute a default under any such
agreement or instrument.
14.5. Partnership Action. Contractor has all necessary power and
authority to execute, deliver and perform its obligations under this Agreement;
and the execution, delivery and performance by Contractor of this Agreement has
been duly authorized by all necessary action on its part; and this Agreement has
been duly and validly executed and delivered by Contractor and constitutes the
legal, valid and binding obligation of Contractor enforceable in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or moratorium or other similar Laws relating to the
enforcement of creditors' rights generally and by general equitable principles.
14.6. Qualifications. It has: (a) examined this Agreement thoroughly
and become familiar with its terms and (b) full experience and proper
qualifications to perform the Work and to construct the Facility.
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<PAGE>
ARTICLE 15.
OWNER'S REPRESENTATIONS
Owner represents and warrants that:
15.1. Corporate Standing. It is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is or will be qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary.
15.2. Litigation. There are no legal or arbitration proceedings or
any proceedings by or before any governmental or regulatory authority or agency,
now pending or (to the best knowledge of Owner) threatened against Owner which,
if adversely determined, would have a material adverse effect on the financial
condition, operations, prospects or business, as a whole, of Owner.
15.3. No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the organizational documents of
Owner, or any applicable law or regulation, or any order, writ, injunction or
decree of any court, or any agreement or instrument to which Owner is a party or
by which it is bound or to which it is subject, or constitute a default under
any such agreement or instrument.
15.4. Partnership Action. Owner has all necessary power and
authority to execute, deliver and perform its obligations under this Agreement;
and the execution, delivery and performance by Owner of this Agreement has been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by Owner and constitutes the legal,
valid and binding obligation of Owner enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or moratorium or other similar Laws relating to the enforcement
of creditors' rights generally any by general equitable principles.
ARTICLE 16.
DEFAULT AND TERMINATION
16.1. Default by Contractor. Each of the following shall constitute
a default by Contractor under this Agreement:
16.1.1. Termination for Contractor's Inability to Perform. If
Contractor or any entity controlling Contractor sells or transfers all or
substantially all of its assets or if Contractor or any entity controlling
Contractor merges with or into any other entity or if any proceedings are
instituted by or against Contractor seeking to adjudicate Contractor as a
bankrupt or insolvent, or if Contractor makes a general assignment for the
benefit of its creditors, or if a
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receiver is appointed on account of the insolvency of Contractor, or if
Contractor files a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding up or composition or
readjustment of debts and, in the case of any such proceeding instituted against
Contractor (but not by Contractor) such proceeding is not dismissed within
thirty (30) Days of such filing, Owner may without prejudice to any other right
or remedy Owner may have, terminate this Agreement effective seven (7) Days
after giving written notice of such termination to Contractor.
16.1.2. Termination for Contractor's Failure to Perform. In
the event Contractor (i) fails, neglects, refuses or is unable at any time
during the course of the performance of the Work to provide sufficient material,
equipment, services, or labor to timely perform the Work, (ii) fails to make
prompt payment of undisputed invoices due to Subcontractors for materials or
labor, or otherwise repudiates or is in default with respect to any of its
obligations to any Subcontractor, (iii) disregards or breaches any Laws, (iv) is
in breach of any representation or warranty furnished hereunder or in any
certificate or notice to Owner, (v) fails to correct any defective Work during
performance of the Work or within the Primary Warranty Period of which it is
advised by Owner or any representative of Owner, or (vi) otherwise is in default
of a material obligation of this Agreement, and, if Contractor fails to correct
such condition within fifteen (15) Days thereof, or with respect to non-monetary
defaults, to diligently commence best efforts to correct such condition within
fifteen (15) Days thereof and to complete the correction of such condition
within thirty (30) Days (or such longer period as Owner, in its sole judgment,
may permit), Owner may, without prejudice to any other right or remedy Owner may
have and after giving Contractor seven (7) Days' notice thereof, terminate this
Agreement.
16.1.3. Termination for Contractor's Inability to Achieve
Substantial Completion by the Date Certain. In the event Contractor fails to
achieve Substantial Completion of the Facility by the Guaranteed Completion
Date, Contractor shall deliver to Owner within five (5) Days a plan setting
forth in detail Contractor's planned corrective action to achieve Substantial
Completion of the Facility at the earliest practical date (the "Substantial
Completion Remedial Plan"). Contractor shall update the Substantial Completion
Remedial Plan on a weekly basis and immediately upon the occurrence of any
material change in the corrective action planned or the target date for
Substantial Completion. If at any time the Substantial Completion Remedial Plan
fails to reasonably demonstrate that Contractor should achieve Substantial
Completion of the Facility by the Date Certain, Owner may, without prejudice to
any other right or remedy Owner may have and after giving Contractor seven (7)
Days' notice thereof, terminate this Agreement.
16.1.4. Owner's Rights. In the event that Owner elects to
terminate this Agreement pursuant to Section 16.1.1, 16.1.2 or 16.1.3 hereof,
Owner may employ any other person, firm or other entity (sometimes hereinafter
referred to as "Replacement Contractor") to complete the Work by whatever method
Owner may deem expedient, and may undertake such expenditures as in Owner's sole
judgment will accomplish timely completion of the Facility (including, without
limitation, the entry into contracts without prior solicitation of proposals).
In
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such event, Contractor shall not be entitled to receive any further payments
under this Agreement except for payments for Work performed prior to such
termination in accordance with the terms of this Agreement.
16.1.5. General Obligations. If Owner elects to terminate this
Agreement pursuant to Section 16.1.1, 16.1.2 or 16.1.3 hereof, Contractor shall,
at Owner's request and at Contractor's sole expense, perform the following
services relative to the Work so affected:
(a) provide Owner or any Replacement Contractor with the
right to take possession of all of Contractor's equipment located at the Site
for the purpose of completing the Work (subject to payment of a reasonable
rental thereon);
(b) assist Owner in preparing an inventory of all
Equipment in use or in storage at the Site;
(c) assign to Owner, or to any Replacement Contractor,
all subcontracts and other contractual agreements (including warranties) as may
be designated by Owner, all of which subcontracts and contractual agreements
shall be so assignable, and make available all issued permits, licenses,
authorizations, approvals, patents and other proprietary rights then held by
Contractor pertaining to the Facility;
(d) remove from the Site all waste and rubbish and all
such equipment as Owner may request;
(e) deliver to Owner all design and other information as
may be reasonably requested by Owner for the completion and/or operation of the
Facility; and
(f) supply any proprietary components needed for the
completion and operation of the Facility.
16.1.6. Contractor Payment Obligations. (a) If Owner
terminates this Agreement pursuant to Sections 16.1.1, 16.1.2 or 16.1.3 hereof,
Owner shall determine the total expenses incurred in completing the Work
including, without limitation, any costs of accelerated or expedited
construction methods incurred in an attempt to mitigate delay, charges for
administering subcontracts, and legal fees associated with the termination. Such
expenses shall be charged to Contractor and deducted from any amounts due and
payable to Contractor hereunder at the time of, or subsequent to, termination.
If the total expenses incurred by Owner in completing the Work exceeds the
unpaid balance of the Contract Price, then Contractor shall be liable for and
shall pay to Owner the amount of such excess within ten (10) Days following
receipt of Owner's demand for such payment. The obligation of Contractor to make
such payments hereunder shall, at Owner's election, be subject to set-off
against any amounts that are due and owing by Owner to Contractor. Any such
payments by Contractor to Owner shall be treated both as reductions in the
Maximum Price and as refunds of a portion of the Contract Price, and any
set-offs by Owner against amounts due and owing to Contractor shall be treated
as reductions in both the Maximum Price and the Contract Price.
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(b) Notwithstanding anything to the contrary contained
herein, if Owner terminates this Agreement pursuant to Sections 16.1.1, 16.1.2
or 16.1.3 hereof, all unpaid Liquidated Damages accrued to the date of
termination shall be immediately due and payable by Contractor to Owner
regardless of Owner's failure to request such amounts or whether the Corrective
Period has expired. Further, if Owner terminates this Agreement pursuant to
Section 16.1.2(vi), Contractor shall pay to Owner additional Delay Liquidated
Damages for the period following termination equal to the dollar amount
specified in Section 12.2 multiplied by the difference in Days between (a) the
projected date of Substantial Completion of each Unit determined at the time of
termination and (b) the Guaranteed Completion Date. This determination shall be
based upon the actual pace and progress of construction maintained by Contractor
prior to the time of termination as reasonably calculated by Owner.
16.2. Optional Termination by Owner.
16.2.1. Termination Prior to Notice to Proceed. In the event
that prior to the issuance of the Notice to Proceed, Owner decides not to
proceed further with the Facility, Owner and Contractor shall, subject only to
any Owner obligations under any Limited Notice to Proceed, have no further
responsibilities under this Agreement and each party shall bear its own costs
and have no right of recovery of those costs against the other.
16.2.2. Termination Following Notice to Proceed. (a) Owner may
terminate this Agreement in whole or in part at any time by written notice
thereof to Contractor. Upon receipt of any such notice, Contractor shall, unless
the notice directs otherwise: (a) immediately discontinue the Work on the date
specified in such notice and to the extent specified in such notice; (b) place
no further orders or subcontracts for Equipment or services except as may be
necessary for completion of such portion of the Work as is not discontinued; (c)
promptly make every reasonable effort to procure cancellation upon terms
satisfactory to Owner of all orders, subcontracts and rental agreements to the
extent they relate to the performance of the Work that is discontinued; and (d)
thereafter execute only that portion of the Work as may be necessary to preserve
and protect Work already in progress and to protect Equipment at the Site or in
transit thereto.
(b) Remedies. Contractor waives any claims for
consequential damages, including loss or anticipated profits for uncompleted
Work, on account of a termination by Owner pursuant to this Section 16.2.2 and
shall accept as its sole remedy the following: (i) reimbursement for all unpaid
aspects of the Work properly performed by Contractor and its Subcontractors,
(ii) all accumulated Retainage and (iii) all reasonable and necessary costs of
termination, in each case, as such costs are reasonably substantiated in writing
by Contractor to Owner. Contractor shall use reasonable efforts to minimize any
costs of termination. If, at the date of such termination, Contractor has
properly purchased, prepared or fabricated off-Site any Equipment for subsequent
incorporation at the Site, Owner shall have the option of having such Equipment
or a portion thereof delivered to the Site or to such other place as Owner shall
reasonably direct. Payments for termination under this Section 16.2.2 shall be
due Contractor within fifteen (15) Days of Owner's receipt of a substantiated
invoice.
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16.3. Termination by Contractor.
(a) If Owner fails to make any undisputed payment due
hereunder within ten (10) Business Days after the date upon which such payment
is due Contractor, then Contractor may upon fifteen (15) Business Days' prior
written notice to Owner stop Work until Contractor receives payment of all
undisputed amounts then due plus reasonable suspension and resumption expenses
and other additional costs as provided in Section 16.4.3 (not including lost
profits or any indirect, incidental or consequential damages), at which time
Contractor shall immediately re-commence performance of the Work. If Owner fails
to pay Contractor any undisputed portion of any payment within ninety (90) Days
after the payment due date, Contractor may terminate this Agreement and any such
termination shall be deemed an optional termination by Owner pursuant to Section
16.2.
(b) Further, if, during the continuance of this Agreement,
Owner shall default in any material respect in the observance or performance of
any material covenant, condition or agreement of Owner contained herein (other
than those contemplated by subsection (a) above) and Owner shall not have taken
reasonable action to commence a cure of such default within thirty (30) Days
after notice from Contractor to Owner and Lender specifying the default and
demanding that the same be remedied, and Owner is not otherwise excused
hereunder, then, in any such event, Contractor may terminate this Agreement by
giving notice of termination to Owner and Lender and any such termination shall
be deemed an optional termination by Owner pursuant to Section 16.2.
16.4. Suspension of the Work.
16.4.1. General. Owner may at any time or from time to time,
and for any reason, suspend performance of the Work or any portion thereof by
giving notice to Contractor (a "Suspension Notice"). Such suspension shall
continue for the period (the "Suspension Period") specified in the Suspension
Notice. At any time after the effective date of the suspension, Owner may
require Contractor to resume performance of the Work. Upon receipt from Owner of
any Suspension Notice, Contractor shall, unless the notice requires otherwise:
(a) Immediately discontinue the Work as directed by the
notice of Suspension, as soon as the Work is brought to a safe condition;
(b) Place no further orders or subcontracts for
Equipment with respect to suspended Work other than to the extent required in
the notice of Suspension;
(c) Promptly make every reasonable effort to obtain
suspension upon terms satisfactory to Owner of all subcontracts, to the extent
they relate to performance of Work suspended; and
(d) Continue to protect and maintain the Work, including
those portions that have been suspended.
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16.4.2. Extension of Time. In the case of any suspension under
this Section 16.4, the Guaranteed Completion Date and the Project Schedule shall
be extended by a period reasonably necessary to account for the Suspension
Period.
16.4.3. Compensation to Contractor. Owner shall compensate
Contractor monthly for those reasonable additional costs attributable to the
suspension of Work during the Suspension Period pursuant to a Suspension Notice
that are documented by Contractor to the satisfaction of Owner. All claims by
Contractor for compensation under this Section 16.4 must be made within
forty-five (45) Days after the Suspension Period has ended and the Work has been
either terminated or resumed. Payments by Owner under this Section 16.4 shall be
made in accordance with Section 7 hereof and shall increase both the Maximum
Price and the Contract Price.
ARTICLE 17.
INDEMNITIES
17.1. General Indemnity. Contractor agrees to indemnify, defend and
hold harmless Owner (including its Affiliates and their shareholders and
partners), Lender and Independent Engineer and each of their employees,
officers, directors, agents and representatives (collectively, "Owner's
Indemnitees") from and against third party actions, legal or administrative
proceedings, claims, demands, damages, liabilities, interest, attorney's fees,
costs, and expenses of whatsoever kind or nature, arising out of or in
connection with (i) bodily injury or property damage to third parties (whether
occurring before or after completion of the Work) to the extent caused by the
negligent acts or omissions of Contractor or any Subcontractor or their
respective employees or agents or anyone else acting under their direction and
control or on their behalf during the performance of the Work or during any
curative action under any warranty and (ii) the presence, discharge, escape,
release or threatened release, of any Hazardous Material brought onto the Site
or permitted to be introduced to the Site by Contractor or any Subcontractor or
their respective employees or agents or anyone else acting under their direction
and control or on their behalf during the performance of the Work or during any
curative action under any warranty. The indemnity provisions expressed in this
Section 17.1 shall apply to the fullest extent permitted by law and shall in no
manner amend, abridge, modify, or restrict any other obligation of Contractor
expressed elsewhere in this Agreement. The parties expressly acknowledge and
agree, however, that any payments made by Owner to Contractor under Section 17.1
represent payments in satisfaction of the indemnification obligations of Owner
to Contractor and do not represent additional compensation to Contractor under
Section 7.1 or increase the Maximum Price or Contract Price.
17.2. Patent Indemnification. (a) Contractor expressly warrants and
represents that it shall pay all royalties under or in respect of, and shall
indemnify, defend and save Owner harmless from and against any and all claims
whatsoever arising from or in any manner related to an infringement of patents
or the improper use of other proprietary rights which may occur in connection
with Contractor's or any Subcontractor's performance of the Work pursuant to
this
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Agreement. Contractor shall have sole authority for the control of the defense
of any and all such claims. Furthermore, should any such claim impair
Contractor's performance of the Work or continued operations of the Facility,
then Contractor shall, at its own expense, either timely procure the appropriate
license so as not to impair the Project Schedule or continuity of operation or
replace the infringing component, part, material, or design with a
non-infringing device or design or modify it so that it becomes non-infringing.
(b) Owner shall notify Contractor in writing as soon as Owner
shall receive notice of any claims of infringement of patents or other
proprietary rights occurring in connection with Contractor's performance of the
Work. In turn, Contractor shall timely notify Owner in writing of any claims
which Contractor may receive alleging infringement of patents or other
proprietary rights which may affect Contractor's performance of the work under
this Agreement.
17.3. Effect of Owner's Actions. Owner's acceptance of Contractor's
engineering designs or proposed or supplied materials and equipment shall not be
construed to relieve Contractor of any of its obligations hereunder.
17.4. No Limitation of Contractor's Obligation. In any and all
claims against Owner, its employees and agents and anyone else acting for or on
behalf of Owner, by any employee of Contractor or any Subcontractor or by anyone
directly or indirectly employed by any of them or anyone for whose acts any of
them may be liable, the indemnification obligation stated above shall not be
limited in any way by any limitation on the amount or type of damages,
compensation or benefit payable by or for Contractor or any Subcontractor under
the applicable worker's compensation act, disability acts, or other employee
benefits acts.
17.5. Tax Indemnity. Contractor shall defend, indemnify and hold
Owner, its assigns and affiliates harmless from and against all claims by any
governmental authority claiming taxes, duties or fees for which Contractor is
responsible for payment under Section 3.14. Owner shall defend, indemnify and
hold Contractor, its assigns and affiliates harmless from and against all claims
by any governmental authority claiming taxes, duties, or fees for which Owner is
responsible for payment under Section 4.5. The tax indemnification obligations
of this Section 17.5 shall survive the completion of the Facility and the
expiration and termination of this Agreement and shall continue for the period
of the applicable statutes of limitations for the assessment and collection of
such taxes during which the appropriate taxing authorities may institute, and
until the termination of, any applicable administrative, judicial, or other
appropriate legal proceedings instituted, for the assessment and collection
thereof.
17.6. Availability Reimbursement. (a) Contractor acknowledges that
(i) Owner intends to commercially operate each Unit under its Power Purchase
Agreement on and after Substantial Completion of such Unit and (ii)(A) any
interference, damage or hindrance by Contractor caused by or relating to the
construction and achievement of Substantial Completion of any other Unit or the
Facility or (B) the failure of any Acceptance Test conducted after any such
Substantial Completion, in each case may affect Owner's ability to meet, among
other
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things, the Unit availability requirements under the Power Purchase Agreement
and emissions under its permits and other governmental approvals.
(b) Notwithstanding anything to the contrary in this
Agreement, if Owner is prevented from operating any Unit or the Facility due
solely to the cause set forth in Section 17.6(a)(ii)(A) above, Contractor shall
be obligated to pay Delay Liquidated Damages accruing upon the commencement of
and for the duration of the period of nonoperation of the Unit or the Facility
due to such conditions until such Unit or the Facility is able to be returned to
operation; provided, that for the purposes of this Section 17.6(b), Contractor
shall pay to Owner liquidated damages on the terms set forth in Section 12.2 but
(i) on and prior to the Guaranteed Completion Date, in an amount payable on the
Guaranteed Completion Date and equal to, as of any date of determination, (A)
the aggregate liquidated damages in an amount accruing upon the commencement of
and for the duration of each period of nonoperation of a Unit due to such
conditions until such Unit is able to be returned to operation at the rates set
forth in Section 12.2 minus (B) the aggregate amount accruing upon the
commencement of and for the duration of each period of operation of the Unit at
a rate equal to Twenty-One Thousand Six Hundred and Sixty-seven dollars
($21,667) per Unit per day in the months of May through September and Sixteen
Thousand Six Hundred and Sixty-seven dollars ($16,667) per Unit per day during
the months of October through April and (ii) thereafter, at the rates set forth
in Section 12.2.
(c) Notwithstanding anything to the contrary in this
Agreement, if Owner is prevented from operating any Unit or the Facility due
solely to the cause set forth in Section 17.6(a)(ii)(B) above, Contractor shall
be obligated to pay Delay Liquidated Damages on the terms and at the rates set
forth in Section 12.2, accruing upon the commencement of and for the duration of
the period of nonoperation of the Unit or the Facility due to such conditions
until such Unit or the Facility is able to be returned to operation.
(d) The obligation of Contractor to pay the Liquidated Damages
amounts under this Section 17.6 shall at Owner's election be subject to set-off
against Retainage or any other amounts that are due and owing by Owner to
Contractor. Any payments of Liquidated Damages by Contractor to Owner shall be
treated both as reductions in the Maximum Price and as refunds of a portion of
the Contract Price, and any set-offs by Owner against amounts due and owing to
Contractor shall be treated as reductions in both the Maximum Price and the
Contract Price.
(e) Notwithstanding anything to the contrary in this
Agreement, Contractor expressly warrants and represents that it shall modify,
repair or replace the defect or deficiency causing such interference or
noncompliance with such Acceptance Test described in Section 17.6(a) above.
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ARTICLE 18.
DISPUTE RESOLUTION
18.1. Procedure. In the event a dispute arises between Owner and
Contractor regarding the application or interpretation of any provision of this
Agreement, the aggrieved party shall promptly provide written notification of
the dispute to the other party within thirty (30) Days after such dispute
arises. A meeting shall be held promptly between the parties, attended by
individuals with decision-making authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute. If within thirty (30) Days
after such meeting, the parties have not succeeded in negotiating a resolution
of the dispute, they agree to submit the dispute to mediation in accordance with
the commercial Mediation Rules of the American Arbitration Association and to
bear equally the costs of the mediation. The parties will promptly appoint a
mutually acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they are unable to agree upon such
appointment within ten (10) Business Days of submission of the dispute to
mediation. The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) Days.
18.2. Litigation and Submission to Jurisdiction. In the event that
the Dispute has not been resolved within thirty (30) Days of the mediator's
appointment, the parties shall have the right to pursue any and all remedies
available at law or in equity. The parties hereby submit themselves to the
exclusive jurisdiction of the state and federal courts located in the state of
New York, City of New York for the purpose of litigating a Dispute under this
Section 18.2 or the purpose of obtaining any preliminary relief related thereto.
A final judgment rendered in accordance with this Section by a New York Court
may be enforced in any court having jurisdiction. Each of the parties hereby
consents to service of process by registered mail at its address set forth in
Section 19.5 and agrees that its submission to jurisdiction and its consent to
service of process are made for the express benefit of the other party.
18.3. Continuation of Work. Notwithstanding any dispute, controversy
or claim ("Claim") that Contractor may have or be involved with whether pursuant
to Section 18.1 or otherwise, and regardless of the basis thereof or grounds
therefor, including, but not limited to litigation or Claims based on or related
to any Change Order or withholding of Progress Payments, Contractor agrees that
it will, for so long as the Agreement has not been terminated, diligently
prosecute the Work to completion, all in accordance with the terms of this
Agreement.
ARTICLE 19.
MISCELLANEOUS PROVISIONS
19.1. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
reflects the prior agreements and commitments with respect thereto. There are no
other oral understandings, terms or conditions and neither party has relied upon
any representation, express or implied, not contained in this Agreement.
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19.2. Amendments. No change, amendment or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change,
amendment or modification shall be in writing and duly executed by both parties
hereto.
19.3. Joint Effort. Preparation of this Agreement has been a joint
effort of the parties and the resulting document shall not be construed more
severely against one of the parties than against the other.
19.4. Captions. The captions contained in this Agreement are for
convenience and reference only and in no way define, describe, extend and or
limit the scope of intent of this Agreement or the intent of any provision
contained herein.
19.5. Notice. Any notice, demand, offer, or other instrument
required or permitted to be given pursuant to this Agreement shall be in writing
signed by the party giving such notice and shall be hand delivered or sent by
certified letter, overnight courier, telefax, or telex to the other parties at
such address as set forth below.
(a) If delivered to Owner:
LSP Energy Limited Partnership
c/o LSP Energy, Inc.
655 Craig Road
Suite 336
St. Louis, Missouri 63141
Attention: Project Manager - Batesville
Telephone: (314) 993-2700
Facsimile: (314) 993-2790
With a copy to:
LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Telephone: (732) 249-6750
Facsimile: (732) 249-7290
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(b) If delivered to Contractor:
BVZ Power Partners - Batesville
c/o Black & Veatch LLP
11401 Lamar Avenue
Overland Park, Kansas 66211
Attn: Mr. Ron Ott
With a copy to:
BVZ Power Partners - Batesville
c/o H.B. Zachry Company
527 Logwood
P.O. Box 21130
San Antonio, Texas 78211
Attn: Mr. Jerry Burke
Each party shall have the right to change the place to which notice
shall be sent or be delivered by similar notice sent or like manner to the other
party. The effective date of any notice issued pursuant to this Agreement shall
be as of the addressee's receipt of such notice.
19.6. Severability. The invalidity of one or more phrases,
sentences, clauses, sections or articles contained in this Agreement shall not
affect the validity of the remaining portions of the Agreement so long as the
material purposes of this Agreement can be determined and effectuated.
19.7. Confidentiality. (a) Except as otherwise required to be
disclosed by Owner for the development or financing of the Facility, each party
agrees to hold in confidence for a period of five (5) years from the date
hereof, any confidential information supplied by the other party and designated
in writing as confidential by such other party, including this Agreement
("Confidential Information"). Contractor further agrees, to the extent requested
by Owner, to require its subcontractors, vendors, suppliers and employees to
enter into appropriate nondisclosure agreements relative to such Confidential
Information, prior to the receipt thereof. Likewise, Owner shall require
prospective lenders, insurance agents, consultants and other agents to enter
into appropriate non-disclosure agreements relative to such Confidential
Information, prior to the receipt thereof.
(b) The provisions of this Section 19.7 shall not apply
to information (i) that was in the public domain prior to the receiving party's
receipt or that subsequently becomes part of public domain by publication or
otherwise, except by the receiving party's wrongful act or (ii) that is required
to be disclosed by law, rule, regulation or order, or in the course of
administrative or judicial proceedings (collectively, a "Legally Compelled
Disclosure"); provided, however, that the party required to make the Legally
Compelled
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Disclosure shall immediately notify the other party of the requirement and the
terms thereof and shall cooperate to the maximum extent practicable to preserve
the confidential nature of the information and to minimize the disclosure.
(c) Notwithstanding anything to the contrary in this
Section 19.7, Contractor agrees to comply with any confidentiality requirements
set forth in any letters of intent, purchase orders or contracts entered into
between Owner and Subcontractors with respect to Owner Purchases.
19.8. Assignment. (a) Without the prior consent of Contractor, Owner
may assign all or part of its right, title, and interest in this Agreement to
the Lender, any affiliate of Owner, any successor to Owner's business and assets
(whether by merger, acquisition or otherwise) and to any financially responsible
entity that agrees to be bound by the term hereof and, with respect to the
engineering and design of the Infrastructure Equipment, to the Local
Governments. In addition, Owner may assign all or part of its right, title, and
interest in this Agreement to any other Person with the prior written approval
of Contractor, which approval shall not be unreasonably withheld.
(b) Contractor may not assign this Agreement or any partial or
total interest therein without Owner's prior written consent (which consent
Owner may refuse in its sole direction).
(c) Owner may grant, in connection with the Infrastructure
Equipment, to the Authority and the Local Government, a perpetual ground lease
or easement for that portion of the Site on which the Infrastructure Equipment
is located
19.9. No Waiver. Any failure of any party to enforce any of the
provisions of this Agreement or to require compliance with any of its terms at
any time during the pendency of this Agreement shall in no way affect the
validity of this Agreement, or any part hereof, and shall not be deemed a waiver
of the right of such party thereafter to enforce any and each such provisions.
19.10. APPLICABLE LAW. EXCEPT WITH RESPECT TO SECTION 7.8, THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF CONFLICTS OF LAWS PROVISIONS. ANY
ACTION ARISING OUT OF THIS AGREEMENT OR THE PARTIES' RIGHTS AND DUTIES HEREUNDER
MAY BE BROUGHT, IF AT ALL, ONLY IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND EACH PARTY SUBMITS ITSELF TO THE JURISDICTION
OF THAT COURT.
19.11. Successors and Assigns. This Agreement shall be binding upon
the parties hereto, their successors and permitted assigns.
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19.12. Exhibits. All exhibits referenced in this Agreement shall be
incorporated into this Agreement by such reference and shall be deemed to be an
integral part of this Agreement.
19.13. Obligations. Nothing contained in this Agreement shall be
construed as constituting a joint venture or partnership between Contractor and
Owner.
19.14. Financing Assistance. Contractor shall provide such
assistance as Owner may reasonably request in connection with obtaining
financing for the Facility. Contractor agrees that it will make available to
Owner and the Lender information relating to the status of the Work, including
but not limited to information relating to the design, engineering, construction
and testing of the Facility, the status of any required licenses and permits,
and such other matters as Owner may reasonably request. Contractor shall
promptly respond to requests by prospective Lenders for information regarding
the qualifications, experience, past performance, and financial condition of
Contractor and its Affiliates. Contractor shall furnish such consents to
assignment, certifications and representations and opinions of counsel,
addressed to Owner and the Lender, as may be reasonably requested by Owner or
the Lender. Contractor and Owner shall make reasonable amendments to this
Agreement and any other agreement or instrument executed pursuant to or in
connection with this Agreement as may be necessary to facilitate the obtaining
of financing for the Facility. Contractor shall indemnify, defend and hold
harmless Owner for any liability resulting from any misstatement made by
Contractor or omission by Contractor in connection with the information provided
by Contractor pursuant to this Section 19.14.
19.15. Further Assurances. Contractor and Owner agree to provide
such information, execute and deliver any instruments and documents and to take
such other actions as may be necessary or reasonably requested by the other
party which are not inconsistent with the provisions of this Agreement and which
do not involve the assumptions of obligations other than those provided for in
this Agreement, in order to give full effect to this Agreement and to carry out
the intent of this Agreement, including, without limitation, the execution and
delivery of any amendments, instruments and documents with necessary or
desirable to carry out the intent and to develop the procedures regarding the
procurement of Equipment and services under Section 3.16(b) and (c) and Article
20.
19.16. Priority. In the event of any conflict or inconsistency
within the various provisions of this Agreement, the Exhibits and other
incorporated or associated documentation, the terms and conditions of this
Agreement shall control.
19.17. Counterparts. This Agreement may be signed in any number of
counterparts and each counterpart shall represent a fully executed original as
if signed by both parties.
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19.18. Lender Approval. This Agreement shall be contingent in all
respects upon Owner obtaining satisfactory financing to proceed with the
construction of the Facility except in connection with Preliminary Work
performed pursuant to the Limited Notice to Proceed.
19.19. Non-Recourse. Contractor specifically acknowledges and agrees
that no recourse for the payment of any sums or the performance of any
obligations hereunder, or for any claim based thereon or otherwise in respect
thereof or relating thereto, shall be had against any employee, incorporator,
shareholder, officer or director, past, present or future, of Owner or any
Affiliate of Owner, it being understood that the partners of Owner may be
special purpose corporations formed for the purpose of developing and managing
the Facility on the express understanding aforesaid and Contractor shall look
solely to Owner and to the assets of Owner for the satisfaction of Owner's
obligations.
19.20. Joint and Several Liability. The liability of Contractor
arising under this Agreement is joint and several to H.B. Zachry Company and
Black & Veatch Construction, Inc. and shall remain so until all responsibilities
of Contractor under this Agreement have been fulfilled and all liabilities have
ceased and all accounts with Owner have been settled and until the liability
under all bonds and indemnity agreements and/or priority agreements and other
agreements, if any, executed by Contractor pursuant to this Agreement has
ceased, notwithstanding any provision of the joint venture agreement of BVZ
Power Partners - Batesville which may be to the contrary, and notwithstanding
the termination or dissolution of BVZ Power Partners -Batesville. In furtherance
of the foregoing, Contractor shall cause to be executed a separate parent
Guaranty Agreement by Black & Veatch LLP in favor of Owner effective as of the
date hereof, in the form and substance satisfactory to Owner.
ARTICLE 20.
INFRASTRUCTURE
20.1. Intention. The intention of the parties is that Owner will
enter into separate technical services agreements with a third-party engineer
for design and engineering services for both the Infrastructure Equipment and
the balance of the Facility as Owner Purchases under Section 3.16(b).
Notwithstanding the foregoing, Contractor expressly acknowledges that the
Infrastructure Equipment constituting a part of the Facility will be engineered
and designed by Contractor and paid for by Owner under this Agreement, but that
the cost of such engineering and design for the Infrastructure Equipment will be
reimbursed to Owner using the proceeds of certain general obligation bonds of
the State of Mississippi issued under the Mississippi Major Economic Impact Act
("Bond Proceeds") pursuant to a certain Inducement Agreement to be entered into
among, inter alia, Owner, the Authority, and the Local Government ("Inducement
Agreement"). Contractor further acknowledges, however, that the Infrastructure
Equipment and the other portions of the Facility are being constructed together
under this Agreement to function and operate together as parts of an integrated
Facility. Other than as explicitly set forth in this Article 20, nothing in the
engineering, design, construction and procurement of the Infrastructure
Equipment shall be construed to relieve Contractor from any
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of its obligations under this Agreement with respect to the Work, the Equipment,
the Subcontractors or other service providers, suppliers, manufacturers, or
Vendors supplying such Infrastructure Equipment or otherwise, including without
limitation, under all indemnity, warranty and guarantee provisions contained
herein.
20.2. Engineering and Design.
20.2.1 Separate Contracts. With the exception of Exhibits J-1
and J-2, all the other provisions of this Agreement regarding design and
engineering are applicable to the design and engineering of the Infrastructure
Equipment. All of the provisions of this Agreement regarding design and
engineering and all of the Exhibits thereto, specifically excluding Exhibits J-1
and J-2 but specifically including those portions of Exhibits J-3 and J-4
relating to the engineering and design of the Infrastructure Equipment, as well
as the separate technical services agreement to be entered into for the design
and engineering for the Infrastructure Equipment, constitute a separate design
and engineering contract regarding the Infrastructure Equipment ("Infrastructure
Contract"). All of the other provisions of this Agreement and all of the
Exhibits thereto, specifically excluding those portions of Exhibits J-3 and J-4
regarding the design and engineering of the Infrastructure Equipment but
specifically including Exhibits J-1 and J-2 and those portions of Exhibits J-3
and J-4 which do not constitute the design and engineering of the Infrastructure
Equipment, constitute a separate contract for the design, procurement and
construction of the Facility (other than the Infrastructure Equipment ("Facility
Contract"). The Infrastructure Contract and Facility Contract collectively
constitute the Agreement, with the Agreement, excluding Exhibits J-1, J-2, J-3
and J-4, merely constituting a master document applicable to and forming an
integral part of both the Infrastructure Contract and Facility Contract. The
division of the Agreement into a separate Infrastructure Contract and separate
Facility Contract is solely for the purposes indicated in this Article 20.
Otherwise, this Agreement shall be performed as if it constituted a single
contract.
20.2.2 Separate Accounting. Since Owner must, under the
Inducement Agreement, submit to the Authority accurate total costs for the
design and engineering of the Infrastructure Equipment under the Infrastructure
Contract, Contractor will create and maintain separate and segregated books and
records for the Infrastructure Contract and Facility Contract in order
accurately to charge costs and separately to account for the total costs,
including the portion of the Contract Price, related to the Infrastructure
Equipment under the Infrastructure Contract, even though the Infrastructure
Equipment and the remainder of the Facility are being constructed to function
and operate together as parts of the integrated Facility. An appropriate and
allocable amount of Contractor's administrative costs, construction management
expense, and other similar indirect costs chargeable to the construction of the
Facility as a whole shall also be allocable and chargeable between the
engineering and design of the Infrastructure Equipment and the remainder of the
Facility.
20.3. Payments. Contractor expressly acknowledges and agrees with
Owner that Owner shall be the sole source of payments required under this
Agreement with respect to the engineering and design of the Infrastructure
Equipment, and Contractor expressly
66
<PAGE>
acknowledges that it has no right of expectation of receipt or to receive any
payments required to be made to Contractor under this Agreement from either the
Authority or the Local Government.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
BVZ POWER PARTNERS - BATESVILLE
By: /s/ Robert Kalt
------------------------------------
Name: Robert Kalt
Title: Vice President
By: /s/ Ronald J. Ott
------------------------------------
Name: Ronald J. Ott
Title: Vice President
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.
Its: General Partner
By: /s/ Frank E. Hardenbergh
------------------------------------
Name: Frank E. Hardenbergh
Title: Senior Vice President
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<PAGE>
EXHIBIT A
ACCEPTANCE TESTS
1.0 GENERAL
1.1 This Exhibit A describes the Acceptance Tests, including the
requirements for the Test Procedures. The following list of tests shall
collectively be known as the Acceptance Tests:
-- Unit Power Output and, Unit Heat Rate Test, and Maximum Unit
Power Output Test,
-- Auxiliary Load Test and Maximum Auxiliary Load Test.
-- Emissions Test.
-- Reliability Test.
-- Start-up Test.
-- Availability Test.
-- Sound Level Test.
-- Cooling Tower Test.
-- Capability Tests.
1.2 The purpose of Acceptance Tests is to demonstrate and verify compliance
with Guaranteed Values as further described in this Exhibit A and to
verify Unit and Facility design requirements as defined in this Exhibit
A. Unless indicated otherwise in this Exhibit A, all Acceptance Tests
will be conducted on a Unit basis.
The Acceptance Tests shall be conducted based on the Test Procedures
developed in accordance with requirements described in Section 2.0 of
this Exhibit A.
1.3 The Acceptance Tests shall be conducted in compliance with requirements
of the Test Procedures and the Agreement.
1.4 Unless indicated otherwise in this Exhibit A or in the approved Test
Procedures, Acceptance Tests shall be conducted with the Unit and/or
Facility operating in its normal, stable and automatic mode, and with a
normal complement of plant operators. However, certain Capability Tests,
because of their respective requirements, will not be required to
operate at base load or in the normal, stable, and automatic mode.
Except for supervisory involvement by the Contractor or his
representatives and Contractor's collection of natural gas samples, no
direct operation of the Unit and/or Facility will be allowed by any
other person than Owner's operators.
1.5 For approval by the Owner, Contractor shall provide a complete set of
Test Procedures no later than ninety (90) days prior to the first
scheduled Acceptance. In addition, no later than six (6) months prior to
the first proposed Acceptance Test, the Contractor shall provide the
combined cycle test correction curves and algorithms or equations (for
the Unit Power Output Test, the Maximum Net Power Output Test, the Unit
Heat Rate Test, Auxiliary Load Test, and Maximum Auxiliary Load Test).
The Contractor shall also provide an electronic spreadsheet to be used
for determining corrections to the Base Conditions.
1.6 Acceptance Tests on a Unit shall not be conducted until after Contractor
has tested the CEM system for certification for that Unit. If the
results of the CEM certification indicate that the CEMS system is
functioning correctly and will obtain certification, the Contractor may
start
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that Unit's Acceptance Tests prior to receiving the formal certification
from the State or governing agency. Contractor also has option to hire
an independent subcontractor to verify that the Unit has met stack
Emissions Guarantee during the Acceptance Tests.
In addition, the Contractor shall operate each Unit and/or the Facility
within compliance of the wastewater discharge permit and Sound Level
Guarantees at all times.
1.7 Contractor/Owner Obligations
1.7.1 All Owner and Contractor obligations regarding requirements for testing
and re-testing shall be as provided in the terms of the Agreement.
1.7.2 Contractor shall provide all necessary calibrated test class
instrumentation and testing supervisory personnel required to complete
the Acceptance Tests.
1.7.3 Contractor shall provide Owner with a detailed testing schedule along
with an Acceptance Testing Notice for each Unit in accordance with
Article 12.4(a) of the Agreement. Confirmation by the Contractor shall
be provided no later than forty-eight (48) hours prior to Contractor's
intent to conduct such tests including any updates to the schedule for
such tests. If Contractor delays the Acceptance Tests, Contractor shall
promptly notify Owner of any revisions to the schedule. Owner shall make
the necessary arrangements with the Power Purchaser to accept power at
the required loads during such 48 hour time period. In the event that
the power cannot be accepted by the Power Purchaser as required by the
Test, Contractor shall make every reasonable effort to modify the
testing schedule to accommodate available load requirements. If a
modified testing schedule cannot be developed consistent with the
then-applicable Project Schedule, Contractor shall be entitled to a
Change Order in accordance with the terms of the Agreement.
Immediately following completion of each Acceptance Test, copies of all
raw data and electronic spreadsheet data acquisition files shall be
provided to Owner and Independent Engineer. Copies of all preliminary
results shall be provided to the Owner and Independent Engineer within
twenty-four (24) hours following completion of such Acceptance Test.
Contractor shall prepare an Acceptance Test Report with respect to the
results of the Acceptance Tests which shall include the information
required in Section 2 of this Exhibit A and be in sufficient detail for
Owner and Independent Engineer to verify compliance with requirements of
the Agreement including this Exhibit A. Preliminary results for the Unit
Heat Rate Test shall be based on fuel characteristics obtained from
samples taken prior to such tests, Contractor shall provide a formal
Acceptance Test Report promptly but no later than 14 days following the
completion of such tests.
1.7 Guarantee Basis Fuel
The guarantee basis fuel analysis is provided in Attachment 4. All output and
heat rate performance guarantees are based on this analysis.
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TABLE I OF EXHIBIT A
GUARANTEED VALUES MATRIX
<TABLE>
<CAPTION>
<S> <C>
Test Guaranteed Values
Maximum Unit Power Output Test.(1) Unit Power Output = 285,400 kW
Unit Power Output Test.(2) Unit Power Output = 248,290 kW
Unit Heat Rate Test.(2) Unit Heat Rate = 6,769 Btu/kWh (HHV)
Auxiliary Load Test Auxiliary Power4 = 15,300 kW
Maximum Auxiliary Load Test Auxiliary Power3 = 18,900 kW
Reliability Test Each Unit shall be capable of operating
at a 99 percent equivalent availability
factor for a period of 112 hours of a
120- hour test period.
Availability Test The Facility shall be capable of operating
at a 95 percent equivalent availability
factor for a period of 20 days.
Emissions Test Each Unit shall meet stack emissions
contained in Section 2.7 of this Exhibit A.
Sound Level Test The Contractor shall demonstrate the
capability of the Facility to meet the
guaranteed noise levels at the locations
identified in Section 2.5.
Startup Test Each Unit shall be capable of
starting within 210 minutes following a
48-hour shutdown, and within 130 minutes
following a shutdown of less than 8 hours.
</TABLE>
Notes:
(1) The Base Conditions for this test are 95 F, 60% RH, 14.577 psia, 0.90
gpf, evaporative cooler in service, power augmentation in service and
duct firing in service.
(2) The Base Conditions for this test are 95 F, 60% RH, 14.577 psia, 0.90
gpf, evaporative cooler in-service, duct burner out of service, and
power augmentation out of service.
(3) Auxiliary loads for this guarantee are based on operation of all
Facility Units. The Base Conditions for each Unit shall be the same as
the Maximum Unit Power Output Test.
(4) Auxiliary loads for this guarantee are based on operation of all
Facility Units. The Base Conditions for each Unit shall be the same as
the Unit Power Output Test.
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Conditions for each Unit shall be the same as the Unit Power Output Test.
2.0 ACCEPTANCE TEST PROCEDURE REQUIREMENTS
2.1 MAXIMUM UNIT POWER OUTPUT TEST, UNIT POWER OUTPUT TEST AND UNIT HEAT
RATE TEST, Auxiliary Load Test, and Maximum Auxiliary Load Test.
The Unit Power Output Test, and Unit Heat Rate Test, the Maximum Unit
Power Output Test and the Auxiliary Load Test (herein referred to as
"Performance Tests") shall be conducted by Contractor to demonstrate
that the respective performance guarantees are met.
2.1.1 Equipment Operating Limits
During the Performance Tests, all Unit and Common Facility equipment
shall be operated within the manufacturers' recommended limits for
continuous and long-term operation. Operation of each combustion
turbine must be within the manufacturer's firing temperature limits
corresponding with the turbine load. Under no circumstances will
operation at firing temperatures above base load be allowed. The
Contractor shall obtain for the Owner the manufacturer's standard
calculations and algorithms used in the control system and control
system constants that will allow Owner to verify the firing temperature
of each combustion turbine is within the required operating range.
Any Performance Test conducted outside of the manufacturers'
recommended limits allowed for continuous and long-term operation shall
be invalidated.
The Contractor shall conduct the Performance Tests in the normal and
automatic mode of operation. Specifically, the Contractor shall develop
a complete Facility valve status list and auxiliary load list that
defines the normal operating status of all major valves in the Facility
and auxiliary equipment operating status. Prior to the Performance Test,
the Contractor shall confirm the status of such valves and auxiliary
equipment and confirm the Unit and Common Facilities are operating in
the automatic mode. No change in equipment operating status shall be
allowed during the test, other than as required for normal operation. In
addition, the Contractor shall not be allowed to make adjustments,
either prior to or during the Performance Tests, to Facility equipment
that would artificially enhance the performance of a Unit or the Common
Facilities. If any such adjustments are made to a Unit or Conunon
Facilities, the Performance Test in question will be reviewed by the
Contractor, Owner, and Independent Engineer for test validity.
2.1.2 Base Conditions
The Base Conditions for each of the Performance Tests are as follows:
Base Conditions for Unit Power Output and Unit Heat Rate Test,
and Auxiliary Load Test:
<TABLE>
<S> <C> <C>
-- Ambient dry bulb temperature, F = 95
-- Ambient barometric pressure, psia = 14.577
-- Ambient relative humidity, % = 60
-- Combustion Turbine Fuel = Natural Gas as defined in
Attachment 4
-- Power factor (at generator terminals) = 0.90 (lagging)
-- HRSG blowdown, % = 0
-- Evaporative cooler On
</TABLE>
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<TABLE>
<S> <C> <C>
-- Combustion turbine power augumentation Off
-- Duet burner Off
-- All equipment required for normal operation of each Unit shall be
in service during the test period, except those items which are
not required for the test, including, but not limited to, the
regeneration of the demineralizer, operation of the main electric
fire pump, and HRSG blowdown.
</TABLE>
Base Conditions for Maximum Unit Power Output Test, and Maximum Auxiliary
Load Test
<TABLE>
<S> <C> <C>
-- Ambient dry bulb temperature, F = 95
-- Ambient barometric pressure, psia = 14,577
-- Ambient relative humidity, % = 60
-- Combustion Turbine Fuel = Natural Gas as defined in
Attachment 4
-- Power factor (at generator terminals) = 0.90 (lagging)
-- HRSG blowdown, % = 0
-- Evaporative cooler On
-- Combustion turbine power augmentation On
-- Duct burner On
-- All equipment required for normal operation of each Unit shall be
in service during the test period, except those items which are
not required for the test, including but not limited to, the
regeneration of the demineralizer, operation of the main electric
fire pump, and HRSG blowdown.
</TABLE>
2.1.3 Determination of Unit Power Output and Unit Heat Rate
The Unit Power Output is the power output measured (with the Owner's
revenue meters) on the high side of the generator step-up transformers
associated with a Unit, plus the auxiliary load, if any, taken from a
respective Unit. Auxiliary loads taken from a respective Unit shall be
measured on the high side of the auxiliary transformer (with the Owner's
electric revenue meters).
Unit Power Output determined in this manner shall be referred to as the
"as-tested" Unit Power Output.
Unit Heat Rate (Btu/(kW-hr)) shall be calculated as follows:
UHR "as tested" = Q / (Unit Power Output expressed in kW)
Q = Thermal heat input from fuel, Btu/hr on an higher heating value
basis, as calculated by the product of the flow times the heating
value of the fuel (higher heating values).
Unit Heat Rate determined in this manner shall be referred to as the
"as-tested" Unit Heat Rate.
Actual test conditions during the Performance Tests may not match the
Base Conditions as defined in Section 2.1.2, therefore, the "as-tested"
Performance Test results shall be adjusted to the Base Conditions using
correction procedures developed as part of the Test Procedures.
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Performance test results adjusted to the Base Conditions shall be
referred to as the "as- adjusted" Unit Power Output (for both the Unit
Power Output Test and the Maximum Unit Power Output Test) and the
"as-adjusted" Unit Heat Rate, and as the as-adjusted Auxiliary Load and
the as-adjusted Maximum Auxiliary Load.
2.1.4 Instrumentation and Data Requirements
Instrumentation used for the Performance Tests shall be provided to
measure the following categories: (i) primary parameters, and (ii)
secondary parameters. The primary parameters are data which are required
to be measured by the respective Performance Test for determination of
electrical output (electrical output, dry and wet bulb ambient
temperatures, atmospheric pressure, power factor, blowdown rates), or
are required for calculations of heat input (flow, temperature, pressure
and composition of fuel). The secondary parameters are all other data
required for verification of plant equipment operating conditions
including: (i) component operating limitations, and (ii) thermal
stability.
For measuring all primary parameters, test class or revenue class
instrumentation shall be used. The instrumentation shall meet the
requirements of NIST and shall be calibrated and installed per the
guidance of the ASME PTC 19 Instruments and Apparatus Supplements to the
ASME Performance Test Codes. Copies of calibration certificates for all
instruments used during the test shall be provided to the Owner and
Independent Engineer prior to commencement of the test for approval. If
proper calibration can not be verified, the test results may be
invalidated.
Specifically the Contractor shall meet the following requirements
related to calibration:
-- Calibration of all primary operating parameters must be completed
prior to the Performance Test, not to exceed 31 days prior.
-- Any test instrumentation provided from a testing contractor shall
have no use following laboratory calibration and installation at
the Facility.
-- All test instruments shall have a testing laboratory sticker
containing: (i) test lab name, (ii) initials of calibration
technician, (iii) date of calibration, (iv) equipment/instrument
serial number.
-- If any test equipment leaves the site, it must be recalibrated
before it is allowed to be used for Performance Tests.
-- If any equipment is dropped or otherwise handled in such a manner
so as to possibly cause the accuracy to be suspect, the equipment
shall be recalibrated.
The Owner and Independent Engineer shall be notified to witness
calibration of all instruments used for performance testing or provided
the ability to audit the calibration facilities.
Data from calibrated test class instrumentation shall be read and
recorded electronically by automatic data acquisition equipment. Test
instrumentation and equipment in many cases may be temporarily installed
for measurements of the primary parameters required for the performance
tests. Raw thermal process data shall be reduced and calculations
performed per the recommendations of the ASME MFC Series, and/or the
appropriate AGA codes for determination of natural gas fuel consumption.
Natural gas fuel consumption shall be determined based on each Unit's
Owner-supplied fuel supply meter and associated instrumentation. The gas
flow meter shall either be a flat plate
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orifice or a turbine type meter, either type to be manufactured and
installed in accordance with the AGA or ASME code requirements. Each
Unit's fuel supply meter shall have an uncertainty of no greater than
+/- 0.75 percent. The pressure transmitters, temperature, and orifice
differential pressure transmitter (if applicable) shall calibrated
within two weeks of the test. The Owner shall provide all calibration
data for the fuel supply meter and associated instrumentation.
Compensated flow signals from the gas meter shall be available to the
Contractor's DCIS in a compatible electronic format.
During the Unit Heat Rate Test, a minimum of three (3) gas fuel samples
per hour shall be taken for chromatographic analysis as per ASTM D 1945.
A third party laboratory shall perform the analysis. The selection of
the laboratory shall be mutually agreed to by the Owner and the
Contractor. Heating value shall be determined according to the version
of ASTM D3588 in effect at the date of the EPC Agreement based on the
composition of the natural gas fuel.
Natural gas fuel density shall be determined by the local pressure and
temperature data, and the fuel composition per the latest version of AGA
8.
Unit Power Output generated by the Unit shall be measured on the high
side of each step-up transformer by the Owner's electric revenue meter.
The electrical revenue meter, including current transformer and
potential transformer contributions shall have an uncertainty of no
greater than +/- 0.3%. The Owner shall be responsible for obtaining
calibration data for the electric meter and associated current and
potential transformers. Output signals from the electrical revenue meter
shall be available to the Contractor's DCIS in a compatible electronic
format.
Auxiliary loads consumed by a Unit and/or the Facility shall be measured
on the high side of the auxiliary transformer by the Owner's electric
metering. The electrical metering associated with auxiliary loads,
including current and potential transformer contributions, shall have an
uncertainty of no greater than +/- 0.3%. The Owner shall be responsible
for obtaining calibration data for the electric meter and associated
current and potential transformers. Output signals from the Owner's
electrical meter shall be available to the Contractor's DCIS in a
compatible electronic format.
Ambient dry and wet bulb temperatures, or ambient dry bulb temperature
and relative humidity shall be measured. Ambient dry bulb temperature
shall be measured with a minimum of four laboratory-calibrated
instruments installed at a location that provides a representative
measurement of combustion turbine inlet temperature (per combustion
turbine). Psychrometers or calibrated relative humidity monitors shall
be used for determination of wet bulb temperature or relative humidity.
This instrumentation shall be located away from effects of cooling tower
recirculation. Ambient barometric pressure shall be measured with one
device near the inlet of the combustion turbines.
All plant emissions shall be recorded by the plant CEM system during
Performance Tests or as otherwise permitted by Section 1.6 of this
Exhibit A.
Secondary parameters shall include the following, as a minimum (provided
these readings are available from permanent Facility instrumentation):
all conditions (temperature, pressure and flow) of main steam, reheat
steam, intermediate pressure steam and low pressure steam, steam turbine
exhaust pressure, circulating water flow, and inlet and outlet
temperatures, combustion turbine exhaust temperature, internal gas-side
temperatures in to the HRSG, steam drums' pressures, stack temperature,
combustion turbine compressor discharge pressure, combustion turbine
exhaust temperature. All primary and secondary parameters
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collected for the Performance Tests shall be summarized for each test
period and an electronic version of the data provided to the Owner and
Independent Engineer.
2.1.5 Duration of Test and Frequency of Data Collection
The Performance Tests for Unit Power Output and Heat Rate, Maximum Unit
Power Output, Auxiliary Load and Maximum Auxiliary Load shall consist of
four (4) one-hour test periods. The four one-hour test periods shall be
continuous, provided steady state conditions are maintained. If
steady-state conditions can not be maintained then the test will be
suspended until steady state conditions return. When steady-state
conditions return the test may resume, provided the test is completed
within eight (8) hours following commencement of the first test period.
Unit Power Output (for both the Unit Power Output Test, and the Maximum
Unit Power Output Test) and Unit Heat Rate for each Unit shall be the
average of results from the four one-hour test periods. Auxiliary load
values for the Auxiliary Load and Maximum Auxiliary Load Tests for the
Facility shall be the average of the results from the four one-hour
tests.
All test data shall be collected at least every one-minute.
2.1.6 Test Preparation
The test procedure developed for the Performance Tests during the
implementation phase of the project shall include the following
information at a minimum:
1. Objective of Test.
2. Parties to the test.
3. Key personnel and their responsibilities.
4. Logistics governing the conduct of the test.
5. Equipment inspection and condition requirements.
6. Equipment operating conditions including required equipment
status, including a detailed steam cycle valve status.
7. Required primary and secondary data.
8. Special calibrated test instrumentation used for measurement of
primary parameters and their location. Post test re-calibration
requirements.
9. Instrumentation for secondary parameters, their location and
control system identification number.
10. Requirements for preliminary testing, including checkout of
instrumentation via the data acquisition system(s).
11. Frequency of data collection, format of data presentation, and
duration of test.
12. Steady state criteria.
13. Raw data reduction and instrumentation calibration correction
methodology.
14. Detailed method for computation of test results (sample
calculation).
15. Correction curves for adjusting the as-tested results to the Base
Conditions. The procedure shall also contain all manufacturers'
correction curves, methods and any other calculations used by the
Contractor for developing the correction curves.
16. Acceptance Test Report Requirements.
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Prior to the commencement of Performance Tests, individual
equipment/system pre-operational checks, inspections, and major control
system adjustments shall be completed, and, in accordance with Section
1.7.3 of this Exhibit A, any arrangements previously made with the Power
Purchaser to receive power during the test shall be confirmed.
2.1.7 Correction Curves
A series of correction curves shall be developed and delivered to Owner
in accordance with Section 1.5 of this Exhibit A for adjustment of the
as-tested results to the Base Conditions. These correction curves shall
be developed based on the manufacturer correction curves for all of the
major equipment comprising the Facility (i.e. combustion turbine,
evaporative cooler, HRSG, steam turbine, steam turbine condenser,
cooling tower). An electronic spreadsheet containing the correction
curves algorithms shall be developed for purposes of making adjustments
to the Base Conditions. All manufacturer data, necessary calculations,
and the spreadsheet shall be provided to the Owner for verification.
2.1.8 Commercial Tolerance Band
The Commercial Tolerance Bands for Unit Power Output and Unit Heat Rate
are based on the assumed accuracies of the Owner's electrical meter and
the fuel supply meter as defined Section 2.1.4. If the uncertainty of
either Unit electrical output or Unit fuel flow is higher than the
uncertainty defined in Section 2.1.4, then the Commercial Tolerance Band
shall be adjusted to account for the different accuracy. Any
modifications to the testing tolerance as a result of changes in the
accuracy of the Unit power meter or the fuel supply meter shall be
mutually agreed to by the Owner, Independent Engineer, and Contractor
prior to beginning the Performance Test; such agreement shall not be
unreasonably withheld.
2.1.9 Degradation
Degradation shall be allowed for extra operating hours on the combustion
turbines due to Owner Delay as defined in the EPC Agreement, and for
time on the combustion turbines in excess of 400 fired hours or 250
equivalent starts, whichever occurs first.
-- WEC, Owner, Independent Engineer, and BVZ shall jointly assess
the effect of plant commissioning on Unit performance related to
degradation.
-- The assessment shall be made on regularly scheduled intervals
(suggested 100 fired hours or 50 equivalent starts) to assess
the commissioning impact on performance (Benchmark Performance
Tests) and to recommend corrective actions to minimize
additional hours of operation and/or starts to complete
commissioning.
-- Reasonable efforts shall be made to conduct a minimum of four
base load Performance tests at approximately equal intervals
during the first 400 fired hours or 250 equivalent starts
(Benchmark Performance Tests) (New and Clean Condition) with the
last test taking place as close as practical, but not over 400
fired hours or 250 equivalent starts (400 fired hours/250
Equivalent Start Test).
-- The purpose of these Benchmark Performance tests are to trend
the degradation of the unit during the commissioning period.
-- In the event that base load operation data can not be taken,
data points at part load will be utilized to trend the
degradation during the first 400 hours or 250 equivalent starts.
-- If the unit exceeds the 400 fired hour or 250 equivalent start
criteria prior to conducting the Unit Power Output Test and Unit
Heat Rate Test and the Maximum Unit Output Test, and base load
benchmark data is taken at the 400 fired /250 Equivalent Start
Test, the
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results of these tests will be adjusted for degradation in
excess of 400 hours or 250 equivalent starts based on the
results of the benchmark testing based on the following:
-- At the beginning of each or just prior to each Unit's
Performance Test, an engine test to establish the comparison to
the benchmark data will be conducted. This test is to be
performed in the same manner as the Benchmark Tests.
-- A degradation factor will be defined for each performance
parameter. The factor will be determined as the difference
between the 400-hour / 250 equivalent start Benchmark Test
results and the results from the test prior to Performance
testing.
-- If the degradation results of the 400 hour / 250 equivalent
starts test do not fall within 25% of the trend line generated
from the results of the previous test, the parties will
investigate the cause of the deviation from the trend and as
necessary, take appropriate corrective action in accordance with
the Agreement.
-- If a physical or control change is made to the unit, the parties
will endeavor to identify and segregate the performance effect
of that change. In the event that effect can be identified and
segregated, the benchmark correction will be adjusted
accordingly. If the effect can not be identified and segregated,
then the degradation will be determined by the degradation curve
contained TTDEG-031.
- -- If the unit exceeds the 400 fired hour or 250 equivalent start
criteria prior to conducting, the Unit Power Output Test and Unit
Heat Rate Test, and the Maximum Power Output Test, and base load data
can not be taken at the 400 Fired Hour /250 Equivalent Start Test,
the results of these performance tests will be adjusted for
degradation in excess of 400 hours or 250 equivalent starts based on
the degradation curve TT-DEG-031.
- -- The degradation correction factor for the combustion turbine,
determined from the test results comparison or the degradation curve
included herein, shall not exceed a 1% correction for power between
the first 400 Equivalent Operating Hours (EOH) after the expiration
of 400 fired hours or 250 equivalent starts, whichever is first (New
and Clean Condition). Likewise between 400 EOH and 700 EOH after the
expiration of the New and Clean Condition, the degradation factor
shall not exceed a 2% correction for power. In addition, between 700
EOH and 1,000 EOH after the expiration of the New and Clean
Condition, the degradation factor shall not exceed a 2.5% correction
for power. For the purposes of applying caps to the other performance
parameters, the following, shall apply; heat rate shall be assumed to
be 2/3 of the power output cap, and Exhaust flow shall be assumed to
be 1/2 of the power cap. The Contractor will determine plant
degradation curves for the combined cycle plant based on the data
from the combustion turbine degradation curves.
BENCHMARK PERFORMANCE TESTS. The combustion turbine benchmark
tests will be an engine test that will measure pertinent
parameters to determine the engine performance (compressor inlet
temperature, barometric pressure, relative humidity, combustor
shell pressure, exhaust temperature, generator power output,
generator power factor, fuel flow, etc.) A heat balance around
the engine will be performed that will establish the performance
deemed representative of that test. Compressor efficiency,
turbine efficiency, and airflow will be calculated for the
degradation comparison.
Each benchmark test will consist of:
-- Loading the unit to base load or part load, and
stabilizing the unit.
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-- Collecting performance parameters from special test and
station instrumentation during, a minimum half-hour test
run.
-- Analyzing, data and computation of measured and
corrected performance.
-- A heat balance calculation around the engine to
determine flows and component efficiencies necessary for
determining performance deterioration.
Note: An off-line water wash will be performed prior to the benchmark
tests, and will also be performed prior to the 400 hour "New and Clean"
test.
All testing will be conducted in accordance with mutually agreeable
testing principals based on related ASME PTC codes and Westinghouse test
procedure EC-93208, Rev. 1.
2.1.10 Auxiliary Load Test
The Auxiliary Load Test shall be conducted to determine the Facility
Auxiliary Load. The Auxiliary Load Test may be conducted in conjunction
with any of the Unit Performance Tests, provided Facility Auxiliary
Loads are determined in the following manner: the Facility Auxiliary
Loads shall be the electrical energy used by the Facility (Common
Facilities and all individual Units) as determined by the Owner's
metering. One Auxiliary Load Test shall be conducted when all Units are
operating based on the conditions of the Maximum Unit Power Output Test
and one Auxiliary Load Test shall be conducted when all Units are
operating based on the conditions of the Unit Power Output Test. The
electric metering point shall be on the high side of the auxiliary
transformers.
The tests for Auxiliary Load and Maximum Auxiliary Load shall consist of
four (4) one-hour periods.
Auxiliary loads for combustion turbine and steam turbine generator
step-up transformer losses, and cooling tower fans, condensate pumps,
and boiler feed pumps horsepower will be corrected for ambient and other
test conditions different from Base Conditions.
2.2 RELIABILITY TEST
The Contractor will demonstrate the equivalent availability of each Unit
during a continuous rolling 96 hour Reliability Test period. During the
period, each Unit shall achieve an equivalent availability of 99%,
during 88 of the 96 hours. During the 96-hour period, the combustion
turbine or steam turbine shall not trip, or the Unit shall not operate
at less than 70 percent of the un-fired, un-augmented capacity of the
Unit. Equivalent availability is defined as follows:
Equivalent Availability (%) = (A+B) x 100%
----
88
Where
A= Total number of hours during the Contractor-selected 88
hours of the 96 hour Reliability Test that the Unit is operated
with breakers closed to the substation and (i) the combustion
turbine is operated on its baseload firing curve and at maximum
power augmentation consistent with equipment limitations for
shaft power, equipment cooling, and the HRSG and steam turbine
operating pressures are at their respective design operating
levels, (ii) any hour the Unit is dispatched below the
conditions of (i) above, and the Unit is capable of operating
at 100 percent of the dispatch requirement.
B= The equivalent number of hours during the Contractor-
selected 88 hours of the 96 hour Reliability Test that the
Unit is operated with the breakers closed to the
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Batesville Generation Facility Page 11 07/22/99
<PAGE>
substation during which there is a Unit capacity restriction on
the Unit. The equivalent hour to account for the Unit capacity
restriction shall be determined as follows:
[1-% capacity restriction]* Number of hours at reduced capacity
During the test, any load changes due to dispatch will be performed at
reasonable load change rates. No load changes will be requested faster
than the reasonable load change rate for the unit. If a Unit is unable
to be power augmented due to manufacturer's design limitations based on
ambient conditions during the test, either by duct firing for increased
steam turbine output or steam injection for increased combustion turbine
output, then the output for these test hours will be treated in the same
manner as for dispatched hours.
Determination if contractor met dispatched output will include the
Commercial Tolerance Band.
If dispatch does not allow the Unit to operate, the test period shall be
suspended until such time that Unit dispatch allows power to be
generated. For any period of time that the Unit is dispatched off-line,
or the test is interrupted or suspended, the Contractor shall be
entitled to a Change Order in accordance with the terms of the EPC
Agreement. If an interruption in a test occurs due to an Owner Delay or
due to a Force Majeure event, including an interruption in the Utility
transmission system, the test shall be suspended and restarted at the
point of suspension once the condition causing the interruption is
remedied. Times for startup and shut down are excluded from being
considered a part of the test. Hours accumulated for the test prior to
the interruption shall be considered as part of the test.
If Contractor elects to declare Substantial Completion at values less
than the Guaranteed Value for power output in accordance with the EPC
Agreement, the values of power output as so declared will be considered
as the value of Maximum Unit Power Output (Maximum Unit Power Output
guarantee minus Maximum Unit Power Output Shortfall).
The electric revenue meter shall be used for determining the Unit power
generated by the Unit over the test period.
A detailed Reliability Test procedure shall be developed and
incorporated into the overall Test Procedures.
A detailed Reliability Test report shall be developed for each
Reliability Test and shall be incorporated into Acceptance Test Report.
The Reliability Test report shall include as a minimum the following
information:
-- Date and time for the beginning and end of the test
period.
-- Names of the participants who witnessed the test.
-- Description under which the test was conducted.
-- Summary of all test data and results.
-- Conclusion, discussion and analysis of the results and
comparison to the Reliability Test requirements.
2.3 AVAILABILITY TEST
An Availability Test shall be conducted by Contractor to demonstrate the
long term operability of the Facility. This test shall be conducted on a
Facility basis, not a Unit Basis.
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<PAGE>
The test shall be a continuous 20-day period. During the test period,
the Contractor shall demonstrate a 95 percent availability factor. The -
availability factor shall be defined as follows:
AF= Available Hours / Period Hours.
Where:
Available Hours=(i) Any hour that the Facility is operated such
that the combustion turbine is on it base load
firing curve and at maximum power augmentation
consistent with equipment limitations for shaft
power and equipment cooling, and the HRSG and
steam turbine operating pressures are at their
respective design operating levels, or (ii) Any
hour the Facility is dispatched below the
conditions of (i) above, and the Facility is
capable of operating at 100 percent of the
dispatch requirement.
Period Hours = Total hours for the test period, a rolling 480
hour period.
Determination if contractor met dispatched output will include the
Commercial Tolerance Band.
During the test, any load changes due to dispatch will be performed at
reasonable load change rates. No load changes will be requested which
are faster than the reasonable load change rate for the unit. If a unit
is unable to be power augmented due to manufacturer's design limitations
based on ambient conditions during the test, either by duct firing for
increased steam turbine output or steam injection for increased
combustion turbine output, then the test hours will be treated in the
same manner as for dispatched hours.
If during the test, the Facility is shut down due to dispatch
considerations or for any non Contractor-caused reason, and the Facility
is capable of being operated, all such hours shall be considered as
available hours. Any startups and shutdowns will be performed at
reasonable rates for the equipment.
If Contractor elects to declare Substantial Completion at values less
than the Guaranteed Value for power output in accordance with the EPC
Agreement the values of power output as so declared will be considered
as the value of Maximum Unit Power Output (Maximum Unit Power Output
guarantee minus Maximum Unit Power Output Shortfall).
The Owner's electric meters shall be used for determining, the Unit
power generated by the Facility over the test period.
A detailed Availability Test procedure shall be developed and
incorporated into the overall Test Procedures.
A detailed Availability Test report shall be developed for the
Availability Test and shall be incorporated into Acceptance Test Report.
The Availability Test report shall include as a minimum the following-
information:
-- Date and time for the beginning and end of the test
period.
-- Names of the participants who witnessed the test.
-- Description under which the test was conducted.
-- Summary of all test data and results.
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-- Conclusion, discussion and analysis of the results and
comparison to the Availability Test requirements.
2.4 START-UP TEST
The Contractor shall demonstrate the capability of each Unit and its
equipment to meet the following requirements during start-ups:
(A) Cold Start-up - This Start-Up Test shall demonstrate the ability
of the Unit to start-up (auxiliary equipment in standby mode
only, all other equipment off-line, but ready for start
initiation) and reach 70 percent of the Unit load (i.e. where
Unit load is defined as the load attainable at a given ambient
temperature based on the combustion turbine operating without
power augmentation and the HRSG operating without duct firing),
following a Unit shutdown of longer than forty eight (48) hours.
The Unit shall reach 70 percent of the Unit load within 210
minutes from initiation of start-up.
(B) Hot Start-up -This Start-Up Test shall demonstrate the ability
of the Unit to start-up (auxiliary equipment in standby mode
only, all other equipment off-line) and reach 70 percent of the
Unit load (i.e. where Unit load is defined as the load
attainable at a given ambient temperature based on the
combustion turbine operating without power augmentation and the
HRSG operating without duct filing), following a Unit shutdown
of less than forty-eight (48) hours. The Unit shall reach 70
percent of Unit load within 130 minutes from initiation of
start-up.
A detailed Start-up Test procedure shall be developed and incorporated
into the overall Test Procedures. The Test Procedures shall include the
detailed requirements for starting the Unit and all equipment operating
status prior to, and during the test.
A detailed Start-up Test report shall be developed for the Start-up Test
and shall be incorporated into Acceptance Test Report. The Start-up Test
report shall include as a minimum the following information:
-- Date and time for the beginning and end of the test
period.
-- Names of the participants who witnessed the test.
-- Description of the conditions under which the test was
conducted.
-- Summary of all test data and results.
-- Conclusion, discussion and analysis of the results and
comparison to the Start-up Test requirements.
2.5 SOUND LEVEL TEST
The Contractor shall conduct the Sound Level Test to demonstrate the
capability of the Facility to meet the Sound Level Guarantee. Sound
Levels shall be measured in accordance with the test requirements herein
as adapted from ANSI B 133.8 and ISO 6190. Note that this test shall be
conducted on a Facility basis. The following section outlines the
measurement procedures, personnel qualifications, instrumentation, load
conditions, and other related factors.
The Facility will not exceed an L50 sound level as defined at the
locations along the site boundary described below as defined in
Attachment 1. This noise guarantee applies to noise emissions radiated
by the facility only, excluding background noise, while operating at any
loads from 70% to maximum load, at steady-state conditions. This
guarantee excludes any
LSP Energy Limited Partnership Exhibit A A-BVZ
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transient or atypical operating, conditions such as startup, shutdown,
load transients, and safety steam release, steam bypass or during
maintenance activities. This guarantee also excludes the noise
contribution from the gas metering station or an other Owner-furnished
equipment or facilities.
2.5.1 General Measurement Procedures
2.5.1.1 Measurements shall be taken at the locations defined
above. The overall A-weight sound pressure levels shall
be used to determine compliance. Measurements shall be a
minimum of one minute in duration to ensure a
representative sampling.
2.5.1.2 If required to obtain a representative background noise
level, measurements shall be conducted at the compliance
measurement locations, immediately prior to or following
the measurements for the Sound Level Guarantee. If the
background measurements are taken on a preceding or
subsequent day the measurements shall be taken at a
similar time as the operational measurements to ensure
representative background conditions. The background
measurements shall be taken at a similar time to ensure
representative background conditions. No Facility
equipment shall be in operation during the background
noise measurement periods. Audible noise sources shall
be noted.
2.5.1.3 Measurements for determining compliance with the Sound
Level Guarantee shall be taken under two operating
scenarios: (1) with all three Units operating at maximum
capability based on ambient conditions with the
combustion turbines operating at base load and all
cooling tower fans on high and (2) with three Units
operating at seventy percent of the combustion turbines
un-augmented capacity. All enclosure doors and typically
closed openings shall be shut during the test.
2.5.2 Noise Measurement Instrumentation
2.5.2.1 All data shall be recorded using a precision sound level
meter that meets the requirements of ANSI S1.4-1983 Type
1. All measurements shall be taken with the meter on the
slow setting to a height of approximately five (5.)
feet. The microphone shall be equipped with a windscreen
specified by the sound level meter manufacturer.
2.5.2.2 The meter(s) shall be field calibrated immediately prior
to and after each round of measurements using a field
calibrator specified by the sound level meter
manufacturer.
2.5.2.3 The meter(s) shall have been calibrated within the
previous 12 months and the calibration shall be
traceable to NIST.
2.5.2.4 Sound pressure level measurement shall be performed by
Contractor's personnel who will be a qualified
technician or acoustical consultant.
2.5.3 Sound Level Calculations and Corrections
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The measured sound pressure level, after corrections for background
noise, shall be used to determine compliance with Sound Level Guarantee.
A measurement uncertainty and testing tolerance as defined in ISO 6190
shall be applied.
2.5.4 Data Reporting
A report shall be generated for inclusion into the Acceptance Test
Report. The report shall describe the measurement procedures, raw
measurement data, results of corrections and calculations, and
determination of compliance or non-compliance. The report, at a minimum,
must include the information specified in the following section.
2.5.4.1 The test report shall include the following information,
at a minimum.
(A) Name of Facility
(B) Location
(C) Model and number of units in service
(D) Description of noise control treatment
(E) Operating conditions
(F) Personnel performing and witnessing the testing.
(G) Data and time of measurements.
2.5.4.2 A drawing shall be generated showing the measurement
locations. A description of the topography of the site
shall be included with the drawing. The drawing shall
include any factors, which may influence acoustical
measurements.
2.5.4.3 The meter serial number(s) and laboratory calibration
dates, meter ANSI type, and the names of all monitoring
personnel shall be included.
2.5.4.4 All data shall be reported in tabularized form,
listing the date and time of each measurement, the
measured sound pressure levels, and the sound
pressure levels corrected for background noise.
Summary tables shall be included which verify the
calculation procedure and results at each measurement
location.
2.6 COOLING TOWER TEST
The cooling tower will be tested by the Contractor to demonstrate that
the cooling tower the thermal capacity to allow the plant to achieve
guaranteed performance. The functional testing will be in accordance
with CTI ACT- 105 or ASME PTC Codes. If it is demonstrated, via the
results of the Cooling Tower Test, that the cooling tower did not
achieve guaranteed performance (where guaranteed performance is as
indicated in Contractor's contract with cooling tower manufacturer),
then Contractor shall determine the effect of the performance shortfall
on Unit Power Output, as adjusted to the Base conditions for the Unit
Power Output Test, Maximum Unit Power Output, as adjusted to the Base
conditions for the Maximum Unit
LSP Energy Limited Partnership Exhibit A A-BVZ
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Power Output Test, and Unit Heat Rate. The Contractor shall utilize the
cooling tower, condenser, and steam turbine manufacturer's correction
curve to determine such affect.
Instrument measurement uncertainty will be applied to the results of the
test based on the accuracy of the individual test measurements.
Measurement uncertainties shall be applied to the test results before
comparison to the performance parameters.
2.7 CAPABILITY TESTS
The Contractor shall conduct the following Capability Tests on the
Facility and/or each Unit and its equipment to demonstrate operational
safety and flexibility of the Facility and/or the Unit.
The Contractor shall develop a detailed Capability test procedure that
shall be incorporated into the Test Procedures. Each Capability Test
procedure shall include the detailed requirements for conducting and
monitoring the Facility's and/or Unit's equipment during the Test.
Following completion of the Capability Tests, a detailed test report
shall be completed for each of the Capability Tests. These test reports
shall be incorporated into the Acceptance Test Report. Each test report
shall include, as a minimum, the following information:
-- Date and Time each test was conducted.
-- Names of participants who conducted and witnessed the
test.
-- Description under which the test was conducted.
-- Summary of all test data and results.
-- Conclusion, discussion and analysis of the results and
comparison to the requirement of the respective
Capability Test.
2.7.1 Duct Burner Capacity Test
The Contractor shall demonstrate the ability of reaching and maintaining
design capacity of each Unit's duct burner, while operating on natural
gas fuel. The design heat input to the duct burner shall be that
required to achieve the maximum output guarantees. Such value will be
consistent with any values less than guaranteed values for Maximum Unit
Output, which Contractor has declared to meet Substantial Completion.
The Test shall be conducted on each Unit for a continuous period of one
(1) hour after attaining thermally stable conditions of the Unit. During
this Capability Test all equipment shall operate within air emission
permit requirements. If due to ambient conditions, Duct Burner capacity
is not capable of being attained and maintained, the Contractor must
still make every reasonable effort to demonstrate Duct Burner capacity.
Under such conditions the Test may require operation of one Unit at a
time, while by-passing (dumping) steam to the condenser and operating
the cooling tower to meet the heat rejection requirements, subject to
practical limitations of equipment and system design.
2.7.2 Ramp Rate Test
The Contractor shall demonstrate the capability of each Unit to meet the
design ramp rate between 70% of Unit load and Unit load (i.e. where Unit
load is defined as the load attainable at a given ambient temperature
based on the combustion turbine operating without power augmentation and
the HRSG operating without duct firing), of no less than 5 MW per
minute.
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In addition, the Contractor shall demonstrate the ability of each Unit
to ramp-up and ramp-down from Unit load to augmented Unit load (where
augmented Unit load is defined as the load attainable at a given ambient
temperature based on the combustion turbine operating with power
augmentation and HRSG with duct firing) in 30 minutes. For this test,
combustion turbine steam injection piping shall be warmed to operating
conditions prior to the start of the test.
The Ramp Rate Test should be demonstrated without using steam injection,
or steam dumping to overcome any transient conditions (i.e. to operate
the most economically).
2.7.3 Water/Steam Purity Test
The Contractor shall demonstrate the capability of each Unit to meet
HRSG and steam turbine requirements for water/steam purity. This
Capability Test shall be conducted while operating with maximum water
flow rates through the HRSG (such as during conditions of high
desuperheating., spray flow, when the steam turbine is at maximum
capacity practical for test, based on ambient conditions).
2.7.4 Steam Turbine By-Pass Test
The Contractor shall demonstrate the capability of each Unit to by-pass,
and of the heat rejection system to accept, all steam produced by the
HRSG under the following two scenarios:
(A) Each Unit with full steam injection and duct burner operating at
full capacity. The test would consist of tripping on a Unit by
Unit basis each steam turbine (CT must remain in operation at
minimum load). Upon tripping the steam turbine, the Test shall
demonstrate tripping the duct burner, opening all steam
by-passes and, once steady state conditions are reached,
acceptance of all by-passed steam by the heat rejection system.
(B) Each Unit shall demonstrate the capability of bypassing all
steam produced by the HRSG to heat rejection system for a period
of one (1) hour. During, the test the Unit combustion turbine
shall be operated at base load and after thermal equilibrium is
reached no steam shall be allowed to pass through the relief
vents.
For both tests the HRSG water/steam purity levels 8 required by
equipment manufacturers and vendors for equipment in service (steam
turbine is not in-service and considering duration of operation) must be
maintained. In addition, after thermal equilibrium is reached, no steam
shall be allowed to pass through the relief vents.
2.7.5 Facility Backup Power Transfer Test
The Contractor shall demonstrate upon loss of AC power the capability of
the Facility to safely transfer all critical equipment to the Facility's
DC backup power supply. This would include demonstrating the ability of
the Facility's un-interruptible power supply (UPS) system to be safely
transferred and powered by the DC power supply.
2.7.6 Boiler Feed Pump Trip Test
The Contractor shall demonstrate the capability of each Unit to safely
accept trip of one of the two (2) boiler feed pumps, when operating at
the Unit maximum power output, and be able to maintain the Unit's design
electrical output with one pump in service, without tripping the Unit.
Both boiler feed pumps shall be tested.
LSP Energy Limited Partnership Exhibit A A-BVZ
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2.7.7 Wastewater Discharge Test
The Contractor shall demonstrate the capability of the Facility to meet
the wastewater discharge requirements imposed on the Facility, as shown
in Attachment 3 of this Exhibit A. This test shall be conducted on an
entire Facility basis.
2.7.8 Demineralizer Demonstration Test
The Contractor shall demonstrate that the Facility's demineralization
system is capable of a net production rate of 1,000,000 gallons of
demineralized water per 24 hour period at required quality, including
allowance for water and time required for regeneration. This production
is based on the design raw water quality set forth in Exhibit I. The
test shall include a full regeneration of all demineralizer trains.
2.7.9 Minimum Load Operation
The Contractor shall demonstrate the capability of each Unit to maintain
stable operation (i.e. power output shall not vary more than +/- 1%) at
70% of Unit load (i.e. where Unit load is defined as the load attainable
at a given ambient temperature based on the combustion turbine operating
without power augmentation and the HRSG operating without duct firing).
The test shall be conducted for two (2) continuous hours. During
operation of this test, each Unit shall comply with all air emission
guarantees.
2.7.10 Power Factor Test
The Contractor shall demonstrate each Unit's capability to operate under
leading and lagging power factor conditions. The test shall be conducted
by operating the Unit's generators at power factors of 0.95 leading for
one hour and at 0.90 lagging for one hour as allowed by the transmission
system.
2.8 EMISSIONS TESTING
The Emission Test shall be conducted to verify compliance of each Unit
to demonstrate achievement of the Guaranteed Emissions. Scheduling of
the Emissions Test shall be in accordance with the requirements of the
air permit. The Emissions Test procedure shall be developed by the
Contractor, subject to approval by the Owner and the State and Federal
issuing agencies. The Emissions Test procedure shall be submitted to the
Owner no later than ninety (60) Days prior to the date of first intended
test, and shall comply with the requirements of the air permit.
Contractor shall submit to Owner within Twenty One (21) Days from the
date of completion of each Test a written Emission Test Report as
required by the Facility's equipment air emission permits.
All emissions guarantees are based on the fuel gas analysis included in
Exhibit 1-4.
LSP Energy Limited Partnership Exhibit A A-BVZ
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Batesville Generation Facility Page 19 07/22/99
<PAGE>
ATTACHMENT I OF EXHIBIT A
(Noise Measurement Locations on Following Page)
<PAGE>
LS Power LLC July 7, 1998
Batesville, Mississipi Generating Plant
----------
[INSERT DIAGRAM]
----------
Facility sound emission levels based upon full load steady state operation under
typical conditions.
LSP Energy Limited Partnership Exhibit A A-BVZ
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<PAGE>
ATTACHMENT 2 OF EXHIBIT A
TABLE I OF ATTACHMENT 2
The Emissions Guarantees are listed in the following respective tables
correspond to the combined stack emissions from one Unit's combustion turbine
and duct burner in the associated heat recovery steam generator.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined Stack Emission Guarantees
Steam Injection Maximum Maximum None None
- ------------------------------- ---------- ------------ ------------- -------------
Duct Firing Maximum None None None
- ------------------------------- ---------- ------------ ------------- -------------
Pollutant Units CT at Full CT at Full CT Load CT Load
load load from 75% to from 50% to
100% 75%
- ------------------------------- ---------- ------------ ------------- -------------
NOx Ppmvd 9.0 9.0 9.0 9.0
@15%O2
- ------------------------------- ---------- ------------ ------------- -------------
CO Ppmvd 30.3 30.3 30.3 200
- ------------------------------- ---------- ------------ ------------- -------------
VOC Ppmvd 9.3 9.3 9.3 20
- ------------------------------- ---------- ------------ ------------- -------------
Ammonia Ppmvd 20.0 20.0 20.0 20.0
- ------------------------------- ---------- ------------ ------------- -------------
Opacity % 20 20 20 20
- ------------------------------- ---------- ------------ ------------- -------------
</TABLE>
Notes to Emission Guarantees Table:
(1) Maximum duct firing is 268 MMBtu/hr HHV.
(2) NOx - total oxides of nitrogen.
(3) CO - Carbon monoxide.
(4) VOC - volatile organic compounds, non-methane and non-ethane.
(5) Ppmvd - parts per million by volume dry basis.
(6) NOx measured by EPA Reference Method 20, 40 CFR 60, Appendix A.
(7) CO measured by EPA Reference Method 10, 40 CFR 60, Appendix A.
(8) VOC measured by EPA Reference Method 25A and 18, 40 CFR 60, Appendix A.
(9) Ammonia measured by EPA Draft Method 206.
(10) Opacity measured by EPA Reference Method 9,40 CFR 60, Appendix A.
LSP Energy Limited Partnership Exhibit A A-BVZ
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<PAGE>
ATTACHMENT 3 OF EXHIBIT A
LSP Energy Limited Partnership Exhibit A A-BVZ
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<PAGE>
Wastewater Testing. The Wastewater Testing shall be conducted to verify
compliance of plant wastewater with the requirements of the Guaranteed
Wastewater Parameters. Scheduling of the Wastewater Testing shall be in
accordance with the requirements of the NPDES permit. The Test Procedure will be
developed by the Contractor, subject to approval by the Owner and the State and
Federal wastewater permit issuing agencies. The Test Procedures shall be
submitted to the Owner no later than sixty (60) Days prior to the date of the
first intended test, and shall comply with the applicable requirements of the
NPDES permit. Contractor shall submit to Owner within twenty-one (21) Days from
the date of completion of each test a written Wastewater Testing Report.
Guaranteed Wastewater Parameters. (a) The Guaranteed Wastewater Parameters are
listed in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Parameter Units Monthly Average Daily Maximum
- ------------------------------------- -------------- --------------- -------------
<S> <C> <C> <C>
Outfall 001A - Cooling Tower Blowdown
- ------------------------------------- -------------- --------------- -------------
Flow Gpm 1070*** 1417***
- ------------------------------------- -------------- --------------- -------------
Free Available Chlorine* mg/l 0.09 0.15
- ------------------------------------- -------------- --------------- -------------
Outfall 001B - Low Vourne Wastes
- ------------------------------------- -------------- --------------- -------------
Flow Gpm 87*** 178***
- ------------------------------------- -------------- --------------- -------------
Total Suspended Solids mg/l 30 100
- ------------------------------------- -------------- --------------- -------------
Oil & Grease mg/l 15 20
- ------------------------------------- -------------- --------------- -------------
Outfall 001 - Total Discharge
- ------------------------------------- -------------- --------------- -------------
Temperature** (0)F 90 90
- ------------------------------------- -------------- --------------- -------------
Flow** Gpm 1157*** 1596***
- ------------------------------------- -------------- --------------- -------------
Total Residual Chlorine mg/l 0.08 0.14
- ------------------------------------- -------------- --------------- -------------
PH Standard units 6.5 - 9 6.5 - 9
- ------------------------------------- -------------- --------------- -------------
Oil & Grease mg/l 1.8 1.8
- ------------------------------------- -------------- --------------- -------------
</TABLE>
Notes
* Plant will be designed so that neither total residual chlorine nor free
available chlorine will be discharged for more than two hours in any one
day.
** Plant design will incorporate the ability to cool effluent temperature to
requirements of Exhibit I.
*** Plant design will allow for these flow values but values are not guaranteed
as they will depend upon makeup water quality and plant operations.
LSP Energy Limited Partnership Exhibit A A-BVZ
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<PAGE>
ATTACHMENT 4 OF EXHIBIT A
PERFORMANCE GUARANTEE FUEL BASIS
Fuel Analysis by % Volume
<TABLE>
<CAPTION>
COMPONENT %VOLUME
<S> <C>
N2 1.4%
C2H4 98.00%
C2H6 0.60%
Gas Supply Pressure 500 psia
Gas Supply Temperature 80F
</TABLE>
<TABLE>
<S> <C>
Gas Lower Heating Value, Btu/lb 20,981
Gas Higher Heating Value, Btu/lb 23,299
Gas Lower Heating Value, Btu/scf 902.7
Gas Higher Heating Value, Btu/scf 1,002.4
Gas Specific Gravity at Standard Conditions 0.5635
</TABLE>
Note: Standard conditions of 60 F and 14.696 psia
LSP Energy Limited Partnership Exhibit A A-BVZ
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<PAGE>
ATTACHMENT 5 OF EXHIBIT A
Combustion Turbine 501 F Non-Recoverable Power Degradation
(Curve on following page)
<PAGE>
BLACK & VEATCH - BATESVILLE PROJECT
501 Non Recoverable Power Degradation
[INSERT CHART]
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF SUBSTANTIAL COMPLETION
------------, ----
LSP Energy Limited Partnership
[--------------------------]
[--------------------------]
Attention: Project Manager
LSP Energy Limited Partnership
c/o LSP Energy, Inc.
655 Craig Road
Suite 336
St. Louis, Missouri 63141
Attention: [___________________]
LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Gentlemen:
This Certificate is delivered to you pursuant to Sections 10.2 and 10.3
of the Turnkey Engineering, Procurement and Construction Agreement, dated July
22, 1998, by and between LSP Energy Limited Partnership, a Delaware limited
partnership ("Owner"), and BVZ Power Partners -Batesville, a Mississippi joint
venture ("Contractor") (as amended, supplemented or otherwise modified from time
to time, the "EPC Agreement"). Capitalized terms used herein but not defined
herein shall have the respective meanings assigned thereto in the EPC Agreement.
This Certificate is delivered in connection with the [Common Facilities
and Unit 1/Unit 2/Unit 3/Facility][INCLUDE AS APPROPRIATE FOR SCOPE OF
CERTIFICATE].
Contractor hereby certifies that:
B-1
<PAGE>
[INCLUDE (i), (ii) AND (iii) IN CERTIFICATES DELIVERED IN CONNECTION WITH THE
SUBSTANTIAL COMPLETION OF A UNIT]
(i) as evidenced in the test reports and other information attached
hereto as Exhibit 1, it has successfully completed the Reliability Test, the
Start-up Test, and the Substantial Completion Capability Tests with respect to
the [Unit 1/Unit 2/Unit 3] in accordance with the requirements of the EPC
Agreement and has achieved each of the Reliability Guarantee and the Start-up
Guarantee for such Unit;
(ii) as evidenced in the test reports and other information attached
hereto as Exhibit 1, it has successfully completed the Net Power Output Test,
the Maximum Net Power Output Test and the Net Heat Rate Test with respect to the
[Unit 1/Unit 2/Unit 3] in accordance with the requirements of the EPC Agreement
and [has achieved each of the Performance Guarantees for such Unit][has achieved
the Performance Minimums for such Unit and has paid Performance Liquidated
Damages to Owner pursuant to Section 12.4(c) of the EPC Agreement];
(iii) attached hereto as Exhibit 2 is a list of Punchlist Items along
with an estimate of the cost to complete each such Punchlist Item, as required
by Section 10.3 of the EPC Agreement; and
[INCLUDE (iv) IN ALL CERTIFICATES]
[(iv)] all [other] requirements for Substantial Completion set forth
in Section 10.1(b)[(I)/ (II)/ (III)] of the EPC Agreement have been met with
respect to the [Common Facilities and Unit 1/Unit 2/Unit 3/Facility].
Please confirm by execution of the acknowledgment below that Substantial
Completion with respect to the [Common Facilities and Unit 1/ Unit 2/ Unit 3/
Facility] shall be deemed to have occurred on ________________.
The undersigned certifies that he is duly authorized to execute and deliver
this Certification on behalf of Contractor.
BVZ POWER PARTNERS LLP - BATESVILLE
By:
Name:
Title:
B-2
<PAGE>
ACKNOWLEDGMENT:
LSP Energy Limited Partnership
By: LSP Energy, Inc.,
as General Partner
By:
Name:
Title:
cc: Independent Engineer
B-3
<PAGE>
EXHIBIT 1 TO CERTIFICATE OF
SUBSTANTIAL COMPLETION
[TEST REPORTS TO BE PROVIDED BY CONTRACTOR]
B-4
<PAGE>
EXHIBIT 2 TO CERTIFICATE OF
SUBSTANTIAL TEST COMPLETION
[PUNCHLIST]
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF FINAL ACCEPTANCE TEST COMPLETION
------------,----
LSP Energy Limited Partnership
[--------------------------]
[--------------------------]
Attention: Project Manager
LSP Energy Limited Partnership
c/o LSP Energy, Inc.
655 Craig Road
Suite 336
St. Louis, Missouri 63141
Attention: [___________________]
LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Gentlemen:
This Certificate is delivered to you pursuant to Section 10.4 of the
Turnkey Engineering, Procurement and Construction Agreement, dated July 22,
1998, by and between LSP Energy Limited Partnership, a Delaware limited
partnership ("Owner"), and BVZ Power Partners - Batesville, a Mississippi joint
venture ("Contractor") (as amended, supplemented or otherwise modified from time
to time, the "EPC Agreement"). Capitalized terms used herein but not defined
herein shall have the respective meanings assigned thereto in the EPC Agreement.
Contractor hereby certifies that:
(i) as evidenced in the test reports and other information attached
hereto as Exhibit 1, it has successfully completed the Availability Test, the
Auxiliary Load Test, the Emissions Test, the Sound Level Test and the Final
Completion Capability Tests with respect to the Facility in accordance with the
requirements of the EPC
C-1
<PAGE>
Agreement and has achieved each of the Availability Guarantee, the Auxiliary
Load Guarantee, the Emissions Guarantee and the Sound Level Guarantee for the
Facility; and
(ii) all other requirements for Final Acceptance Test Completion set
forth in Section 10.1(c) of the EPC Agreement have been met with respect to the
Facility.
Please confirm by execution of the acknowledgment below that Final
Acceptance Test Completion with respect to the FACILITY shall be deemed to have
occurred on ________________.
The undersigned certifies that he is duly authorized to execute and deliver
this Certification on behalf of Contractor.
BVZ POWER PARTNERS LLP - BATESVILLE
By:
Name:
Title:
ACKNOWLEDGMENT:
LSP Energy Limited Partnership
By: LSP Energy, Inc.,
as General Partner
By:
Name:
Title:
cc: Independent Engineer
C-2
<PAGE>
EXHIBIT 1 TO CERTIFICATE OF
FINAL ACCEPTANCE TEST COMPLETION
[TEST REPORTS TO BE PROVIDED BY CONTRACTOR]
C-3
<PAGE>
EXHIBIT D
FORM OF FINAL COMPLETION CERTIFICATE
------------,----
LSP Energy Limited Partnership
[__________________________]
[__________________________]
Attention: Project Manager
LSP Energy Limited Partnership
c/o LSP Energy, Inc.
655 Craig Road
Suite 336
St. Louis, Missouri 63141
Attention: [___________________]
LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Gentlemen:
This Certificate is delivered to you pursuant to Section 10.5 of the
Turnkey Engineering, Procurement and Construction Agreement, dated July 22,
1998, by and between LSP Energy Limited Partnership, a Delaware limited
partnership ("Owner"), and BVZ Power Partners - Batesville, a Mississippi joint
venture ("Contractor") (as amended, supplemented or otherwise modified from time
to time, the "EPC Agreement"). Capitalized terms used herein but not defined
herein shall have the respective meanings assigned thereto in the EPC Agreement.
Contractor hereby certifies that:
(i) Substantial Completion has been achieved and has been
accepted by Owner; and
(ii) Final Acceptance Test Completion has been achieved and has
been accepted by Owner; and
D-1
<PAGE>
(iii) all other conditions to Final Completion set forth in
Section 10.5 of the EPC Agreement have been satisfied.
Please confirm by execution of the acknowledgment below that Final
Completion shall be deemed to have occurred on ________________.
The undersigned certifies that he is duly authorized to execute and
deliver this Certificate on behalf of Contractor.
BVZ POWER PARTNERS - BATESVILLE
By:
Name:
Title:
ACKNOWLEDGMENT:
LSP Energy Limited Partnership
By: LSP Energy, Inc.,
as General Partner
By:
Name:
Title:
cc: Independent Engineer
D-2
<PAGE>
EXHIBIT E-1
FORM OF LIMITED NOTICE TO PROCEED
_________________, 1998
BVZ Power Partners - Batesville
[________________________]
[________________________]
Attention : Project Executive
Reference is made to the Turnkey Engineering, Procurement and
Construction Agreement, dated July 22, 1998, by and between LSP Energy Limited
Partnership, a Delaware limited partnership ("Owner"), and BVZ Power Partners -
Batesville, a Mississippi joint venture ("Contractor") (as amended, supplemented
or otherwise modified from time to time, the "EPC Agreement"). Capitalized terms
used herein but not defined shall have the respective meaning assigned thereto
in the EPC Agreement.
This Limited Notice to Proceed is being delivered pursuant to Section 5.3
of the EPC Agreement. By issuing this Limited Notice to Proceed, the Owner
hereby directs the Contractor to commence and complete the Preliminary Work as
set forth on Exhibit 1 hereto. Except as set forth on Exhibit 1 hereto, the
Preliminary Work set forth on such Exhibit shall be subject to and governed by
the terms of the EPC Agreement.
Please confirm by execution of the acknowledgment below that the
Contractor received this Limited Notice to Proceed on , 1998.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
as General Partner
By:
Name:
Title:
ACKNOWLEDGMENT:
BVZ POWER PARTNERS - BATESVILLE
By:
Name:
Title:
E-1-1
<PAGE>
EXHIBIT E-2
FORM OF NOTICE TO PROCEED
_________________, 1998
BVZ Power Partners - Batesville
[________________________]
[________________________]
Attention : Project Executive
This Notice to Proceed is being delivered pursuant to Section 5.1 of
the Turnkey Engineering, Procurement and Construction Agreement, dated July 22,
1998 between LSP Energy Limited Partnership, a Delaware limited partnership
("Owner"), and BVZ Power Partners - Batesville, a Mississippi joint venture
("Contractor") (as amended, supplemented or otherwise modified from time to
time, the "EPC Agreement"). Capitalized terms used herein but not defined herein
shall have the respective meanings assigned thereto in the EPC Agreement.
Owner certifies that funds are available to be drawn down by Owner
under the Construction Financing and all tasks necessary to authorize the
commencement of Work have been accomplished.
Please confirm by execution of the acknowledgment below that the
Contractor received the Notice to Proceed on _________, 1998.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
as General Partner
By:
Name:
Title:
ACKNOWLEDGMENT:
BVZ POWER PARTNERS - BATESVILLE
By:
Name:
Title:
E-2-1
<PAGE>
EXHIBIT F-1
Schedule of Values
- --------------------------------------------------------------------------------
See attached Schedule of Values.
Payment Schedule - Contractor to invoice in accordance with the following:
* Initial Payment - 100% With Notice to Proceed
(NTP)
* Mobilization - 50% On Notice to Proceed
(NTP)
50% On Site mobilization
* Engineering Period - Actual progress in
billing period based
upon mutually agreed
progress of engineering
deliverables.
* Equipment and Material Procurement - 10%
Upon issuance of P.O.
or Material Contract
5% Upon receipt of vendor
drawings
5% Upon drawing approval
and manufacturing
release
60% During manufacture
10% Upon final assembly,
shop test or ready for
delivery
10% Upon delivery
* Bulk Materials - 100% On-site delivery
* Construction - 5% Of installation upon
unloading and handling
of equipment and
material
Balance based upon actual
progress in billing period
(mutually agreed actual
construction erected in
place).
<PAGE>
* Construction Overheads - 4.2% For each of the 23
months following Notice
to Proceed and 3.4% the
24th month. First
payment for this work
will be included with
the first monthly
payment after NTP.
<PAGE>
EXHIBIT F
Schedule of Values
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ENGINEERING & MATERIAL & PERCENTAGE
DESCRIPTION CONSTRUCTION EQUIPMENT TOTAL OF TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GENERAL
INITIAL PAYMENT $ 3,500,000 $ 3,500,000 1.46%
CONSTRUCTION MOBILIZATION $ 4,023,112 $ 4,023,112 1.68%
PERFORMANCE TESTING $ 192,842 $ 17,919 $ 210,761 0.09%
OPERATOR TRAINING COSTS $ 432,819 $ 432,819 0.18%
JOINT VENTURE OVERHEADS $ 8,019,863 $ 8,019,863 3.34%
ENGINEERING & SERVICES
CIVIL / STRUCTURAL $ 3,190,426 $ 3,190,426 1.33%
MECHANICAL $ 3,326,774 $ 3,326,774 1.39%
CHEMICAL $ 425,390 $ 425,390 0.18%
ELECTRICAL / CONTROL $ 3,190,426 $ 3,190,426 1.33%
CONSTRUCTION $ 531,737 $ 531,727 0.22%
ARCHITECTURAL / CIVIL
CLEARING AND GRUBBING $ 43,248 $ 43,248 0.02%
TOPSOIL ACTIVITIES $ 124,177 $ 124,177 0.05%
FILL MATERIAL $ 58,955 $ 58,955 0.02%
SITE LEVELING EXCAVATION AND BACKFILL $ 237,128 $ 237,128 0.10%
BERMS EXCAVATION AND BACKFILL $ 97,465 $ 97,465 0.04%
CIRCULATING WATER PIPE EXCAVATION AND BACKFILL $ 648,471 $ 648,471 0.27%
PIPE TRENCHING AND BACKFILL $ 575,636 $ 575,636 0.24%
SURFACING - CONCRETE PAVING $ 28,926 $ 9,401 $ 38,327 0.02%
SURFACING - AGGREGATE $ 229,343 $ 303,991 $ 533,334 0.22%
ASPHALT $ 28,208 $ 17,202 $ 45,410 0.02%
U/G GRAVITY FLOW PIPING $ 233,553 $ 302,953 $ 536,506 0.22%
EROSION CONTROL $ 13,974 $ 13,974 0.01%
SITE IMPROVEMENTS - FENCING $ 49,870 $ 45,435 $ 95,305 0.04%
LANDSCAPING $ 21,744 $ 12,328 $ 34,072 0.01%
FOUNDATIONS - BALANCE OF PLANT $ 360,062 $ 159,107 $ 519,169 0.22%
FOUNDATIONS - BUILDINGS $ 165,365 $ 154,772 $ 320,137 0.13%
FOUNDATIONS - COOLING TOWER $ 346,891 $ 221,710 $ 568,601 0.24%
FOUNDATIONS - HRSG (3) F 163 MW $ 272,996 $ 320,966 $ 593,962 0.25%
FOUNDATIONS - COMB. TURB. (3) F 163 MW $ 285,981 $ 310,812 $ 596,793 0.25%
FOUNDATIONS - STM. TURB. (3) EA. 97 MW W $ 293,951 $ 287,591 $ 581,542 0.24%
FOUNDATIONS - ELECTRICAL/XFRMRS F 1000 $ 337,753 $ 122,208 $ 459,961 0.19%
DRILLED PIERS $ 364,660 $ 222,385 $ 587,045 0.24%
STRUCTURAL
STRUCTURAL STEEL $ 24,424 $ 47,990 $ 72,414 0.03%
PIPE RACK STEEL $ 147,817 $ 589,325 $ 737,142 0.31%
PIPE SUPPORTS (TEE'S) $ 2,920 $ 16,627 $ 19,547 0.01%
GRATING STEEL $ 83,794 $ 161,980 $ 245,774 0.10%
HANDRAIL $ 24,997 $ 121,376 $ 146,373 0.06%
STAIRS AND LADDERS $ 15,323 $ 52,751 $ 68,074 0.03%
PLANT SERVICES BUILDING
PLANT SERVICES BUILDING $ 606,600 $ 369,931 $ 976,531 0.41%
MECHANICAL EQUIPMENT
HRSG #1 $ 628,328 $12,603,333 $13,231,661 5.51%
HRSG #2 $ 628,328 $12,603,333 $13,231,661 5.51%
HRSG #3 $ 628,328 $12,603,333 $13,231,661 5.51%
COMBUSTION TURBINE #1 $ 289,602 $25,550,000 $25,839,602 10.77%
COMBUSTION TURBINE #2 $ 289,602 $25,550,000 $25,839,602 10.77%
COMBUSTION TURBINE #3 $ 289,602 $25,550,000 $25,839,602 10.77%
STEAM TURBINE #1 $ 268,126 $ 9,666,667 $ 9,934,793 4.14%
STEAM TURBINE #2 $ 268,126 $ 9,666,667 $ 9,934,793 4.14%
STEAM TURBINE #3 $ 268,126 $ 9,666,667 $ 9,934,793 4.14%
AIR COMPRESSOR AND DRYER $ 8,048 $ 83,230 $ 91,278 0.04%
CONDENSATE PUMPS $ 107,598 $ 556,545 $ 664,143 0.28%
BOILER FEED PUMPS $ 307,165 $ 2,516,294 $ 2,823,459 1.18%
CONDENSER AND VACUUM PUMPS $ 510,104 $ 4,138,141 $ 4,648,245 1.94%
CIRC WATER PUMPS $ 19,115 $ 1,109,733 $ 1,128,848 0.47%
FUEL GAS HEATERS AND SEPERATORS $ 13,412 $ 149,814 $ 163,226 0.07%
SHOP FABRICATED TANKS $ 11,962 $ 244,141 $ 256,103 0.11%
FIELD ERECTED TANKS $ 425,086 $ 583,280 $ 1,008,366 0.42%
WATER TREATMENT EQUIP. (DEMIN) $ 203,935 $ 1,333,780 $ 1,537,715 0.64%
GENERAL SERVICE PUMPS $ 50,178 $ 421,414 $ 471,592 0.20%
MISC SUMP PUMPS $ 12,323 $ 104,314 $ 116,637 0.05%
PRETREATMENT SYSTEM $ 244,145 $ 1,171,515 $ 1,415,660 0.59%
</TABLE>
1
<PAGE>
EXHIBIT F
Schedule of Values
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ENGINEERING & MATERIAL & PERCENTAGE
DESCRIPTION CONSTRUCTION EQUIPMENT TOTAL OF TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHEMICAL FEED PACKAGES $ 16,326 $ 358,444 $ 374,770 0.16%
MISC EQUIPMENT $ 235,169 $ 260,169 $ 495,338 0.21%
STRAINERS $ 1,011 $ 49,938 $ 50,949 0.02%
SAMPLE PANELS $ 4,494 $ 277,433 $ 281,927 0.12%
SPECIAL PROTECTIVE COATINGS $ 4,382 $ 4,382 0.00%
OIL WATER SEPERATORS $ 2,959 $ 22,195 $ 25,154 0.01%
SANITARY LIFT STATIONS $ 1,424 $ 5,548 $ 6,972 0.00%
AQUEOUS AMMONIA UNLOADING AND STORAGE SKIDS $ 133,167 $ 133,167 0.06%
CHEMICAL WASTE DRAINAGE / TREATMENT $ 2,247 $ 22,195 $ 24,442 0.01%
FUEL GAS HEATERS $ 28,181 $ 300,000 $ 328,181 0.14%
COOLING TOWER $ 1,116,584 $ 2,383,294 $ 3,499,878 1.46%
FIRE PROTECTION & PUMPS $ 447,908 $ 603,760 $ 1,051,668 0.44%
CTG OIL FLUSH $ 108,021 $ 8,063 $ 116,084 0.05%
STG TESTING AND OIL FLUSH $ 276,437 $ 10,751 $ 287,188 0.12%
CHEMICAL CLEAN / STEAM BLOW $ 438,453 $ 94,077 $ 532,530 0.22%
NDE (MECH EQUIPMENT) $ 53,758 $ 53,758 0.02%
STRESS RELIEF (MECH EQUIPMENT) $ 35,839 $ 35,839 0.01%
HARTFORD INSPECTION $ 20,159 $ 20,159 0.01%
EMISSIONS TESTING $ 132,227 $ 13,439 $ 145,666 0.06%
MECHANICAL START-UP HOURS $ 123,129 $ 123,129 0.05%
OUTSIDE HAUL OF MAJOR EQUIPMENT $ 215,034 $ 215,034 0.09%
PIPING
UNDERGROUND PIPING $ 350,353 $ 562,636 $ 912,989 0.38%
CIRCULATING WATER PIPE $ 205,147 $ 804,558 $ 1,009,705 0.42%
ERECT SMALL BORE PIPE $ 397,346 $ 275,574 $ 672,920 0.28%
ERECT LARGE BORE PIPE $ 576,978 $ 3,301,462 $ 3,878,440 1.62%
CHEMICAL PIPING $ 162,655 $ 353,783 $ 516,438 0.22%
ERECT CRITICAL PIPE $ 858,290 $ 623,567 $ 1,481,857 0.62%
VALVES $ 440,338 $ 3,546,858 $ 3,987,196 1.66%
HANGERS & SUPPORTS $ 250,384 $ 622,435 $ 872,819 0.36%
TESTING $ 437,300 $ 437,300 0.18%
ELECTRICAL
UNDERGROUND DUCTBANKS
U/G CONDUIT $ 346,204 $ 276,027 $ 622,231 0.26%
EXCAVATION / BACKFILL $ 31,950 $ 31,950 0.01%
RED CONCRETE $ 47,972 $ 96,469 $ 144,441 0.06%
MANHOLES / HANDHOLES / PULL WIRE $ 21,493 $ 62,936 $ 84,429 0.04%
CT W 501 F VENDOR FURNISHED ELECTRICAL ITEMS $ 168,422 $ 168,422 0.07%
GROUNDING $ 73,679 $ 85,759 $ 159,438 0.07%
LIGHTNING PROTECTION $ 13,985 $ 40,026 $ 54,011 0.02%
CATHODIC PROTECTION $ 74,977 $ 185,313 $ 260,290 0.11%
CONDUIT ABOVEGROUND $ 692,368 $ 443,986 $ 1,136,354 0.47%
CABLE TRAY $ 130,883 $ 113,574 $ 244,457 0.10%
ELECT PENETRATIONS & FIRE-STOPS $ 20,527 $ 1,775 $ 22,302 0.01%
POWER CABLE $ 355,986 $ 1,411,938 $ 1,767,924 0.74%
CONTROL CABLE $ 106,991 $ 128,168 $ 235,159 0.10%
INSTRUMENT CABLE $ 103,207 $ 175,551 $ 275,758 0.11%
TERMINATIONS FOR POWER, CONTROL, & INSTRUMENTATION $ 234,210 $ 99,206 $ 333,416 0.14%
ELECTRICAL EQUIPMENT
TRANSFORMER (MAIN) $ 43,488 $ 4,254,251 $ 4,297,739 1.79%
TRANSFORMER (MISC) $ 45,696 $ 515,624 $ 561,320 0.23%
TRANSFORMER ACCESSORIES (MAIN) $ 36,069 $ 26,042 $ 62,111 0.03%
SWITCHGEAR 5kV AND ABOVE $ 15,640 $ 556,343 $ 571,983 0.24%
480 V SWITCHGEAR $ 18,548 $ 346,108 $ 364,656 0.15%
MOTOR CONTROL CENTER (MCC) $ 56,549 $ 222,537 $ 279,086 0.12%
DISTRIBUTED CONTROL SYSTEM (DCS) $ 23,461 $ 1,068,179 $ 1,091,640 0.45%
VIBRATION MONITORING SYSTEMS $ 7,519 $ 7,519 0.00%
EMERGENCY POWER EQUIP / PANELS $ 1,804 $ 177,184 $ 178,988 0.07%
BATTERIES AND CHARGERS $ 11,630 $ 166,903 $ 178,533 0.07%
ISO PHASE BUS DUCT $ 122,243 $ 1,112,686 $ 1,234,929 0.51%
LIGHTS & RECEPTICALS $ 201,894 $ 278,096 $ 479,990 0.20%
HEAT TRACING/FREEZE PROTECTION $ 164,787 $ 189,683 $ 354,470 0.15%
SECURITY AND MONITORING SYSTEMS $ 11,183 $ 4,461 $ 15,644 0.01%
COMMUNICATION SYSTEMS $ 33,442 $ 67,699 $ 101,141 0.04%
TESTING $ 52,197 $ 52,197 0.02%
OIL FILL AND TEST TRANSFORMER $ 27,260 $ 37,405 $ 64,665 0.03%
</TABLE>
2
<PAGE>
EXHIBIT F
Schedule of Values
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ENGINEERING & MATERIAL & PERCENTAGE
DESCRIPTION CONSTRUCTION EQUIPMENT TOTAL OF TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTRUMENTATION
HRSG INSTRUMENTATION $ 108,319 $ 55,989 $ 164,308 0.07%
COMBUSTION TURBINE INSTRUMENTS $ 88,708 $ 48,306 $ 137,014 0.06%
STEAM TURBINE INSTRUMENTS $ 118,602 $ 57,961 $ 176,563 0.07%
BALANCE OF PLANT INSTRUMENTS $ 212,542 $ 1,095,957 $ 1,308,499 0.55%
CONTINUOUS EMISSIONS MONITORING SYSTEM $ 22,906 $ 430,068 $ 452,974 0.19%
SAMPLE TUBING $ 67,146 $ 67,088 $ 134,234 0.06%
INSULATION
HEAT RECOVERY STEAM GENERATOR (HRSG) "101" INSULATION $ 148,501 $ 66,457 $ 214,958 0.09%
HEAT RECOVERY STEAM GENERATOR (HRSG) "201" INSULATION $ 148,501 $ 66,457 $ 214,958 0.09%
HEAT RECOVERY STEAM GENERATOR (HRSG) "301" INSULATION $ 148,501 $ 66,457 $ 214,958 0.09%
COMBUSTION TURBINE INSULATION 101 $ 82,848 $ 24,228 $ 107,076 0.04%
COMBUSTION TURBINE INSULATION 201 $ 82,848 $ 24,228 $ 107,076 0.04%
COMBUSTION TURBINE INSULATION 301 $ 82,848 $ 24,228 $ 107,076 0.04%
STEAM TURBINE/GENERATOR SYSTEMS 101 INSULATION $ 203,658 $ 67,342 $ 271,000 0.11%
STEAM TURBINE/GENERATOR SYSTEMS 201 INSULATION $ 203,658 $ 67,342 $ 271,000 0.11%
STEAM TURBINE/GENERATOR SYSTEMS 301 INSULATION $ 203,658 $ 67,342 $ 271,000 0.11%
CONDENSATE TANKS $ 4,600 $ 669 $ 5,269 0.00%
BOP PIPE INSULATION & JACKETING $ 324,349 $ 364,754 $ 689,103 0.29%
PAINTING
STRUCTURAL STEEL PAINTING $ 6,050 $ 1,915 $ 7,965 0.00%
HEAT RECOVERY STEAM GENERATOR (HRSG) PAINTING $ 167,483 $ 43,536 $ 211,019 0.09%
COMBUSTION TURBINE PAINTING $ 17,692 $ 4,594 $ 22,286 0.01%
STEAM TURBINE PAINTING $ 17,692 $ 4,594 $ 22,286 0.01%
PIPE PAINTING $ 83,111 $ 21,674 $ 104,785 0.04%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $50,428,133 $189,570,167 $239,998,300 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
EXHIBIT F-2
ESTIMATED CASH FLOW
<TABLE>
<CAPTION>
Month Calendar Client Client
EPC Month Expenditures Cash Flow
--- ----- ------------ ---------
<S> <C> <C> <C>
LNTP 21-Jul-98 $750,000 $750,000
LNTP + 15 05-Aug-98 $500,000 $1,250,000
LNTP + 20 FNTP or 10-Aug-98 $500,000 $1,750,000
FNTP At FNTP $6,352,500 $8,102,500
2 31-Aug-98 $3,806,000 $11,908,500
3 Sep-98 $5,963,555 $17,872,055
4 Oct-98 $11,104,359 $28,976,414
5 Nov-98 $12,224,430 $41,200,844
6 Dec-98 $12,371,398 $53,572,242
7 Jan-99 $12,885,126 $66,457,368
8 Feb-99 $15,937,911 $82,395,279
9 Mar-99 $15,524,160 $97,919,439
10 Apr-99 $18,148,239 $116,067,678
11 May-99 $16,373,688 $132,441,366
12 Jun-99 $15,693,636 $148,135,002
13 Jul-99 $14,961,719 $163,096,720
14 Aug-99 $14,406,941 $177,503,661
15 Sep-99 $15,363,773 $192,867,434
16 Oct-99 $8,593,691 $201,461,126
17 Nov-99 $5,773,662 $207,234,788
18 Dec-99 $3,566,437 $210,801,225
19 Jan-2000 $2,884,901 $213,686,126
20 Feb-2000 $3,772,480 $217,458,606
21 Mar-2000 $4,090,680 $221,549,286
22 Apr-2000 $1,435,048 $222,984,334
23 May-2000 $1,712,601 $224,696,935
24 Jun-2000 $722,895 $225,419,830
25 Jul-2000 $14,578,470 $239,998,300
26 Aug-2000 $239,998,300
27 Sep-2000 $239,998,300
- --------- -------- ------------ ------------
-- 239,998,300
- --------- -------- ------------ ------------
</TABLE>
(1) - When date options are specified, the payment is due at the earliest event.
<PAGE>
EXHIBIT G
FORM OF PROGRESS INVOICE
Progress Invoice No.: ________________________
Invoice Date: _________________________
This is to certify (i) the stated progress has been achieved, (ii) the quality
of all Work for which payment is requested is in accordance with the terms of
this Agreement, (iii) Contractor is entitled to payment of the amount invoiced,
(iv) title to all materials and equipment invoiced has passed or will pass in
accordance with the terms of this Agreement, (v) Contractor has paid in full or
will pay all of its direct Subcontractors in accordance with the terms of their
subcontracts for the proceeds of the amount invoiced and has received
certification from each of its Subcontractors that all of their respective
Subcontractors have been paid in full or will be paid in accordance with terms
of their subcontractors's for the proceeds of the amount invoiced, and (vi) upon
receipt of the amount invoiced, (a) the Facility will be free of Subcontractor's
liens for the Work invoiced (or all Subcontractor's liens have been secured or
removed in a manner satisfactory to Owner and Lender) and (b), the Contractor
waives its right to a lien for any Work furnished or performed through the date
of the invoice to the extent of such amount.
Authorized Representative
BVZ Power Partners-Batesville
<PAGE>
BVZB-INV
BVZ POWER PARTNERS-BATESVILLE
P.O. Box 240130
527 Logood
San Antonio, Texas 78224-0130
VENDOR:_________________
INVOICE NO.:____________
DATE:___________________
INVOICED TO: [ ]
[ ]
PLEASE WIRE REMITTANCE PAYABLE TO: NATIONS BANK-TEXAS
BA: 111-000-025
FOR THE ACCOUNT OF
BVZ POWER PARTNERS-BATESVILLE
ACCOUNT NUMBER:
TERMS: NET 30 DAYS - CONTACT MIKE LOPEZ @ 210-475-8708 WITH PAYMENT INFORMATION.
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DESCRIPTION THIS PERIOD TO DATE
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To invoice you for work performed in connection with
the Bateville Cogeneration Project during the month
of 1998. This progress invoice is in accordance with
Section 7.2 of the Contract.
Gross Amount Earned $0.00 $0.00
Less __________% Retainage $0.00 $0.00
Less Amount Previously Invoiced $0.00 $0.00
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NET AMOUNT DUE THIS INVOICE $0.00 $0.00
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EXHIBIT H
[Project Summary Schedule]
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EXHIBIT I1
Scope of Services -- Plant
TABLE OF CONTENTS
I1.1.0 Plant Design Criteria
I1.1.1 Site Conditions
I1.1.2 Applicable Regulations, Codes and Standards
I1.1.2.1 U.S. Government Codes, Acts and Standards
I1.1.2.2 National Regulations, Codes and Standards
I1.1.2.3 State and Local Regulations, Codes and Standards
I1.2.0 Terminal Points
I1.2.1 Site Access
I1.2.2 Electrical Interconnection
I1.2.3 Storm Water
I1.2.4 Sanitary Wastes
I1.3.0 Major Equipment/Systems
I1.3.1 Combustion Turbine-Generators
I1.3.2 Heat Recovery Steam Generator
I1.3.3 Exhaust Stack
I1.3.4 Steam Turbine Generator
I1.3.5 Steam Condenser
I1.3.6 Deaeration System
I1.3.7 Feedwater Pumps
I1.3.8 Evaporative, Mechanical Draft Cooling Tower
I1.3.9 Control System
I1.3.10 Electrical System
I1.3.11 Piping
I1.3.12 Pumps
I1.3.13 Tube and Shell Heat Exchangers
I1.3.14 Compressed Air
I1.3.15 Thermal Insulation
I1.3.16 Fuel Handling System
I1.3.17 Infrastructure
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The Contractor shall provide complete engineering, procurement, and
construction ("EPC") of a combined cycle power generating plant ("Project" or
"Facility") in accordance with the performance requirements, reliability,
economic criteria and environmental requirements designated herein as well as
comply with all applicable codes and standards.
I1.1.0 Plant Design Criteria
This technical specification provides general guidance only. However, if
there is a discrepancy between Exhibits I-1 and I-2, Exhibit I-1 shall take
precedence.
I1.1.1 Site Conditions
Refer to Attachment I-1 - Subsurface Investigation Data Report for more
information about site conditions.
Site Location - The site is located on a 60 acre parcel in the Batesville
Industrial Park. The site is located as identified in Exhibit J.
Access - An Illinois Central Gulf Railroad and Mississippi State Highway
35 are approximately 1,000 feet to northwest of the site. Interstate
Highway 55 is approximately 1,500 feet to the east of the site. The
Mississippi River is the closest navigable water way and is
accessible approximately 38 miles west of the site.
Elevation - The elevation of the site varies from 215 to 260 feet above
mean sea level.
Wind - The prevailing wind direction is 10 miles per hour from the South.
The design wind speed per UBC (the fastest-mile wind speed
associated with an annual probability of 0.02 measured at a point 33
ft above the ground for an area having exposure Category C) is 70
miles per hour.
Temperature - The following are the temperature conditions for the site.
Average annual: 61.8(degree)F dry bulb,
Average annual: 50.0(degree)F wet bulb,
Minimum design: 0(degree)F dry bulb,
Maximum design: 105.0(degree)F dry bulb,
Maximum design: 83.0(degree)F wet bulb
Precipitation - The design annual precipitation is 48 inches and the
maximum precipitation rate is 4.0 inches/24 hours.
Snow Load - The design snow load is 10 psf per UBC (50-year mean
recurrence interval).
Seismic Risk Zone - The seismic classification for the site is
seismic risk Zone 2A, Importance Factor = 1.0 (as defined by Uniform
Building Code).
Soil Condition - Refer to Attachment I-1 - Subsurface Investigation
Data Report for more details regarding soil conditions.
Water Table Depth - Refer to Attachment I-1 - Subsurface
Investigation Data Report more details regarding soil conditions.
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I1.1.2 Applicable Regulations, Codes and Standards
The design of the Project and its components shall comply with all
applicable Federal, State and Local Regulations, Codes and Standards.
I1.1.2.1 U.S. Government Codes, Acts and Standards
As a minimum, the design of the Project shall comply with the U.S.
Government Codes, Acts and Standards issued by the following agencies:
Federal Energy Regulatory Commission,
Occupational Safety and Health Act,
Environmental Protection Agency,
Federal Aviation Administration
I1.1.2.2 National Regulations, Codes and Standards
As a minimum, the applicable portions of the design of the Project shall
comply with the following National Regulations, Codes and Standards:
American Boiler Manufacturers Association,
American Concrete Institute,
American Gear Manufacturers Association,
American Institute of Steel Construction,
American Iron and Steel Institute,
American Petroleum Institute,
American Society of Heating, Refrigeration and Air Conditioning
Engineers,
American Society of Nondestructive Test Engineers,
American Society of Testing and Materials,
American Society of Mechanical Engineers,
American National Standards Institute,
American Welding Society,
American Water Works Association,
Antifriction Bearing Manufacturers Association,
Cooling Tower Institute,
Expansion Joint Manufacturers Association,
Factory Mutual,
Heat Exchange Institute,
Hydraulics Institute,
institute of Electrical and Electronics Engineers,
Instrument Society of America,
Insulated Cable Engineers Association,
Insulated Power Cable Engineers Association,
Manufacturers Standardization Society,
Mississippi Code of Building Regulations,
National Electrical Manufacturers Association,
National Fire Protection Association,
Pipe Fabrication Institute,
Rubber Manufacturers Association,
Thermal Insulation Manufacturers Association,
Tubular Exchanger Manufacturers Association,
Underwriters Laboratories, Inc.,
Uniform Building Code of International Conference of Building Officials.
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I1.1.2.3 State and Local Regulations, Codes and Standards
As a minimum, the design of the Project shall comply with all applicable
State and Local Regulations, Codes, Acts, Ordinances and Standards.
I1.2.0 Terminal Points
The following articles identify interfaces and terminal points for the
Contractor's scope of supply for utilities and facilities which extend beyond
Project scope. Terminal point locations and conditions are summarized in Table
2-1.
I1.2.1 Site Access
As described in Exhibit J, the Project site is bounded by a proposed
industrial park access road to the north and Brewer Road to the south. Both
Brewer Road and the industrial park access road provide access to MS Hwy. 35.
Site access will be provided from the industrial park road. All roads within the
site boundary, including the entrance road leading from the industrial park
access road, are to be constructed by the contractor.
I1.2.2 Electrical Interconnection
The Project will interconnect with both the TVA side and the Entergy side
of the Batesville Substation located southwest of the site along MS Hwy. 35. The
transmission lines interconnecting the Project to the Batesville substation will
run across the site near its southwest corner. The Contractor's scope of work
terminates at the high voltage terminals of the generation step-up transformers.
Timely completion of all necessary electrical interconnection facilities,
including any required transmission line upgrades, beyond the main step-up
transformer will be by others. Circuit breakers on the 161KV switchyard provided
by the Owner will be used to synchronize each generator to the system and
disconnect the generator from the system. Circuit breaker(s) shall also be
provided by the Owner for protection on the 161KV side of the auxiliary
transformers.
I1.2.3 Storm Water
Project storm water should be directed to the wet weather stream located
at the northeast corner of the site. The Contractor's scope shall include
appropriate storm water erosion and pollution prevention measures in accordance
with storm water discharge regulations.
I1.2.4 Sanitary Wastes
Sanitary wastes will be discharged to the City of Batesville's municipal
sewer system. The Project Site and Interface Drawing provided in Exhibit J
identifies the approximate location along the site boundary at which the sewer
interconnection will be made. The Contractor's scope of work shall include
piping required to connect the site with the sewer line at the site boundary.
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Table 2-1
Terminal Point List
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Terminal Point
Item Terminal Point Location Conditions Remarks
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Civil
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Site Access Two(2) site access road NIA
terminal points on north
site boundary at proposed
industrial park access
road, as shown on Drawing
32676-1STA-S1001D,
Rev. A.
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Telephone Multi-purpose N/A Permanent telephone
building telephone equipment by LSP.
junction box
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Sitework Perimeter of site as N/A
shown on Drawing
32676-1STA-S1001D,
Rev. A.
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Sanitary Waste At south site 0-100 gpm Sewer connection
boundary as shown on gravity drain interface by LSP
Drawing
32676-1STA-S1001D,
Rev. A
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Mechanical
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Potable Water At south site 0-100 gpm @
boundary as shown on 50 psig
Drawing 32676-1 minimum
STA-S1001D, Rev. A.
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Electrical
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Outgoing Power Generator step-up N/A
transformers 161 kV,
HV bushings.
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Startup and Auxiliary NIA
Auxiliary Power transformers 161 kV,
HV bushings.
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Synchronizing Generator control 0-120 Volt
Signals from 161 panel terminal
kV Switchyard
OT's
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Relaying Signals From current 0 - 5 Amp
transformers in Secondary
generator step up
transformers
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I.3.0 Major Equipment/Systems
The Project will consist of all necessary equipment required to provide
continuous, reliable, economic and easy to maintain operation of the Project.
The following is a list of major equipment:
Combustion Turbine-Generators
Heat Recovery Steam Generators
Duct Burners
Exhaust Stacks
Steam Turbine Generator(s)
Steam Condenser(s)
Deaeration Systems
Feedwater Pumps
Evaporative, Mechanical Draft Cooling Tower
Control Systems
Electrical Systems
Piping
Pumps
Heat Exchangers
Compressed Air Systems
Thermal Insulation
Fuel Handling Systems
I1.3.1 Combustion Turbine-Generators
Each combustion turbine generators (CTG's) shall be designed for
continuous duty operation assuming pipeline quality natural gas as the primary
fuel. Dry low NOx ("DLN") combustors shall be utilized to lower the formation of
nitrogen oxide ("NOx") during the combustion process. Steam injection for power
augmentation will be provided. Combustion air conditioning shall consist of air
filtration and evaporative cooling. Pulse type self cleaning filters shall be
utilized. Each CTG shall be capable of starting-up by back-feed from the utility
grid. Black start capability is not required. The CTG may be an outdoor design,
but shall include a walk-in enclosure to allow for ease of operation and
maintenance.
Three (3) multiple shaft CTG, HRSG, and steam turbine generator (STG)
trains shall be provided. The CTGs and STGs shall each be coupled to electric
generator. The generator shall be a two-pole type, synchronous, 3,600 RPM, AC
type, 3-phase, 60 Hz rated at a power factor between 0.95 leading and 0.90
lagging.
I1.3.2 Heat Recovery Steam Generator
A heat recovery steam generator ("HRSG") shall be included for each CTG. A
reheat steam cycle system shall be used. Each HRSG shall be capable of being
supplementary fired with natural gas. Each duct burner shall be sized to meet
the guaranteed performance, and allow flexible operation of the Project at other
load, subject to HRSG load limitations, changes and transient conditions.
Each HRSG shall be equipped with a selective catalytic reduction ("SCR")
system to limit NOx emissions to 9 ppmvd at 15% O2 from the exhaust stack when
operating on natural gas fuel. The SCR catalyst systems shall be designed for a
minimum six (6) year design life and shall limit ammonia slip below 20 parts per
million ("ppm"). A CO catalyst spool piece, sized for up to 90% reduction shall
also be included.
The HRSG may use natural, assisted or forced circulation. If assisted or
forced circulation is used, the circulation pumps shall be sized for 2 x 50% of
maximum steaming capacity of the HRSG operating at maximum operating pressure.
If applicable, cascade boiler blowdown shall be utilized to
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maintain boiler water quality as recommended by the American Boiler
Manufacturers Association. Each HRSG may be configured as a vertical or
horizontal design.
The Project shall have one 10,000 gallon capacity aqueous ammonia storage
tank, an ammonia unloading skid, two 100% capacity each vaporizers and a
transfer pump system having at least one spare pump. Each HRSG shall have a
dedicated ammonia injection skid. A containment berm shall be provided for the
storage tank and all pumping equipment.
I1.3.3 Exhaust Stack
Gas leaving each HRSG will be discharged to the atmosphere via an
uninsulated CORTEN steel stack. Each of the stacks shall be 125 feet tall. Stack
exhaust gas sampling shall be provided with a continuous emissions monitoring
system ("CEMS") on each stack including an OSHA approved ladder and platform.
CEMS shall monitor CO, NOx, and O2. FAA approved stack lights shall be provided,
if required.
I1.3.4 Steam Turbine Generator
The steam turbine(s) shall be of reheat design. The STG shall be designed
to comply with the Recommended Practices for the Prevention of Water Damage to
Steam Turbines Used for Power Generation, American Society of Mechanical
Engineers' Standard No. TDP -1 Part 1.
I1.3.5 Steam Condenser
A water cooled steam condenser shall be provided for each STG. The
condenser shall be a shell-and-tube type with cooling water flowing inside and
steam condensing outside the tubes, which shall be arranged in a dual or single
pass configuration. The condenser shall be capable of operating with full STG
steam by-pass receiving up to 100% of the HRSG(s) rated thermal capacity with
the duct burners off.
The condenser shall comply with recommended design methods of the Heat
Exchange Institute. Each condenser shall be provided with two 50% capacity
condensate pumps with one uninstalled equal size pump assembly, without can as a
spare for the project. Redundant steam ejection system is required. An option
will be provided for each pump to be sized to provide 100% of the condensate for
one HRSG full load without duct firing or power augmentation on a 95(degree)F
ambient day.
I1.3.6 Deaeration System
Deaerating condensers, a separate deaerator, or an integrated deaerator
with each HRSG shall be provided.
I1.3.7 Feedwater Pumps
Two 50% electrical motor driven feedwater pumps shall be provided for each
HRSG. One spare (not installed) equal size feedwater pump with drive shall be
provided for the Project. An option will be provided for each pump to be sized
to provide 100% of the feedwater for one HRSG full load without duct firing or
power augmentation on a 95(degree)F ambient day.
I1.3.8 Evaporative, Mechanical Draft Cooling Tower
One evaporative, mechanically induced draft, multi-cell cooling tower
shall be provided to service the cooling needs of the Project. Each cell shall
have a dual fan speed control system.
The cooling tower shall be constructed of treated redwood with
polypropylene fill, located on a concrete basin capable of storing a volume
equal to a five minute flow from the cooling tower. Three 50%
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capacity each, vertical type, circulating water pumps shall be provided with the
cooling tower basin. The cooling tower shall be provided with efficient drift
eliminators.
I1.3.9 Control System
A fully distributed and integrated, redundant digital control system
("DCS") shall be provided to monitor, record, perform on-line testing, and
control the operation of the facility via a redundant data highway. The DCS
system shall have a 10% spare capacity for future expansion and for user
programming.
The Project control system will be designed to provide safe and reliable
operation of each component of the Project. Control and monitoring of all
Project equipment and processes shall be possible from the central control room
except for local control systems such as the demineralizer, compressors, and
duct burner safety systems.
I1.3.10 Electrical System
Project electrical system shall be safe, reliable, efficient and easy to
maintain. The Project shall be capable of providing all electrical power to the
utility grid via 161 kV 650 kV BIL interfaces. The same interfaces shall be used
to energize and start-up the Project equipment. The interfaces shall be provided
by multiple step-up transformers and two auxiliary transformers. Project
auxiliary loads shall be provided by redundant auxiliary transformers. The
Project shall have a DC emergency back-up for critical systems. Electric heat
tracing system shall be provided for whenever required. The Contractor scope of
work shall terminate at the high-voltage bushings of the generator step-up and
auxiliary step-up transformers.
All necessary SCADA required transducers and status contact signals shall
be furnished and wired to the utility-furnished SCADA RTU. Any communication
links or additional SCADA system equipment will be furnished by the Utility.
I1.3.11 Piping
Piping shall be designed to meet the appropriate Code requirements related
to all operating loads and shall be protected against freezing and excessive
heat loss. All piping shall be furnished with appropriate venting and draining
trim. Whenever accessible by operators, the piping shall be thermally insulated
to limit external skin temperature to 140(degree)F.
I1.3.12 Pumps
In general, multiple electrical motor driven pumps shall be provided for
each application. Pump protection shall be incorporated by recirculation or
speed control. A 1.15 service factor will be used for sizing the motor drives.
Except for circulating water pumps, a minimum of a 10% pressure margin for 100%
of the design flow rate shall be used to select each pump system. Freeze
protection measures, such as drainage provisions or freeze protection cable,
shall be incorporated in the design.
I1.3.13 Tube and Shell Heat Exchangers
Minimum 3/4 inch diameter tubes shall be used to allow for easy cleaning
of tube surfaces. Conservative fouling factors shall be used for the design.
I1.3.14 Compressed Air
Two 50% capacity air compressors shall be provided. A five minute
compressed air surge-storage tank shall be furnished. Instrument air shall be
dried and filtered to meet the dew point of -40(degree)F. As a back-up, CTG's
compressor air bleed may be used if available.
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I1.3.15 Thermal Insulation
Thermal insulation shall be provided based on an economical evaluation
comparing the required capital cost for insulation to the value of lost heat
during the life of the facility.
Indoor cold water lines will be provided with anti-sweat insulation where
required.
I1.3.16 Fuel Handling System
The facility shall be designed to operate at 100% capacity on pipeline
quality natural gas. Natural gas will be delivered by a pipeline to the property
boundary. The natural gas shall be cleaned up by a gas scrubber, if required by
the CTGs, and preheated to the highest practicable temperature prior to firing
in the CTG's. The preheating shall use steam cycle, HRSG low grade heat or
combustion turbine heat rejection. The minimum natural gas supply pressure is
500 (based on a WEC required pressure of 400 psig) psig at the property
boundary.
I1.3.17 Infrastructure
As a minimum, the Project shall have one large, multi-purpose building
housing water treatment equipment, control room, control and electrical
equipment, warehouse (minimum 2,000 square feet), repair shops (minimum 2,000
square feet), and operators' building consisting of air conditioned and heated
offices, conference/training room, locker rooms, showers and sanitary
facilities, and having minimum 3,000 square feet. The STG shall be furnished
with an outdoor, walk-in enclosure designed to accommodate routine maintenance
and inspections. The STG enclosure will be removable for major maintenance and
inspections. All buildings shall be thermally insulated, ventilated and heated.
The CTs, STGs, Generators, HRSGs, exhaust stacks, cooling towers and
step-up transformers shall be located outdoors.
The facility shall have 12 foot wide, one-way traffic, hard surface
internal roads for equipment access. A gravel finish shall be provided.
A storm water drainage system design shall be incorporated into the
Industrial Park's storm water drainage system.
The site will be fenced, and the power block area inside the loop road
will be finished with 6 inches of crushed stone. The disturbed areas outside the
loop road will be seeded.
Two Project access gates shall be provided. One of the access gates shall
be equipped for remote activation from the control room, or utilize electronic
access cards from a reader located at the gate. A closed circuit TV camera and a
voice communication system shall be available at the gate.
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Exhibit I2
Scope of Supply - Plant
I2.1 Overall Plant Description
The plant consists of three multiple shaft thermal island trains each consisting
of a nominal 175 MV combustion turbine; heat recovery steam generator; reheat,
condensing, nominal 95 MW steam turbine. As shown on the site plan, Drawing
32676-1STA-S1001D, the plant will be located in the center part of the plot of
land indicated in the RFP as available for the plant site. The location of the
power island is shown near the center part of the plot to limit noise at the
site boundary, and to avoid the hilly area at the southern end of the site.
Each combustion turbine generator will be designed for continuous duty operation
with natural gas fuel. Dry low NOx combustors will be utilized to lower the
formation of nitrous oxide during the combustion process. Combustion air
conditioning will consist of air filtration and evaporative cooling. Pulse type
self cleaning filters will be utilized. Each CTG will be capable of starting up
by backfeed from the utility grid. An on-line and off-line compressor water wash
system will be provided.
The HRSGs will be three-pressure units with reheat and will include HP, IP, and
LP economizer sections. Each HRSG will be capable of being supplementary fired
with natural gas. A cascading blowdown system will be utilized along with drum
chemical feed to control boiler water chemistry.
The steam turbines will be reheat units with axial exhaust. The main steam and
reheat steam design temperatures will be 1050/1000 F. The steam turbines will be
housed in weatherproof enclosures.
The exhaust of each steam turbine will be directed to its own water-cooled
condenser. Circulating water from each condenser is routed to a common
forced-draft cooling tower. The cooling tower is located west from the power
block to orient the tower in the direction of the prevailing wind and to
minimize the length of the circulating water piping.
North of the steam turbine is a single-story general-purpose building which will
house the control room and control equipment, electrical equipment, water
treatment equipment, warehouse, maintenance facilities, and administration area.
The plant switchyard (provide by others) is located at the south end of the
site, to interface with the off-site substation. Natural gas, sanitary waste,
wastewater, process water, and potable water interfaces are at the south and
west site boundaries as shown on Drawing 32676-1STA-S1001D.
Access to the site is provided from the north, in conjunction with the plans for
the proposed road north of the site to be the primary access to the industrial
park in the future. The loop arrangement allows for easy access throughout the
site. Additional area within the plot will be utilized for construction
trailers, construction parking, and material storage, laydown, and staging.
I2.2 Mechanical Systems
I2.2.1 Steam System
The steam system conveys the steam from each HRSG to its associated steam
turbine. It consists of high-pressure (HP) steam, intermediate-pressure (IP),
low-pressure (LP) steam, and reheat steam.
HP steam is piped from each HRSG HP superheater outlet to the steam turbine.
Each line is equipped with flow, pressure, and temperature measuring devices
along with safety valves and automatic drains.
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Each steam turbine is provided with a HP steam turbine and reheat bypass line to
the condenser, with pressure reducing and steam desuperheating for startup. The
HP bypass, as well as the LP bypass, will be sized to be capable of extended
period non duct-fired operation of the HRSG.
IP steam from each HRSG is combined with the cold reheat steam which is reheated
and sent to the steam turbine. The IP and reheat steam lines contain similar
valving, instrumentation, and controls as outlined for the HP steam line.
LP steam from each HRSG is piped to the steam turbine. The LP steam then
exhausts from the turbine into the main condenser where it condenses. The LP
steam lines also contain similar valving, instrumentation, and controls as the
HP steam lines. Each steam turbine is provided with an LP steam turbine bypass
line to the condenser, with pressure reducing for startup.
I2.2.2 Condensate System
The condensate system includes a deaerating condenser for each steam turbine.
Condensate is delivered from the condenser hot well to the low-pressure
economizer inlet. Two (2) 50 percent capacity condensate pumps take suction from
each condenser hot well and discharge to the LP economizer inlet. One
uninstalled spare pump rotating element will be provided for the project.
Condensate is also used for the following purposes:
o Gland condenser cooling.
o Turbine exhaust hood spray.
o Steam desuperheating.
o Closed cycle cooling water makeup.
o Cycle chemical feed dilution water.
The required minimum flow through the condensate pump and gland seal condenser
is automatically provided using a flow measuring device, with transmitter, which
automatically modulates a flow control valve to recirculate condensate back to
the hot well when required.
Condenser hot well level is automatically controlled by a split-range level
transmitter in conjunction with two (2) control valves. The control signal is
programmed to dump excess condensate to the condensate storage tank to prevent
high level, and to deliver makeup condensate to the condenser hot well to
prevent low level. Sparging steam will be provided during low load and high
makeup operation, as required.
I2.2.3 Condenser Air Removal System
The condenser air removal system creates and maintains vacuum in the shell side
of each main condenser by removing air and noncondensable gases. The system
consists of a twin element, two-stage steam jet air ejector and one (1) steam
hogging ejector. Noncondensable gases flow from the main condenser to the steam
jet air ejector skid during normal operation. The steam hogging ejector will be
used during startup.
I2.2.4 Feedwater System
The feedwater system delivers feedwater from the LP steam drum to the IP and HP
steam drums through their economizers. The system also supplies desuperheating
water to the HP steam attemperator and the hot reheat steam attemperator. There
are two (2) boiler feed pumps for each HRSG. One uninstalled spare pump will be
provided for the project. The pumps are horizontal, multi-stage type with
monitored automatic recirculation control to the LP drum.
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I2.2.5 Cooling Water Systems
I2.2.5.1 Circulating Cooling Water. Condenser cooling water is provided by three
(3) 50 percent wet pit circulating water pumps located in the cooling tower
basin. Removable stainless steel screens are provided at the circulating water
pump structure to remove debris from the water before entering the circulating
water pumps. The circulating water pumps discharge cooling water through
distribution piping to each condenser inlet water box. The circulating water
flows through the condenser and discharges through a common header to the
mechanical draft, counterflow cooling tower. The circulating water flows through
distribution piping to the individual cells of the cooling tower. Isolation
valves are provided in the distribution piping to allow individual cells to be
taken out of service.
The cooling water tower will be designed for the manufacturers standard drift
and will have a 2(degree)F allowance for recirculation.
The circulating water pump discharge valves will be motor operated and their
operation will be automated at startup and shutdown to mitigate the effects of
water hammer.
I2.2.5.3 Auxiliary Cooling Water. The auxiliary cooling water for equipment
cooling is provided by two 100% capacity pumps located in the cooling tower
basin. These pumps circulate cooling tower water to the following plant
equipment.
o Lube oil coolers.
o Hydraulic power units.
o Boiler feed pump coolers.
o Air compressors and aftercoolers. (if required)
o Sample coolers.
o Generator coolers.
o CT backup air coolers (if required).
After leaving the equipment coolers, the water is piped into the circulating
water return header. Throttling valves are provided on the outlet of each
component to balance system flows and pressures.
I2.2.6 Condensate Makeup Water. The condensate makeup system automatically
maintains the proper amount of water in the condenser hot well.
Normal condensate makeup to the condenser is provided via a vacuum drag system
from the condensate storage tank through the makeup control valve at each
condenser. Two (2) 100 percent condensate transfer pumps handle surge conditions
and startup makeup water requirements.
I2.2.7 Blowdown. One blowdown tank with associated piping and valves is provided
for each HRSG. Each blowdown tank will receive blowdown and water/steam drains
from the corresponding HRSG.
Three (3) types of blowdown-startup, intermittent, and continuous-will be
discharged to the blowdown tanks. A startup blowdown connection is located on
the HP and IP steam drums. This is used to assist in controlling water level in
the drums during startup. An intermittent blowdown connection is located on the
HP, IP, and LP evaporator lower headers. This blowdown is used to reduce the
solids which collect in the bottom drum. It is operated intermittently, usually
shortly after the HRSG is shut down and still pressurized.
The continuous blowdown connection is located just below the low water level in
the HP and IP steam drums. This blowdown is used during normal operation, in
conjunction with the chemical feed system, to control the steam drum water
chemistry.
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During blowdown operation, water is blown down into the blowdown tank. The
blowdown is normally a water/steam flashing mixture when it enters the blowdown
tank. Here, the steam is vented off through the top of the tank while the
discharge water flows out the side near the bottom and is sent to a sump which
collects blowdown drains only. In addition to the blowdown, the tank receives
water/steam drains from the HP, IP, and LP economizers and superheaters,
reheater, and the HP, IP, and LP drum gauge glasses and water columns. Blowdown
water is pumped from the sump to the cooling tower basin via the circulating
water return line by two (2) 100 percent blowdown transfer pumps.
Blowdown valves used for unit start-up will be motor-operated.
I2.2.8 (Not Used)
I2.2.9 Fuel Systems
I2.2.9.1 Gas. The fuel gas system treats and delivers the required quantities of
gas to the combustion turbines and duct burners at the proper conditions. The
Owner will supply gas to the site as defined in Exhibit I-5 and such that a gas
heater or other equipment is not required to be furnished by Contractor. A
scrubber is supplied for each combustion turbine to remove small amounts of both
particulate matter and liquids thereby providing a gas which meets CTG
manufacturers' requirements, based on gas as defined in Exhibit I-5 being
delivered to the site. The gas scrubber comes complete with a liquid level
control system to automatically maintain a safe level of accumulated liquid in
the scrubber. A scrubber drains tank receives mixed drains from the scrubber and
safely separates and vents fuel gas from the waste drain stream.
A separate orifice or other type meter is provided to measure and record fuel
gas consumption to the combustion turbines and duct burners.
I2.2.9.2 Fuel Oil (Not used)
I2.2.10 Drains Systems
I2.2.10.1 Steam Cycle Drains. Various high-pressure drains including those from
the stop valve and the steam supply to the steam seal regulator are taken to the
condenser hot well.
I2.2.10.2 Site Drains. The site drains system directs site wastewater to the
Tallahatchie River. The site wastewater system is composed of the following
effluents:
o Neutralized effluent from the neutralization tank.
o Non-oily plant drains.
o Separated non-oily effluent from the oil/water separator in the oily
drains system.
o Cooling tower blowdown.
Indoor areas and equipment with the potential for oil in the waste stream have
drains that are routed through an oil/water separator either by gravity flow or
pumping, if required. In the oil/water separator, the oil is separated out and
held for disposal, while the water is sent to the wastewater system. The oil is
disposed of off-site through the services of an Owner-furnished disposal
contractor.
Areas outside the buildings with the potential for oil in the water stream, such
as oil-filled transformers, have containment dikes or basins. Water from these
areas is routed through an oil/water separator by either gravity flow or
pumping, if required. The effluent is sent to the wastewater system and any oil
is held in the oil/water separator for off-site disposal by an Owner-furnished
disposal contractor. The oil/water separators are not designed to contain major
oil spills.
4
<PAGE>
I2.2.11 Compressed Air System
The compressed air systems provides air for instrument air and service air uses.
Instrument air is required for the various air-operated valves and instruments
in the power plant. Service air will be distributed throughout the plant for
general maintenance usage.
A five minute compressed air surge storage tank will be provided.
Two (2) x 50 percent capacity rotary screw air compressors will be provided to
supply compressed instrument and service air for the plant. Instrument air will
pass through two (2) x 100 percent capacity coalescing filters; one (1) x 100
percent capacity self regenerative dual tower desiccant type instrument air
dryers with purge saver, dew point monitoring, and after filters, before it is
used. The dryers and coalescing filters shall produce oil free instrument air
with a dew point of (-) 40(degree)F.
As a backup, CTG compressor air bleed, if used, will be cooled as required and
piped into the service air system piping upstream of the air receiver, to be
filtered and dried to the same conditions described above.
The service air hose connections will be of the quick disconnect type where the
air is ON when a hose is connected and OFF when the hose is disconnected.
I2.2.12 Compressed Gas Systems
I2.2.12.1 Hydrogen. If required for generator cooling, a hydrogen storage system
is provided to maintain the hydrogen pressure in the generators. The hydrogen
system consists of standard pressurized hydrogen storage cylinders connected to
a generator manifold supplied generator.
I2.2.12.2 Carbon Dioxide. If hydrogen is used for generator cooling, a carbon
dioxide system is provided to purge the hydrogen from the generators. The carbon
dioxide system consists of standard pressurized carbon dioxide storage cylinders
connected to a manifold supplied with each generator.
Carbon dioxide for combustion turbine fire protection if used, is provided in a
separate low-pressure storage tank with each combustion turbine unit.
I2.2.13 Space Conditioning
The multipurpose building will be provided with heating, ventilating and air
conditioning, as required, for personnel comfort and equipment protection.
I2.2.13.1 Space Conditioning Design Temperatures
The ASHRAE design temperatures represent the recommended values for moderate
risk equipment sizing and energy efficiency. The 2.5 percent summer dry-bulb
temperature represents values that have been equaled or exceeded by 2.5 percent
of the total hours during the months of June through September in the northern
hemisphere. The coincident wet-bulb temperature listed is the mean of all
wet-bulb temperatures occurring at the specified dry-bulb temperature. The
ASHRAE temperatures indicated are for the nearest city tabulated by ASHRAE,
adjusted for the specific site elevation. The 97.5 percent temperature
represents values that have been equaled or exceeded by 97.5 percent of the
total hours during the months of December through February in the northern
hemisphere.
5
<PAGE>
Space conditioning system design will be based on the following design
temperatures:
ASHRAE, 2.5/97.5 Percent Extreme
------------------------ -------
Summer
------
Dry-Bulb 95 F 98 F
Wet-Bulb 76 F 77 F
Winter
------
Dry-Bulb 18 F 13 F
I2.2.13.2 Space Conditioning Design
Space conditioning consisting of heating, ventilating, and air conditioning
(HVAC) will be provided to ensure design basis environmental conditions for
equipment and personnel.
HVAC systems will be designed to maintain the indoor conditions listed in Table
I2-1
Table I2-1 indicated the level of redundancy for HVAC equipment in the indicated
areas. Multiplicity means that more than one partial capacity ventilation device
will be used. Some ventilation capacity will be provided with single component
failure. When redundancy is indicated, only the major active components are
provided with backup equipment. Static components such as ductwork would not be
duplicated.
When indicated in Table I2-1, the air conditioning systems will be designed in
accordance with ASHRAE Standard 62, Ventilation for Acceptable Indoor Air
Quality.
Tabulated filtration levels are indicated as low, medium, or high. These levels
are according to the following filtration efficiencies as defined by ASHRAE
Standard 52, Method of Testing Air-Cleaning Devices Used in General Ventilation
for Removing Particulate Matter:
Efficiency
Level Percent
----- -------
High 80-90
Medium 20-30
Low Less than 20
The noise criteria listed in Table I2-1 represents the noise contributions from
HVAC equipment only. Noise criteria is indicated as NC levels, decibels, or as
background. Noise criteria (NC) values are indicated in the ASHRAE Handbook
series for acoustical design criteria. Decibels are sound pressure levels,
A-weighted, to a reference of 0.0002 microbar (0.00002 Pa), at 5 feet from the
equipment as measured in a free field with single reflecting plane. Background
indicated that the HVAC equipment will be designed such that the contribution
will be 2 dB or less than the overall room noise at 6 feet above the floor with
normal plant equipment if operation.
Mechanical equipment rooms containing refrigerants will be designed in
accordance with the requirements of ASHRAE Standard 15, Safety Code for
Mechanical Refrigeration.
Minimum design ventilation rates in Table I2-1 are based on gross building
volumes at sea level. The volume of equipment inside the buildings is not
deducted from the total volume when calculation air change rates.
6
<PAGE>
Maximum design temperatures represent the average building temperature. Cooler
temperatures will occur near the ventilation inlets and higher temperatures will
occur at relief and exhaust points.
7
<PAGE>
TABLE I2-1. HVAC DESIGN CRITERIA
<TABLE>
<CAPTION>
==========================================================================================================
Building/Area Ambient Air Indoor Control Methodology Humidity Minimum Design
- ------------- Tempurature Temperature ------------------- Control Ventilation
----------- Maximum ------- Rate AC/h
Minimum ---------
--------------- Summer Winter
F F ------ ------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIR-CONDITIONED
AREAS
- ----------------------------------------------------------------------------------------------------------
Control Rooms
and control
equipment rooms;
for instruments ASHRAE
and electronics Extreme 75 75 Automatic Automatic 30-65 STD-62
- ----------------------------------------------------------------------------------------------------------
Offices;
personnel
comfort and ASHRAE
efficiency ASHRAE 78 72 Automatic Automatic 30-65 STD-62
- ----------------------------------------------------------------------------------------------------------
Locker Rooms and ASHRAE
Restrooms ASHRAE 78 72 Automatic Automatic 65 MAX STD-62
- ----------------------------------------------------------------------------------------------------------
1 or as
required for
hydrogen
Battery Rooms Extreme 80 60 Automatic Automatic None dilution
- ----------------------------------------------------------------------------------------------------------
Ambient
temp
Shops ASHRAE plus 10 55 Manual Automatic None 15
- ----------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
Ambient
Enclosed SUS temp
equipment areas Extreme plus 10 55 Manual Automatic None 30
- ----------------------------------------------------------------------------------------------------------
Miscellaneous Ambient
electrical temp
equipment Extreme plus 10 55 Manual Automatic None 20
- ----------------------------------------------------------------------------------------------------------
MECHANICAL EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
Ambient
Pumps, large temp
horsepower Extreme plus 10 55 Manual Automatic None 30
- ----------------------------------------------------------------------------------------------------------
Ambient
temp
Miscellaneous Extreme plus 10 55 Manual Automatic None 10
- ----------------------------------------------------------------------------------------------------------
Ambient
Chemical temp
treatment ASHRAE plus 10 60 Manual Automatic None 10
==========================================================================================================
<CAPTION>
================================================================================
Building/Area Filtration Pressurization Redundancy Noise Criteria
- ------------- Efficiency ------------------------- --------------
----------
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIR-CONDITIONED
AREAS
- --------------------------------------------------------------------------------
Control Rooms
and control
equipment rooms;
for instruments ASHRAE
and electronics STD-62 Positive 2 x 100% NC 40
- --------------------------------------------------------------------------------
Offices;
personnel
comfort and ASHRAE
efficiency STD-62 Positive None NC 40
- --------------------------------------------------------------------------------
Locker Rooms and ASHRAE
Restrooms STD-62 Negative None NC 40
- --------------------------------------------------------------------------------
Battery Rooms None Negative None 85 dBA
- --------------------------------------------------------------------------------
Shops None None None 85 dBA
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
- --------------------------------------------------------------------------------
Enclosed SUS
equipment areas None None Multiplicity 85 dBA
- --------------------------------------------------------------------------------
Miscellaneous
electrical
equipment None None Multiplicity 85 dBA
- --------------------------------------------------------------------------------
MECHANICAL EQUIPMENT
- --------------------------------------------------------------------------------
Pumps, large
horsepower None None None 85 dBA
- --------------------------------------------------------------------------------
Miscellaneous None None None 85 dBA
- --------------------------------------------------------------------------------
Chemical
treatment None None None 85 dBA
================================================================================
</TABLE>
8
<PAGE>
I2.2.14 Freeze Protection
Piping which will be subject to freezing while the plant is in operation will be
protected with electric heat tracing. Piping and equipment subject to freezing
only when the unit is down for maintenance will be provided with drain valves.
All water lines 2" and smaller exposed to freezing temperatures will be heat
traced. Water lines 4" and smaller which will be dead legs during normal
operation will also be heat traced.
I2.2.15 Mechanical/Fluid Equipment
I2.2.15.1 Steam Bypass Stations
Three (3) per steam Steam turbine bypass stations are provided for use
turbine during startup and shutdown. One is provided for
the HP steam system, one for the hot reheat steam
system, and one for the LP steam system. Included
are pressure reducing valves, desuperheater spray
control valves, and all required instrumentation.
I2.2.15.2 Deaerating Condenser
Three (3) Single shell, dual-pass water box, shell and tube,
deaerating condenser designed in accordance with
HEI standards, and designed to operate with
circulating water. Sparging steam equipment will
be provided as required for low load operation.
Tube Material: Stainless steel or
I2.2.15.3 Condensate Pumps
Two (2) per condenser Condensate pumps (two per condenser with one
uninstalled spare pump rotating element for the
project) are provided to pump condensate from the
condenser to the HRSG. Each pump is sized to
handle the requirements of 59(degree)F operation
without power augmentation or steam injection. The
pumps are electric motor-driven centrifugal,
multi-stage can type pumps.
Material: Ductile Iron Bowls, SS/ductile iron
Impellers, Carbon Steel Cans and Discharge Head
I2.2.15.4 Condenser Air Removal Equipment
One (1) per condenser 100 percent capacity skid-mounted twin element,
two-stage steam jet air ejector, and one (1) steam
hogging ejector complete with all accessories,
instrumentation, and controls are provided.
Holding Capacity: Per HEI or as required for plant
startup.
Hogging Capacity: Designated to reduce the
condenser pressure from atmospheric to 10 inches
HgA in 15 minutes.
9
<PAGE>
I2.2.15.5 Feedwater Pumps
Two(2) per HRSG Two equal sized feedwater pumps are provided (Two
per HRSG with; one spare uninstalled pump and
drive motor assembly for the project). Each pump
will be sized to handle the requirements of
59(degree)F operation without power augmentation
or steam injection.
Each pump is a multi-stage, horizontal,
centrifugal type with split-case or segmental ring
design. The pumps are provided with a forced
lubrication system if required by the
manufacturer.
Material: Chrome Casing and Impellers
I2.2.15.6 Circulating Water Pumps
Three (3) 50 percent capacity circulating water pumps are
provided to supply cooling water to the condenser
inlet water box. The pumps are vertical wet pit,
mixed flow, centrifugal type.
Material: CI/CS Casing and Bronze Impeller
I2.2.15.7 Auxiliary Cooling Water Pumps
Two (2) 100 percent capacity auxiliary cooling water pumps
are provided to supply cooling tower water to the
plant equipment coolers. The pumps are vertical
type.
Material: CI/CS Casing and Bronze Impeller
I2.2.15.8 Condensate Transfer Pump
Two (2) 100 percent capacity condensate transfer pumps are
provided. The pump is a horizontal, centrifugal
type.
Material: SS Casing and Impeller
I2.2.15.9 (Not Used)
I2.2.15.10 (Not Used)
I2.2.15.11 HRSG Blowdown Tank
One (1) per HRSG Vertical, cylindrical pressure vessels are
provided. The tanks are shop fabricated and tested
in accordance with ASME Section VIII.
Material: Carbon Steel w/SS Liner Plate
I2.2.15.12 Fuel Gas Scrubber and Drains Tank
One (1) per Combustion Fuel gas scrubbers for removing moisture and
Turbine particulate combustion turbine from the incoming
fuel gas lines to the gas turbines are
provided. The scrubbers are vertical, cylindrical
pressure vessels, shop fabricated in accordance
with ASME Section VIII with associated instruments
and controls.
Material: Carbon Steel
10
<PAGE>
I2.2.15.13 (Not used)
I2.2.15.14 (Not Used)
I2.2.15.15 (Not Used)
I2.2.15.16 Air Compressor
Two (2) 50 percent capacity air compressors are provided.
The compressors are rotary screw type, complete
with intake filter, intercoolers, aftercoolers,
air receiver, motor drive, and accessories. The
air receiver is free-standing.
Air Receiver
Material: Carbon Steel
I2.2.15.17 Instrument Air Dryer
One (1) Dual column desiccant air dryer package complete
with integral control valves and regenerator
controls is provided. The air dryer is
skid-mounted.
Type: Dual Column Desiccant
Inlet Pressure: 125 psi
Outlet Air Dew Point: -40(degree)F
-40(degree)F
I2.3 Electrical/Control
I2.3.1 Electrical/Control Systems
Power Delivery
Power is generated at 18kV 60 Hz, by the gas turbine generators and 13.8kV, 60
Hz, by the steam turbine generators. Each generator is bus- connected to a
dedicated generator step-up transformer. Each generator step-up transformer will
be connected by the Owner to the 161 kV switchyard furnished by others.
Generator Synchronization
Synchronization to the 161kV utility grid will be supplied and furnished by
others. Each generator will require a separate 161kV circuit breaker to be
provided by others. Signals to close and open the circuit breaker will be
furnished by the Contractor.
Medium Voltage System
Two Unit Auxiliary Transformers will be provided per the RFP. Each transformer
will transform power from 161kV to the medium voltage of 4.16kV A 161kV
connection to each transformer with protective devices will be provided by
others.
The medium voltage auxiliary switchgear will feed power to the plant medium
voltage motors and to the primary winding of the low voltage station auxiliary
transformer(s). The Unit Auxiliary Transformers are sized to carry the entire
plant auxiliary load.
Low Voltage System
The low voltage system for the power plant will be obtained from the plant
medium voltage system transformer(s). The transformer(s) will feed two
double-ended line-ups of 480 volt switchgear. Each low voltage transformer is
sized to carry the entire load of the lineup.
11
<PAGE>
Direct Current Power Systems
There is one 125 V dc station battery, two battery chargers, and dc power
distribution system included in the power plant to power the plant auxiliary dc
loads, gas turbine loads, steam turbine loads, control loads via the inverter,
and the plant electrical relay protection for a period of 2 hours.
Motor Control Centers and Distribution Panelboards
The Motor Control Center (MCC) will contain full voltage, combination starters
for the three-phase, 460 volts auxiliary motors. Each MCC will also contain
molded-case breakers for those non-motor loads not requiring remote control
functions. Local panelboards will provide circuits for lighting, receptacles,
and other small loads.
Electrical Motors
Large motors [over 250 HP (200kW)] in the station are connected to medium
voltage motor control center, using vacuum break contactors and multi-function
solid-state motor protection modules. Motors 200 hp (150 kW) and below are
connected to the 480 V motor control centers. Outdoor motors rated 30 hp and
larger are provided with space heaters.
Lighting Systems
Outdoor lighting is high-pressure sodium vapor type and provides illumination in
areas of normal personnel traffic, such as:
o Building exteriors.
o Equipment areas.
o Walkways and stairs.
o Roadways.
Indoor lighting is high-pressure sodium vapor type in high-bay building areas
and fluorescent type in all other areas. Emergency lighting of the wall-mounted
battery pack type will provide adequate level of illumination for all building
egress routes. The minimum outdoor lighting level for any place in the facility
will generally be 0.5 footcandles. Elevated walkways, including HRSG platforms
will be illuminated to a higher level, typically 2.0 - 5.0 footcandles, as
recommended by ANSI/IES RP-7.
Grounding
The grounding system consists of bare copper cables and ground rods and their
extension/connection to structures, electrical equipment, raceways, etc., to
provide safe touch and step potentials in accordance with IEEE requirements. The
power plant grounding system will be connected to the switchyard grounding
system in at least two (2) places per unit.
Uninterruptible Power Supply System
The uninterruptible power supply system provides standby ac control power from
the station battery to the plant DCS control system, critical instrumentation,
plant communications, and the fire protective signaling system. The UPS consists
of a regulated ac supply, an inverter, an automatic static transfer switch, and
a manual bypass switch.
Lightning Protection
Power plant facilities will be protected by a lightning protection system
designed in accordance with the recommendations of NFPA-78.
Station Communication System
A multi-channel party-page communication system is included for the combined
cycle facility. The system includes indoor and outdoor handset/loudspeaker
stations, in various critical operating areas of the power plant to allow
communication with the central control room as well as between various work
stations.
[PAGE 19 MISSING]
other components within the system.
12
<PAGE>
Redundant and secure power supplies will be provided for all control components
in the system. Peripheral devices such as printers and copiers will be powered
from vital power source in the plant. The system will be designed to execute the
alarm functions without using any rotating (disk) memories.
System outputs controlling redundant or parallel process equipment will be
assigned to minimize the impact of an output card failure. In cases of a failure
of a single system input transducer or of an input module serving only that
transducer, a predicted DCS system control response to the failure will be
allowable. All such failures, however, will be alarmed.
The DCS will include spare capacity and equipment, and provisions for future
expansions. Spare equipment will include 10 percent active I/O points.
The DCS will be equipped with a diagnostic package that includes both hardware
and software to detect system malfunction and equipment failure. The occurrence
of any malfunction or equipment failure will be alarmed instantly. The
diagnostic package will be capable of pinpointing the defective component down
to the card level.
RTU Interface
The DCS will be configured to accept signals from the utility's remote AGC to
control the megawatt output of each unit. Space will be provided in the control
room for the RTU provided by others. The RTU signal will provide a megawatt
target for the plant. The starting and stopping of individual units and plant
equipment will be by the operators or the DCIS.
I2.3.2 Electrical/Control Equipment
Gas Turbine Generator Step-up Transformers
Three (3) Outdoor, three-phase, oil-filled, gas turbine
generator step-up transformers are provided which
are rated and equipped as follows:
Rated MVA: The GSU transformer MVA rating will be provided to
deliver 100% of the gas turbine generator output,
based on ambient temperature and a maximum
transformer maximum temperature rise of
65(degree)C. The MVA rating will be based on the
generator operating with a power factor of .9
lagging to .95 leading. The transformer will be
provided with copper windings.
Cooling Class: OA/FA/FA or OA/FOA/FOA
Voltage Ratio: (Generator Voltage) -161 kV
Vector Group: Wye-Delta
High Voltage Two (2) 2.5% above and
Winding Taps (off- Two (2) 2.5% below rated voltage
load):
Impedance: 10.0% on OA MVA base (nominal)
Average Winding 65(degree)C maximum above average ambient
Temperature Rise: temperature of 30(degree)C with a maximum ambient
temperature of 40(degree)C
High Voltage 650 kV
Winding BIL:
13
<PAGE>
Low Voltage Winding 150 kV
BIL:
High Voltage CTs: Two (2) per Bushing
High Voltage One (1)
Neutral Bushing CT:
Accessories:
o Tank cover-mounted low voltage bushings with provisions for
connection to isolated phase bus duct to the gas turbine generator.
o Nitrogen blanketing system or sealed bladder system, if a nitrogen
blanketing system is utilized an annunciator will be provided for
low gas pressure.
o The high voltage winding will be connected to 161 kV overhead
transmission lines through tank cover-mounted oil bushings.
o Fault pressure relay, Device 63PT.
o Oil temperature gauge with alarm contacts.
o Liquid level gauge with alarm contacts.
o Pressure relief device with alarm contacts.
o Pressure/vacuum gauge.
o Top filter-press connection.
o Lower filter-press connection and drain valve.
o Stainless steel nameplate.
o Grounding pads.
o Lifting pads.
Steam Turbine Generator Step-up Transformers
Three (3) Outdoor, three-phase, oil-filled, steam turbine
generator step-up transformers are provided which
are rated and equipped as follows:
Rated MVA: The GSU transformer MVA rating will be provided to
deliver 100% of the steam turbine generator
output, based on ambient temperature and a maximum
temperature rise of 65(degree)C. The MVA rating
will be based on the generator operating with a
power factor of .9 lagging to .95 leading. The
transformer will be provided with copper windings.
Cooling Class: OA/FA/FA or OA/FOA/FOA
Voltage Ratio: (Generator Voltage) -161 kV
Vector Group: Wye-Delta
High Voltage Two (2) 2.5% above and
Winding Taps Two (2) 2.5% below rated voltage
(off-load):
Impedance: 10.0% on OA MVA base (nominal)
Average Winding 65(degree)C maximum above average ambient
Temperature Rise: temperature of 30(degree)C with a maximum ambient
temperature of 40(degree)C
High Voltage 650 kV
Winding BIL:
14
<PAGE>
Low Voltage Winding 150 kV
BIL:
High Voltage CTs: Two (2) per Bushing
High Voltage One (1)
Neutral Bushing CT:
Accessories:
o Tank cover-mounted low voltage bushings with provisions for
connection to isolated phase bus duct to the gas turbine generator.
o Nitrogen blanketing system or sealed bladder system, if a nitrogen
blanketing system is utilized an annunciator will be provided for
low gas pressure.
o The high voltage winding will be connected to 161 kV overhead
transmission lines through tank cover-mounted oil bushings.
o Fault pressure relay, Device 63PT.
o Oil temperature gauge with alarm contacts.
o Liquid level gauge with alarm contacts.
o Pressure relief device with alarm contacts.
o Pressure/vacuum gauge. Top filter-press connection.
o Lower filter-press connection and drain valve.
o Stainless steel nameplate.
o Grounding pads.
o Lifting pads.
Gas Turbine Generator Isolated Phase Bus Duct
One (1) Lot Isolated phase bus duct for the connection of the
output of each generator to the generator step-up
transformer is provided. The bus is rated and
equipped as follows:
Bus:
Operating Voltage: Generator Voltage
Conductor Material: Aluminum
Enclosure:
Type: Minimum Flux, Weatherproof, Welded
Material: Aluminum
Enclosure Temperature 40(degree)C Above a Maximum Ambient Temperature of
Rise: 40(degree)C
Accessories:
o Galvanized steel support structures for the entire bus assembly.
o Generator transition assembly including flexible copper connectors.
o Step-up transformer transition assembly including flexible copper
connectors.
o Breathers and drainage points.
15
<PAGE>
Steam Turbine Generator Isolated Phase Bus Duct
One (1) Lot Isolated phase bus duct for the connection of the
output of each generator to the generator step-up
transformer is provided. The bus is rated and
equipped as follows:
Bus:
Operating Voltage: Generator Voltage
Enclosure:
Type: Minimum Flux, Weatherproof, Welded
Material: Aluminum
Enclosure Temperature
Rise: 40(degree)C Above a Maximum Ambient Temperature
of 40(degree)C
Accessories:
o Galvanized steel support structures for the entire bus assembly.
o Generator transition assembly including flexible copper connectors.
o Step-up transformer transition assembly including flexible copper
connectors.
o Breathers and drainage points.
Unit Auxiliary Transformers
Two (2) Outdoor, oil-filled, step-down transformers with
copper windings are provided. The auxiliary
transformers provide startup, standby, and normal
running auxiliary power to the combined cycle
power plant. Each transformer is sized to provide
the auxiliary power requirements of the facility,
and is rated and equipped as follows:
Unit Auxiliary Transformer
No. of Phases: Three (3)
Frequency: 60 Hz
Rated MVA: 15/20 MVA @ 55(degree)C temperature rise
Cooling Class: OA/FA
Voltage Ratio: 161 kV-4.16 kV
Vector Group: Delta-Wye
Low Voltage Winding Two (2) 2.5% above and
Taps (off-load): Two (2) 2.5% below rated volts
Impedance: 6.0% on 15 MVA base (nominal)
Average Winding 65(degree)C maximum above average ambient
Temperature Rise: temperature of 30(degree)C with a maximum ambient
temperature of 40(degree)C
16
<PAGE>
High Voltage Winding
BIL: 650 kV
Low Voltage Winding
BIL: 75 kV
High Voltage Bushing
CTs: Three (3) per phase
Low Voltage Neutral
Bushing CT: One (1)
Accessories:
o Tank cover-mounted high voltage bushings with provisions for
connection to overhead lines.
o Nitrogen blanketing system or sealed bladder system, if a nitrogen
blanketing system is utilized, an annunciator will be provided for
low gas pressure.
o One (1) air-filled junction box for the connection of 5 kV power
cable on the low voltage side of the transformer.
o Fault pressure relay, Device 63 PT.
o Thermal relay, Device 49.
o Oil temperature gauge with alarm contacts.
o Liquid level gauge with alarm contacts.
o Pressure relief device with alarm contacts.
o Pressure/vacuum gauge. Top filter-press connection.
o Lower filter press connection and drain valve.
o Stainless steel nameplate.
o Grounding pads.
o Lifting lugs.
o Handhole.
4.16 kV Neutral Grounding Resistor
One (1) per Outdoor, stainless steel, neutral grounding
transformer resistor, to ground the 4.16 kV neutral of each
Unit Auxiliary transformer is provided. The
resistor is rated and equipped as follows:
Rated Voltage: 2400 V, line-to-neutral
Rated Voltage: 1000 A for 10 seconds
Resistance: 2.4 ohms (nominal)
Accessories:
o Grounded safety screen enclosure.
o Standoff insulator and entrance bushing with all necessary hardware
and terminating material.
4.16 kV Station Auxiliary Switchgear
One (1) Double-ended line-up of indoor, metal-clad, vacuum
switchgear to supply various medium voltage loads
throughout the power plant is provided. The
switchgear is rated and equipped as follows:
Main Bus - One (1) lot. Three-phase, three-wire,
copper bus rated 4.16 kV 3,000 amperes, 60 Hz,
braced for 350 MVA short-circuit duty.
17
<PAGE>
Main Circuit Breaker - Two (2), main incoming
circuit breaker, rated 4.16 M 3,000 A continuous,
350 MVA interrupting duty and provided with the
following accessories:
- Three (3) window type current transformers
rated 3,000 A, bus side.
- Six (6) window type current transformers
rated 3,000 A, line side.
- Three (3) inverse time overcurrent relays,
Device 51.
- One (1) residually-connected neutral
overcurrent relay, Device 51 N.
- One (1) transformer neutral overcurrent
relay, Device 51 TN.
- One (1) circuit breaker control switch with
red and green open/close indication.
- Three (3) transformer differential relays,
Device 87 AT.
- One (1) transformer differential lockout
relay, Device 86 AT.
- One (1) fused drawout potential transformer
rated 4200-120 V, connected line-to-line,
open delta, on the incoming line.
- One (1) undervoltage relay, Device 27, with
timer, Device 62.
- One (1) multi-meter.
Induction Motor Controllers - Quantity as
required, rated 4.16 kV, 1200 A continuous, 350
MVA interrupting duty and provided with the
following accessories:
- Three (3) window type phase current
transformers.
- One (1) window type ground sensor current
transformer.
- One (1) control power transformer, ratio
4160/120 V.
- One (1) multi-function solid-state motor
protective device.
- One (1) single-phase ammeter with phase
selector switch.
- One (1) local trip switch.
- Provisions for remote control.
Transformer Feeders - Four (4), rated 4.16 kV,
1250 A continuous, 350 MVA interrupting duty and
provided with the following accessories:
- Three (3) window type phase current
transformers.
- One (1) window type ground sensor current
transformer.
- One (1) control power transformer, ratio
4160/120 V.
- Three (3) instantaneous and inverse time
overcurrent relays, Device 50/51.
- One (1) instantaneous ground sensor relay,
Device 50 G.
- One (1) single-phase ammeter with phase
selector switch.
- Provisions for remote control.
DC Control Power - Control Power is supplied at
125 V dc for breaker controls.
480 V Station Switchgear
Two (2) Indoor, double-ended line-up of low voltage
circuit breaker is provided with bus-tie breakers
to service low voltage auxiliary loads associated
with the power plant. Each unit substation is
rated and equipped as follows:
Incoming Section
Each 480 V switchgear is directly connected
through a main
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circuit breaker to the secondary of each 4160/480
V switchgear transformer.
Transformer Section
Four (4) indoor, air-cooled cast coil or dry-type
power transformers, throat-connected to the
incoming section of the low voltage switchgear,
rated and equipped as follows:
Rated kVA: (as required by 480 V load) kVA
No. of Phases Three (3)
Frequency: 60 Hz
Cooling Class: AA/FA
Voltage Ratio: 4.16 kV-480 V
Vector Group: Delta-Wye
High Voltage Winding
Taps (off-load): +5.0%, +2.5%, 0%, -2.5%, -5.0%
Impedance: 5.75% (nominal)
Winding Temperature
Rise: 150(degree)F
Hot Spot Temperature 65(degree)C above maximum ambient temperature of
Rise: 40(degree)C.
High Voltage Winding
BIL: 30 kV
Low Voltage Winding
BIL: 10 kV
Accessories:
o High voltage air terminal chamber for the termination of the
incoming 5 kV cable
o Flanged, throat connections to the low voltage switchgear
compartment.
o Heaters and thermostat.
o Cooling fans.
o Stainless steel diagrammatic nameplate
o Grounding pads.
o Lifting lugs.
o Handhole
Low Voltage Switchgear Section
Two (2) double-ended line-ups of indoor, low voltage power switchgear, to
service various loads which are associated with the operation of the power
plant are provided. The switchgear is rated and equipped as follows:
Main Bus - Two (2) lot copper main bus rated 3200 A continuous 480
V, 3-phase, 4-wire, 60 Hz, braced for 65,000 A RMS symmetrical
short-circuit duty.
Main Circuit Breakers - Four (4) low voltage, drawout, power circuit
breakers, 3200 A, electrically-operated, with solid-state trip
device, including long time, short time, and ground fault
protection.
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Feeder Circuit Breakers - Twelve (12) low voltage, drawout, power
circuit breakers, 800 A, manually-operated, all with solid-state
trip device, including long time, short time, and ground fault
protection.
Accessories:
Compartment strip heaters, rated 240 V ac, single-phase, operating o at 120 V
ac, single-phase.
o Test set for circuit breaker solid-state trip devices.
o Four (4) 480 V - 120 V bus potential transformers, connected
open-delta.
o Four (4) single-phase bus voltmeter with phase selector
switch.
o Four (4) bus undervoltage detection relay.
o Four (4) single-phase indicating ammeter with phase selector
switch.
Motor Control Centers
One (1) lot of Motor Control Centers (MCC) housed in indoor enclosures are
provided. These MCCs provide control of the various motor loads 250 hp and below
for the operation of the plant and cooling tower equipment.
The MCC main buses are rated 480 V, 3-phase, 4-wire, 60 Hz and 800 A,
continuous.
Motor starters are a combination magnetic, full voltage, non-reversing and
reversing, and are provided with molded-case circuit breakers for branch circuit
overcurrent protection. Thermal overload protection is provided by thermal
overload heater/relays. Each starter is equipped with indicting lamps and a
"hand/off/auto" control selector switch. Starters intended only for manual
control are provided with start/stop push buttons in lieu of the selector
switch.
Feeder circuit breakers are installed in the MCCs as needed to supply loads not
requiring the use of a motor starter.
125 V DC Station Battery
One (1) lead-acid stationary storage battery, to provide dc power to the plant
control and protection systems, is provided. The battery is rated and equipped
as follows:
Voltage: 125 V dc
No. of Cells: 60
Standard Battery Accessories are provided including a Steel Rack.
125 V DC Distribution Board
One (1) 125 V dc distribution board is provided and equipped with a main
incoming, fused disconnect switch, a two-wire bus system sized for the full
current capability of the battery, and various two-pole feed circuit breakers.
Station Battery Chargers
Two (2) full capacity battery chargers are provided to supply non-grounded dc
power to the dc loads under normal operating conditions. Each battery charger
operates on 480 V, three-phase, ac power. The battery charger float charges the
unit battery while simultaneously supplying power to the dc loads. The battery
operates ungrounded. A ground detection scheme is provided to detect ground on
either polarity of the 125 V dc battery system for annunciation.
Under abnormal or emergency conditions, the battery system will supply dc power
to the dc loads and the Uninterruptible Power Supply System. Recharging of the
discharged battery will occur whenever 480 V, ac power becomes available.
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The 125 V dc battery system is sized to provide full-load power for safe plant
shutdown after loss of ac power.
Uninterruptible Power Supply System
One (1) solid-state, uninterruptible power supply (UPS) system for the supply of
critical ac power to various components of the plant control system is provided.
The UPS system will consist of the following:
o One static inverter, rated for a 120 V, single-phase, 60 Hz output.
o One (1) static transfer switch, offering instantaneous transfer of
the critical load from the inverter to a standby supply.
o One (1) manual bypass switch for maintenance of the system.
o One (1) isolation transformer for the standby supply.
o One (1) UPS distribution panel.
Cathodic Protection System
One (1) lot cathodic protection equipment for the combined cycle plant is
provided in accordance with applicable NACE International Standards. The system
shall consist of the following:
o Sacrificial anode protection of the steam turbine condenser water
box.
o Based on soil resistivity testing, a protection system of
sacrificial or impressed current types for buried piping or
structures.
Low Voltage AC Panelboards
One (1) lot distribution panelboards for the supply of various low voltage loads
throughout the combined cycle power plant is provided. Panelboards are
wall-mounted and include incoming main circuit breakers. Feeder circuits are fed
from a combination of one, two, and three-pole molded-case circuit breakers.
Electrical Cable
One (1) lot copper conductor power cable 600 V and 5 kV is provided for the
distribution of power throughout the power plant. Cable is single conductor with
flame retardant EPR insulation. Shielding is provided on 5 2 kV cable only.
Copper conductor control cable, 600 V, single and multi-conductor type, for the
interconnection of the electrical equipment, pressure switches, flow switches,
and protective devices for control of the power plant equipment. Cable is
multi-conductor, with flame retardant EPR insulation. Instrument and
thermocouple cable are twisted, shielded pairs. The minimum conductor size will
be 16 AWG, except for special (non-power) prefabricated cables. Electrical cable
connectors will utilize non-aluminum materials.
Electrical Conduit and Tray
One (1) lot Raceway System is provided to provide support and protection for
electrical power and control circuits between various pieces of equipment,
devices, and cabinets. A general description of the various components within
the Raceway System is included below:
o Cable Tray - The cable tray provides support to electrical cable
which is routed throughout the plant either directly to equipment or
to areas of concentrated electrical loads. Galvanized steel or
aluminum open rung cable tray is used. Tray covers are used in
outdoor installations and top tray below walkways. Medium voltage
cable tray will be limited to 30 percent cable fill, 600V power
cable tray will be limited to 40 percent cable fill, and
control/instrument cable tray will be limited to 50 percent cable
fill.
o Conduits - Conduits are used to extend circuits from cable trays,
cable trenches, manholes, wireways to equipment or cabinets, and for
circuits between equipment and cabinets. Rigid galvanized steel
(RGS) above ground or PVC below ground conduit is used for all
circuits except lighting.
o Duct Bank - Underground duct banks are used to route cables to
remote areas where overhead tray or conduit cannot be used.
Ductbanks will have a minimum of 10 percent spare tubes at the
completion on the project.
o Wireways - Wireways provide an advantageous wiring transition
between power panels or other groupings of equipment. Wireways are
oil tight, metallic wiring enclosures with hinged covers.
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o Junction Boxes - Junction boxes (terminal boxes) and pull boxes
provide access to the conduit system, serve as a transition from one
type of raceway to another, and serve as circuit and raceway
collection points.
o Components of the Raceway System separate different types of cables
to avoid electromagnetic interference as required by equipment
manufacturers.
Station Grounding Material
One (1) Lot Station grounding material is provided consisting of the following:
o Bare Copper Cable - Copper ground cable of adequate size for station
ground grid and connection of electrical and other
equipment/structures to the grounding grid. Nominal size: 4/0
(minimum) AWG copper.
o Ground Rods - Copper-clad steel ground rods will be installed in the
ground grid to establish a low resistance station grounding system.
o Connectors - Above-grade connections to equipment will utilize
compression-type connectors and bolted terminals.
All below-grade connections between grounding conductors or between ground
conductors and ground rods or between grounding conductors and structural steel
are made using an exothermal welding process which fuses the two members
together.
A ground grid system consisting of bare stranded copper conductors connected to
copper-clad ground rods is installed to provide a low resistance path to ground
for fault currents, lightning strikes, and other electrical current surges. The
ground grid is buried beneath and around all major plant buildings and
structures. The grid will be arranged in a rectangular pattern with spacing
between conductors determined by safe step potentials. The number, location, and
depth of the ground rods is determined by the soil resistivity and subsurface
structural properties of the plant site.
Remote smaller structures have a ground loop with ground rods buried around the
building perimeter. Two bare ground conductors are buried along the entire
length of all below grade duct banks if any duct banks are required. These
ground conductors help reduce the overall grid resistance and are used to
connect the remote grids to the main plant grid. All on-site areas are connected
to the plant ground grid with a minimum of two connections. The ground grid will
be buried around the outside of the plant area and connected to the overall
ground grid. The site fencing will be appropriately grounded.
Bare copper ground "stingers" are exothermally welded to the grid and extended
through the building floor slabs to electrically connect the ground grid to
building steel, support steel, large motors, electrical switchgear, motor
control centers, and other selected equipment. Sensitive electronic cabinets are
grounded in accordance with the manufacturer's instructions. This generally
requires a separate insulated ground conductor between the cabinet isolated
ground bus and the ground grid.
A copper grounding conductor is installed the entire length of the cable tray,
racks, and wireways. Ground conductor for cable trays is bolted to each tray
section. The conductor is connected at various locations to the ground grid or
ground loop.
Lightning Protection
One (1) Lot Lightning protection system for building structures, transformers,
associated equipment, and tanks is provided in accordance with the requirements
of the Lightning Protection Code, NFPA No. 78.
Distributed Control System
The Distributed Control System shall include the following equipment.
Distributed I/O cabinets containing the system input/output equipment and
wiring terminations for process sensing and control equipment interface.
These I/O cabinets will be located throughout the plant in areas of high
concentration of field equipment that interfaces with the DCS. All I/O
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cabinets shall be powered from the plant DC Power Supply System or the
uninterruptible Power Supply System.
Distributed processing unit cabinets containing the redundant processing
units, data highway communications equipment, and power supplies.
Communication interfaces between the DCS and proprietary control systems
furnished with major equipment packages.
Redundant data highway to provide communication between the various
components of the DCS. The redundant data highway cables will be routed
through separate raceway systems to provide proper isolation.
Operator control stations, each comprised of color CRTs, a keyboard, and a
cursor control (trackball or mouse), to provide the normal interface
between the operator and the plant processes and equipment being
controlled or monitored. Alarm functions will also be displayed on these
CRT units.
Printers to provide the operator with a hard copy record of logs, reports,
system events, and CRT displays. One printer is dedicated to
sequence-of-events logs.
Engineer/Programmer's work station containing the CRT based operator
station to provide the interface between the plant engineer and the plant
processes and equipment for control system tuning, system program
modification, and CRT graphic display development. A printer will also be
located on the console to provide the engineer logs and special reports,
and documentation system programming changes.
Facilities for historical storage and retrieval (HSR) with the capacity
for trending input points will be provided. Both analog values and digital
status information will be stored. Each data point will have an
individually selectable collection frequency. Summary reports will be
stored in the HSR for future retrieval.
Emergency backup hard-wired control switches, lights, and meters for
critical functions, including generator field breaker control and key
turbine generator trip functions.
I2.3.3 Protective Relaying and Metering
The following general requirements apply to all protective relaying
applications:
o The protective relay system will be designed to remove or alarm abnormal
operating occurrences occurring on equipment designed for electrical power
generation, voltage transformation, energy conversion, and transmission
and distribution of electrical power.
o All protective relaying applications will limit damage to faulted
equipment.
o All protective relaying applications will minimize possibility of fire or
explosion.
o All protective relaying applications will minimize hazard to personnel.
o The protective relaying system will be a coordinated application of either
individual relays, multifunction relays, or a combination of individual
and multifunction relays. All protective relays will be selected to
coordinate with protective devices supplied by manufacturers of major
equipment and the thermal limits of electrical conductors and electrical
equipment, such as transformers and motors.
o Secondary current produced by current transformers will be in the 5 ampere
range, and voltage signals produced by voltage transformers will be in the
120 volt range.
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I2.3.3.1 Generator Protective Relays
Protective relay packages will be provided to minimize the effects from the
following faults and malfunctions. Minimum level of protection and list of
expected relay devices are noted below:
o Generator phase faults.
o Generator stator ground faults.
o Stator open circuits and unbalanced currents.
o Loss of excitation.
o Backup protection for external system faults.
o Reverse power.
o Generator potential transformer circuit monitoring.
o Underfrequency/overfrequency.
o Inadvertent energization of the generator from the primary power
system.
Equipment furnished with the generators static excitation equipment will provide
the following additional protection:
o Underexcitation.
o Overexcitation.
o Generator field ground faults.
o Excessive volts per hertz.
Additionalgenerator protective monitoring equipment will be provided to protect
against the following:
o High-bearing temperatures.
o Overspeed conditions.
o Excessive vibrations.
o Generator overheating.
The generator protective relay packages are discussed in the following
paragraphs. The functions may be part of a solid-state multifunction relay
module or may be discrete relays. Primary relaying is fully duplicated per the
RFP:
o Generator Differential Relay (Device 87G). A generator differential
relay will provide primary generator protection against three-phase
and phase-to-phase faults within the generator. This relay will not
detect ground faults within its zone of protection. Device 87-G1
relay will trip the generator lockout relay to remove all sources of
fault current to the generator.
o Generator Ground Relays (Device 59G). Device 59-N will be a low
voltage pickup, overvoltage relay which will sense voltage across
the generator neutral grounding transformer secondary resistor when
a ground fault occurs in the generator, nonsegregated phase bus
duct, generator transformer low voltage windings, or the surge
protection and potential transformer equipment.
o Negative Sequence Relay (Device 46). The negative sequence relay
provides protection against unbalanced phase currents which result
from unbalanced loading, unbalanced faults, a turn-to-turn winding
fault, and an open circuit. Negative sequence currents exceeding the
generator allowable limits result in overheating of the generator
rotor.
o Loss-of-Field Relay (Device 40). The loss-of-field relay complete
with timer will provide protection against thermal damage caused by
underexcitation and loss-of-field. This relay provides backup
protection for excitation system protective devices furnished with
the generator. This relay will be connected to current transformers
which are independent of the excitation system and will trip the
generator lockout relay.
o Reverse Power Relays (Device 32). Reverse power relay (Device 32)
will provide protection of the turbine generator by detection of
reverse power flow and motoring of the generator. Device 32 will
initiate the tripping of generator breaker and excitation.
o Voltage Balance Relays (Device 60). Voltage balance relay (Device
60) will monitor potential transformer circuits to the generator
voltage regulator and protective relays. Upon loss of relaying
potential, Device 60 will disable the loss-of-field relay (Device
40) to avoid false tripping of the unit. Upon loss of potential to
the voltage regulator, Relay 60 will transfer the voltage regulator
from the automatic to manual mode of operation. An alarm will be
actuated upon loss of either potential.
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o Underfrequency Relays (Device 81). Underfrequency relays (Device 81)
will provide protection of the turbine generator by detection of
underfrequency conditions. Each relay will initiate tripping of the
generator breaker at a set frequency.
o Overvoltage and Undervoltage Protection (Devices 27 and 59). The
voltage regulator and static excitation system include interlocks
and protective circuits to prevent operating the generator beyond
its design limits. An undervoltage relay (Device 27) and an
overvoltage relay (Device 59) will alarm if the voltage regulator
fails to maintain voltage within design limits.
o Field Ground Fault Protection (Device 64F). Grounds on the generator
field will be alarmed by Device 64F.
o Generator Voltage Relay (Device 51V). This relay will provide
protection against external system faults. This relay will trip the
generator breaker after a time delay.
Generator lockout relays will be used to receive signal inputs from protective
relays and to provide the contacts needed to initiate protective action. All
lockout relays will have a manual reset feature which will require an operator
to manually reset the lockout relay prior to returning the affected equipment to
service.
I2.3.3.2 Power Transformer Relays
Generator Transformer. The generator transformer is protected against the
effects of the following conditions:
o Phase faults.
o Ground faults.
o Sudden pressure.
o High winding temperature.
This protection will be provided by the following relays which are discussed in
the following paragraphs.
Device 87 T is a differential relay that provides transformer primary protection
by detection of three-phase and phase-to-phase faults in the generator
transformer low voltage delta-connected windings, and three-phase,
phase-to-phase, and phase-to-ground faults in the generator transformer high
voltage wye-connected windings. Per the RFP, a redundant 87T is furnished to
fully duplicate the primary relay protection. This device will trip a lockout
relay for a fault in its zone of protection which includes the generator
transformer and phase bus duct.
Device 51-TN will provide sensitive backup protection for ground faults in the
external system. This relay will actuate a generator lockout relay.
A rapid increase in pressure within the transformer tank associated with an
internal fault will be detected by a sudden-pressure relay, Device 63T. An
unsafe winding temperature will be detected by a thermal relay, Device 49.
Devices 63T and 49 actuate the generator lockout relay through an auxiliary
tripping scheme designed to prevent false trips. These relays will be furnished
with the transformer.
Loss of cooling and resulting high oil temperature will be alarmed.
Auxiliary Transformer. The auxiliary transformer is protected against the
effects of the following conditions:
o Phase faults.
o Ground faults.
o Overloads.
This protection will be provided by the following relays which are discussed in
the following paragraphs.
Device 87 provides primary protection for the high voltage and low voltage
windings of the auxiliary transformers and for the cable connecting each low
voltage winding to each incoming main breaker in the
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plant metal-clad switchgear lineups. These relays offer protection against
phase-to-phase and three-phase faults. Device 87 is relatively insensitive to
ground faults on the secondary side of the transformer should the fault current
magnitudes be less than the maximum available ground fault current.
One time overcurrent relay (Device 51G) is connected to the bushing current
transformer on the neutral of each low voltage winding of the main auxiliary
transformer. Each relay provides primary overload protection to its neutral
winding's resistor for ground faults on the switchgear buses or on feeders
emanating from the switchgear lineups. Each relay also provides backup
protection for ground faults in the transformer low voltage winding, in the
cable, on the switchgear buses, or on feeders emanating from the switchgear
lineups.
Lockout relays will be used to receive signal inputs from protective relays and
to provide the contacts needed to initiate protective action. The lockout relays
will have a manual reset feature which will require an operator to manually
reset the lockout relay prior to returning the affected equipment to service.
I2.3.3.3 Metal-Clad Switchgear Relays
The protective relays used in the 4,160 volt metal-clad switchgear lineup are
discussed in the following paragraphs.
Incoming Breaker. The incoming transformer breaker will be provided with time
overcurrent relays (Device 51) and a time overcurrent ground detection relay
(Device 51 N). Device 51 would detect and trip the respective switchgear breaker
for sustained overloads and short-circuit currents on the switchgear bus. These
relays provide backup protection for faults on feeders emanating from the
switchgear lineups. Device 51N is residually connected to switchgear current
transformers (CXFs) and provides primary protection for ground faults on the
switchgear bus and backup protection for ground faults in feeders emanating from
the switchgear lineup. The medium voltage switchgear bus will be provided with
an undervoltage relay (Device 27) which will, when bus voltage drops to a preset
level, trip load feeder circuit breakers.
Secondary Unit Substation (SUS) and Motor Feeders. The secondary unit substation
transformer and each single-speed induction motor will be protected by a
solid-state motor protection relay (MPR). The solid-state MPR will provide
primary motor, SUS feeder, and cable protection. It will provide as a minimum
the following functions: three-phase time overcurrent (51), three-phase
instantaneous overcurrent (50), zero sequence ground overcurrent (50G), and
phase imbalance (46).
I2.3.3.4 480 Volt Secondary Unit Substation Relaying
Overload and fault protection for loads connected to the 480 volt secondary unit
substations (SUS) will be provided by Solid-State Trip Devices (SSTD) which are
an integral part of the drawout type air circuit breakers.
Breakers supplying motors or other devices which do not require coordination
with downstream trip devices will have adjustable long-time and instantaneous
elements for phase protection.
Main breaker and breakers supplying motor control centers (MCCs) or other loads
which contain trip devices will have adjustable longtime and short-time SSTD
elements for phase protection. The pickup point and time settings will be
adjustable to allow for proper coordination with all downstream trip devices.
The 480 volt system is high resistance neutral grounded. A ground fault will be
detected and alarmed.
I2.3.3.5 480 Volt Motor Control Center Protection.
Each magnetic starter within an MCC which supplies power to a motor will be
equipped with a magnetic-only molded-case circuit breaker and a bimetallic
thermal overload element in the starter to protect motors against over-load.
Manual reset of the overload is required.
I2.4 Civil-Structural Systems
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I2.4.1 Site Subsurface Investigation
Subsurface investigation of the site, has been conducted using a program of
field investigation, laboratory testing, and engineering analysis which defines
the critical geotechnical characteristics of the site and the parameters used in
the design and proportioning of the foundation systems. Based on the Subsurface
Investigation Data Report included in Attachment I-1, auger cast piling for
heavily loaded foundations such as the combustion turbine, steam turbine, HRSG,
and step-up transformer is included.
I2.4.2 Site Topography Survey
A site survey will be performed from benchmarks provided by the Owner to
identify existing contours, features, and facilities as they exist prior to
startup of the work, and to establish baselines for locating and controlling the
work. Underground utilities, if any, are also identified.
I2.4.3 Clearing and Grubbing
Clearing, collecting, and moving off-site any standing vegetation or organic
debris that is present on the undeveloped site, within the area designated for
earthwork, is included. Materials not suitable for reclamation, salvage, or for
any engineered purpose are disposed of in accordance with local environmental
requirements.
I2.4.4 Foundation Excavation
Existing soils are removed to expose the grade at which reinforced concrete mat
foundations are placed. Bearing grades are to be kept dry. Excavation closure is
accomplished using selected, graded materials installed to the required
compaction, moisture, and density. Most soil-supported foundations and slabs on
grade require foundation excavations less than 3 feet deep. A few foundations
require excavations up to 13 feet.
I2.4.5 Backfill
Backfill is performed for foundations, piping, cable trenches, and other
underground structures and utilities. Excavated material is used for backfill
with any excess hauled to a disposal location within 1 mile of the site.
I2.4.6 Surface Drainage System
A surface drainage and culvert system is provided for the site to direct surface
runoff, not at risk of contamination from potential spills of fuel, oils, and
coolants, away from equipment and structures by appropriate grading and sloping.
Unlined swales and ditches collect, combine, and discharge the run-off flow
naturally to the wet weather stream crossing the northeast corner of the site.
I2.4.7 Sanitary System
A sanitary system, with packaged lift station, sized to service the plant, is
provided and tied into the municipal sewer system at the site boundary.
I2.4.8 Roads
Aggregate surfaced roads are provided as shown on the Plot Plan. Roads are 12
feet wide. The roads consist of 8-inch compacted gravel base over a compacted
existing sub-base.
I2.4.9 Fencing/Gates
Fencing, with gates, is provided around the perimeter of the project site. In
addition, fencing is included around the switchyard to separate the switchyard
from the balance of plant. Posts and struts are galvanized steel at maximum
spacing of 10 feet. The height of the galvanized chain link fabric is 7 feet
topped with three strands of galvanized barbed wire. One of the plant entrance
gates will be a motor operated cantilever slide gate. This gate will be
monitored from the control room, a closed circuit television camera, and by
voice communications. The gate will be operated remotely from the control room
and locally by electronic access cards.
I2.4.10 Concrete
Structural concrete and reinforcing steel are provided for all foundation
components including footings,
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grade beams, walls, and all above-grade reinforced concrete structures such as
firewalls, elevated slabs, and concrete pavement. Also included are concrete
work for tank vaults and encased conduits at all bearing grades. Above ground
piping not on a structural steel pipe rack is placed on concrete sleepers as
required by final design.
I2.4.11 Embedments
Steel fixtures and anchor bolts are accurately set to required elevation,
projection, and line for the purpose of aligning, guiding, setting, and securing
equipment onto or with respect to finished concrete foundations. Included are
bolts, anchor blocks, jacking posts, and sills which shall be firmly tied and
secured in position to required level and tolerance such that concrete placement
will not disturb their position.
I2.4.12 Structural Steel
Structural steel for building frames, platforms, stair towers, embedments, and
other general structural applications are fabricated in accordance with
recognized standards with material having a yield strength of at least 36,000
psi. Steel is galvanized or receives grit blast surface preparation before shop
application of the fabricator's standard prime paint system. Welding materials,
procedures, workmanship, and inspection are held to the designated codes, as are
erection procedures and tolerances. Field connections are high strength
structural bolts installed in accordance with AISC standards.
I2.4.13 Multi-Purpose Building
The multi-purpose building houses the water treatment equipment, control room,
electrical equipment, warehouse, shop, offices, kitchen/lunch room,
conference/training room, and locker rooms with showers and sanitary facilities.
The steam turbine is housed in a separate outdoor enclosure provided by the
steam turbine manufacturer.
The structure is approximately 100 foot by 160 foot pre-engineered metal
building with an 18-foot eave height. The wall panel is 26 gauge thick,
preformed galvanized steel with 4 inches of fiberglass insulation. The inside is
finished with 26 gauge thick steel liner panels. The roof is 24 gauge thick,
preformed, galvanized steel, standing steam metal panels with 6 inches of
fiberglass insulation.
Interior partitions are of drywall construction. The drywall is finished
painted. Shower walls are covered with glazed ceramic tiles.
The floors within the building are generally trowel finished concrete. The
floors in the control room, locker rooms, offices, kitchen/lunch room, and
conference room are covered with vinyl floor tile. Showers floors are covered
with ceramic mosaic tile.
The ceilings within the building are generally open. The ceilings in the control
room, locker rooms, offices, kitchen/lunch room, and conference room have
suspended acoustical panels.
The control room, locker rooms, offices, kitchen/lunch room, and conference room
will be air conditioned.
I2.4.14 Pipe Rack
Power block piping and electrical cable is routed and supported on a structural
steel pipe rack located as shown on the site arrangement.
I2.4.15 Crushed Stone Surfacing
The power block area enclosed by the new road is finished with crushed stone.
Crushed stone surfacing is 6 inches thick and bladed dense.
I2.4.16 Landscaping
Areas disturbed during construction outside of the crushed stone limits are
forked and aerated to a depth of 6 inches prior to being overspread with a 4
inch thickness of prepared topsoil. Turf cover is then installed.
28
<PAGE>
I2.4.17 Storm Water Erosion and Pollution Prevention
Storm water will be routed via ditches and culverts to natural drainage and the
wet water stream located northeast of the site. Before construction begins, a
silt fence will be installed around the north and east site boundaries to trap
suspended sediment before it exits the site. The silt fence will consist of a
filter fabric buried 6 inches below grade and extending 2 feet above grade.
Initial construction will remove all significant vegetation. Topsoil will be
removed and stockpiled for finished grading and site restoration. Drainage ways
will be constructed concurrently with initial clearing activities. Diversion
ditches and storm water inlets will be equipped with straw bale dikes to aid in
minimizing the amount of sediments flowing to the silt fence at the site
boundary.
In general, all erosion and sediment control measures will be checked weekly and
after each significant rainfall event. Required repairs will be made
immediately. Sediment deposits at barriers will be removed when the deposit
depth reaches approximately one-half the height of the barrier.
The permanent erosion and sediment control system will be installed as early as
possible during construction and will remain in service throughout the life of
the plant. The primary components of this system include established vegetation,
aggregate surfacing, and paving.
I2.5 Chemical Systems
I2.5.1 (Not Used)
I2.5.2 Chemical Injection System
The Chemical Injection System consists of cycle chemical feed equipment and
circulating water chemical feed equipment.
The cycle chemical feed equipment supplies water conditioning chemicals to each
condensate system and the HRSGs. The cycle chemical feed system consists of
chemical solution tanks, solution mixers, pumps, piping, instrumentation, and
controls.
Phosphate is fed to the HP and IP boiler drums to maintain desired boiler water
pH, inhibit corrosion, and to react with any hardness present for subsequent
removal in the blowdown process. The phosphate feed equipment for each HRSG
consists of one (1) solution tank with one (1) mixer and three (3) metering
pumps with manual stroke positioners. A dilute solution of sodium phosphate is
manually prepared in the phosphate solution tank. One (1) pump each is utilized
for the HP and IP and LP steam drums with a common spare. The injection rate of
each pump is manually adjustable. The phosphate converts the calcium and
magnesium salts to their respective phosphate compounds which are removed by the
HP and IP steam drum blowdowns.
The oxygen scavenger injection and the amine injection feed equipment for each
block consists of one (1) solution tank and two (2) 100 percent metering pumps
with automatic stroke positioners. Each dilute solution is manually prepared in
the solution tanks. One (1) pump from each system feeds to the condensate pump
discharge with the other pump acting as a spare. The oxygen scavenger minimizes
corrosion by reducing the dissolved oxygen levels in the condensate system.
Control of oxygen scavenger feed is in proportion to condensate flow. The amine
maintains a high pH level. Control of the amine feed is in proportion to the
specific conductance of the condensate after chemical feed.
Hydrazine solution will be used as the oxygen scavenger and ammonia solution
will be used as the amine during startup, performance testing, and during
drinking water or steam quality testing.
The circulating water chemical feed equipment supplies water conditioning
chemicals to the circulating water. The water conditioning chemical controls
bacterial growth which affects condenser surface transfer and interferes with
cooling water flow and inhibitor sealing or corrosion.
29
<PAGE>
Sodium hypochlorite solution is fed to the circulating water intake structure on
a shock basis to minimize biological fouling. The sodium hypochlorite subsystem
consists of one (1) bulk storage tank with two (2) metering pumps with manual
stroke positioners and one hypochlorite diffuser. The sodium hypochlorite
solution is fed to the intake structure to protect the cooling water side of the
condenser and circulating water system from biological fouling. Control of the
shock sodium hypochlorite feed is manual, based on the chlorine residual desired
in the circulating water at the condenser outlet. The hypochlorite subsystem is
designed for 5 ppm shock chlorination two to three times per day for a total of
one hour per day.
A circulating water inhibitor feed skid is provided to feed corrosion or scale
inhibitors to the circulating water system. The circulating water inhibitor feed
skid will consist of one (1) solution tank and two (2) 100 percent metering
pumps. A dilute solution is manually prepared in the solution tank. One pump
feeds inhibitor to the cooling tower basin with the other pump acting as a
spare.
A dilute solution of sulfuric acid is fed to the cooling tower basin to control
the level of M-Alkalinity in the circulating water to approximately 150 mg/l.
Concentrated acid from the acid storage tank located near the cycle makeup
treatment equipment will be diluted and piped to the cooling water. The pH of
the circulating water is continuously monitored.
I2.5.3 Sampling and Analysis System
The Sampling and Analysis System provides a means to monitor the performance of
the steam-condensate-feedwater cycles, to monitor the quality of various process
fluids, and to provide sufficient data to operating personnel for detection of
any deviations from control limits so that corrective action can be taken.
The system provides conditioning of samples by pressure and temperature
reduction. It measures flow, temperature, pressure, cation conductivity,
specific conductance, and pH.
Samples are taken from various points in each unit and are routed to a centrally
located sample panel dedicated to that unit. At the panel, pressure reduction is
accomplished by pressure reducing valves. Temperature reduction is accomplished
by sample coolers of the shelf and tube design. A grab sample is provided for
each sample for wet chemical analysis in a laboratory.
The samples are directed to automatic analyzers and the results displayed as
required. The following samples are taken and automatically monitored by the
listed analysis:
o Condensate makeup: grab sample only.
o Condensate pump discharge: grab sample only.
o Condensate after chemical feed: specific conductance, pH.
o HP saturated steam: specific conductance, cation conductivity.
o HP blowdown: specific conductance, pH.
o IP saturated steam: specific conductance, cation conductivity.
o IP blowdown: specific conductance, pH.
o LP saturated steam: specific conductance, cation conductivity.
o LP blowdown: specific conductance, pH.
o Quick disconnect survey: specific conductance, cation conductivity,
and pH.
Recording is accomplished by the DCS for display in the main control room.
Sample lines and valves are designed in accordance with requirements of systems
from which they originate. All sampling, delivery, tubing, valves, and the
sample sink are of stainless steel construction to minimize corrosion.
30
<PAGE>
BATESVILLE GENERATING PLANT
SCOPE OF RESPONSIBILITY SUMMARY
- --------------------------------------------------------------------------------
Engineering Activities BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Engineering Design X
- --------------------------------------------------------------------------------
Record Drawings X Conformed to
Construction
- --------------------------------------------------------------------------------
Engineered Equipment Specifications X
- --------------------------------------------------------------------------------
Engineered Equipment Purchase and
Expediting Services X
- --------------------------------------------------------------------------------
Vendor Service Representatives X
- --------------------------------------------------------------------------------
Construction Specifications X
- --------------------------------------------------------------------------------
Environmental Consultant and (1) Permitting Support
Permitting Services X(1) X (BVZ to provide
engineering
information to support
LS Power's permitting.
Design information
will be that normally
developed during
design to facilitate
permitting support and
in the
engineer's normal
format.)
- --------------------------------------------------------------------------------
Obtain Spare Parts Recommendations X
from Equipment Vendors
- --------------------------------------------------------------------------------
Engineering QA & QC Programs X
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Site Activities BVZ LS Power, LLC
- --------------------------------------------------------------------------------
Construction Startup Supervisory Staff X X
- --------------------------------------------------------------------------------
Field Expenses X
- --------------------------------------------------------------------------------
Trailers X BVZ to In agreement with
provide EPC Agreement
trailer
space for 3
LS Power
personnel
- --------------------------------------------------------------------------------
Medical Safety X
- --------------------------------------------------------------------------------
Security X
- --------------------------------------------------------------------------------
Clean-up X
- --------------------------------------------------------------------------------
Offices X
- --------------------------------------------------------------------------------
Furniture X
- --------------------------------------------------------------------------------
Construction Utilities X
- --------------------------------------------------------------------------------
HVAC X
- --------------------------------------------------------------------------------
Telephones X X Each his own
- --------------------------------------------------------------------------------
FAX X X Each his own
- --------------------------------------------------------------------------------
Reproduction X X Each his own
- --------------------------------------------------------------------------------
Commissioning, SU, & Testing Staff X X(1) (1) Operating
Personnel
- --------------------------------------------------------------------------------
Temporary Warehouse Facilities X
- --------------------------------------------------------------------------------
Equipment Receiving X
- --------------------------------------------------------------------------------
Equipment Inspecting X
- --------------------------------------------------------------------------------
Equipment Warehousing X
- --------------------------------------------------------------------------------
Equipment Maintenance X
- --------------------------------------------------------------------------------
Equipment Vendor Contact X
- --------------------------------------------------------------------------------
Construction QA/QC X
- --------------------------------------------------------------------------------
Scheduling X
- --------------------------------------------------------------------------------
Site Survey X
- --------------------------------------------------------------------------------
Geotechnical
- --------------------------------------------------------------------------------
Soil Borings X
- --------------------------------------------------------------------------------
Soils Reports X
- --------------------------------------------------------------------------------
Soils Resistivity X
- --------------------------------------------------------------------------------
Construction Testing
- --------------------------------------------------------------------------------
Soils Compaction X
- --------------------------------------------------------------------------------
Concrete X
- --------------------------------------------------------------------------------
Structural Steel X
- --------------------------------------------------------------------------------
Welding X
- --------------------------------------------------------------------------------
NDT X
- --------------------------------------------------------------------------------
Equipment BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Combustion Turbine Generator X
- --------------------------------------------------------------------------------
Steam Turbine Generator X
- --------------------------------------------------------------------------------
HRSGs X
- --------------------------------------------------------------------------------
Balance of Plant Equipment X
- --------------------------------------------------------------------------------
Spare Parts
- --------------------------------------------------------------------------------
31
<PAGE>
Startup X
- --------------------------------------------------------------------------------
Permanent X
- --------------------------------------------------------------------------------
Special Tools
- --------------------------------------------------------------------------------
Construction X
- --------------------------------------------------------------------------------
Operation X
- --------------------------------------------------------------------------------
Vendor Erection Assistance X
- --------------------------------------------------------------------------------
Vendor Startup Assistance X
- --------------------------------------------------------------------------------
Construction Activities BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Demolition N/A
- --------------------------------------------------------------------------------
Site Work X
- --------------------------------------------------------------------------------
Paving/Surfacing X
- --------------------------------------------------------------------------------
Utilities (Construction) X 178XX
- --------------------------------------------------------------------------------
Fencing X
- --------------------------------------------------------------------------------
Masonry X
- --------------------------------------------------------------------------------
Structural Steel X
- --------------------------------------------------------------------------------
Office Furnishings, Permanent Phones,
etc. X
- --------------------------------------------------------------------------------
Warehouse Fixtures X
- --------------------------------------------------------------------------------
Maintenance Equipment/Machine Tools X
- --------------------------------------------------------------------------------
Pre-Engineered Buildings X
- --------------------------------------------------------------------------------
Piping X
- --------------------------------------------------------------------------------
Valves X
- --------------------------------------------------------------------------------
Plumbing X
- --------------------------------------------------------------------------------
Fire Protection X
- --------------------------------------------------------------------------------
HVAC X
- --------------------------------------------------------------------------------
Equipment Erection X
- --------------------------------------------------------------------------------
Insulation and Lagging X
- --------------------------------------------------------------------------------
Electrical X
- --------------------------------------------------------------------------------
I&C Installation X
- --------------------------------------------------------------------------------
Switchyard X
- --------------------------------------------------------------------------------
Transmission Line X
- --------------------------------------------------------------------------------
Bulk Materials/Commodities X
- --------------------------------------------------------------------------------
Scaffolds X
- --------------------------------------------------------------------------------
Small Tools X
- --------------------------------------------------------------------------------
Consumables X
- --------------------------------------------------------------------------------
Construction Equipment Rental X
- --------------------------------------------------------------------------------
Hydrostatic Testing X
- --------------------------------------------------------------------------------
Systems Flushing and Hydro Waste X
- --------------------------------------------------------------------------------
Lube Oil Flush X
- --------------------------------------------------------------------------------
Steam Blow X
- --------------------------------------------------------------------------------
Chemical Clean HRSG X
- --------------------------------------------------------------------------------
Disposal of chemical cleaning waste X(1) (1) Assume discharge
to the sewer,
off-site disposal
not included
- --------------------------------------------------------------------------------
Meggar & Hipot Cable X
- --------------------------------------------------------------------------------
Rotate Motors X
- --------------------------------------------------------------------------------
Maintenance of Equipment in Temporary
Storage X
- --------------------------------------------------------------------------------
Instrumentation Calibration
- --------------------------------------------------------------------------------
Bench Testing X
- --------------------------------------------------------------------------------
In Line Tests X
- --------------------------------------------------------------------------------
Initial Charge of Lubricants X
- --------------------------------------------------------------------------------
Fuses, Lamps, Filters and other
similar Consumables (During SU,
Commissioning) X
- --------------------------------------------------------------------------------
Initial Charge of Chemicals, Gases
and other similar consumables X
- --------------------------------------------------------------------------------
Mechanical Checkout of Systems X
- --------------------------------------------------------------------------------
Miscellaneous Activities BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Project Labor Agreement N/A
- --------------------------------------------------------------------------------
Bonds
- --------------------------------------------------------------------------------
Payment N/A
- --------------------------------------------------------------------------------
Performance N/A
- --------------------------------------------------------------------------------
Insurance
- --------------------------------------------------------------------------------
Workman's Compensation X X Each his own.
- --------------------------------------------------------------------------------
Employer Liability X X Each his own.
- --------------------------------------------------------------------------------
Comprehensive General Liability X X Each his own.
- --------------------------------------------------------------------------------
Auto Liability X X Each his own.
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
Excess Liability X X Each his own.
- --------------------------------------------------------------------------------
Builder's Risk X LSP to provide
Builder's Risk
insurance,
consistent with EPC
agreement.
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Sales Taxes X If Applicable
- --------------------------------------------------------------------------------
Engineered Equipment X
- --------------------------------------------------------------------------------
Construction Commodities X
- --------------------------------------------------------------------------------
Construction Expendables X
- --------------------------------------------------------------------------------
Master Schedule X
- --------------------------------------------------------------------------------
Monthly Progress Reports X
- --------------------------------------------------------------------------------
Contractors License X If applicable
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Permits and Inspections BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Permits
- --------------------------------------------------------------------------------
Building X
- --------------------------------------------------------------------------------
Zoning/Site Plan Approval X
- --------------------------------------------------------------------------------
Air X
- --------------------------------------------------------------------------------
Water X
- --------------------------------------------------------------------------------
FERC X
- --------------------------------------------------------------------------------
Historical/Arch X
- --------------------------------------------------------------------------------
FAA X
- --------------------------------------------------------------------------------
Erosion Control X(1) X(2) (1) Construction
(2) Operation
- --------------------------------------------------------------------------------
Spill Prevention X(1) X(2) (1) Construction
(2) Operation
- --------------------------------------------------------------------------------
Wet Lands Permit X If required
- --------------------------------------------------------------------------------
Temporary Sewage Disposal X
- --------------------------------------------------------------------------------
Highway X
- --------------------------------------------------------------------------------
Sewage X
- --------------------------------------------------------------------------------
Temporary Water X
- --------------------------------------------------------------------------------
Potable Water X
- --------------------------------------------------------------------------------
Construction Wastes X
- --------------------------------------------------------------------------------
Certificate of Occupancy X
- --------------------------------------------------------------------------------
Plant/Boiler Operation X
- --------------------------------------------------------------------------------
Operating X
- --------------------------------------------------------------------------------
Utility Disconnect X
- --------------------------------------------------------------------------------
Explosives N/A
- --------------------------------------------------------------------------------
Permitting Compliance
Coordination X
- --------------------------------------------------------------------------------
Inspections
- --------------------------------------------------------------------------------
Electrical X
- --------------------------------------------------------------------------------
Plumbing X
- --------------------------------------------------------------------------------
Fire Protection X
- --------------------------------------------------------------------------------
Calibration of Emissions
Monitoring Equipment X
- --------------------------------------------------------------------------------
Calibration of Utility Revenue
Metering X
- --------------------------------------------------------------------------------
Gas Meter X
- --------------------------------------------------------------------------------
Warranties BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Performs Warranty Work X
- --------------------------------------------------------------------------------
Risks and Contingencies BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Schedule Guarantee X
- --------------------------------------------------------------------------------
Plant Performance Guarantees X
- --------------------------------------------------------------------------------
Quantity/Cost Overrun Bulk
Materials/Commodities X
- --------------------------------------------------------------------------------
Quantity/Cost Overrun on Equipment X
- --------------------------------------------------------------------------------
Quantity/Cost Underrun on Bulk
Materials/Commodities X
- --------------------------------------------------------------------------------
Quantity/Cost Underrun on Equipment X
- --------------------------------------------------------------------------------
Noise Abatement X(1) (1) Requires
confirmation by
noise analysis prior
to contract. BVZ to
be allowed credit
for background noise.
- --------------------------------------------------------------------------------
Wage and Labor Productivity X
- --------------------------------------------------------------------------------
Checkout, Startup, Testing, and
Training BVZ LS Power, LLC Remarks
- --------------------------------------------------------------------------------
Checkout Procedures X
- --------------------------------------------------------------------------------
Checkout and Turnover X X(1) (1) Operating
Personnel
- --------------------------------------------------------------------------------
Relay Settings X X(1) (1) Relay settings
for LS Power
transmission scope
- --------------------------------------------------------------------------------
Startup Procedures X
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
Startup of Systems and Plant X X(1) (1) Operating
Personnel and LS
Power Scope
- --------------------------------------------------------------------------------
Performance Testing Procedures X
- --------------------------------------------------------------------------------
Test Equipment X X(1) (1) LS Power Scope
- --------------------------------------------------------------------------------
Performance Test X X(1) (1) Operating
Personnel
- --------------------------------------------------------------------------------
Emission Compliance Testing X
- --------------------------------------------------------------------------------
Performance Test Report X
- --------------------------------------------------------------------------------
Operator Training X X(1) (1) Training for LS
Power scope
- --------------------------------------------------------------------------------
Vendor Operation & Maintenance Manuals X X(1) (1) LS Power Scope
- --------------------------------------------------------------------------------
Operation & Maintenance Personnel X
- --------------------------------------------------------------------------------
Obtain Recommended Spare Parts from
Vendors X
- --------------------------------------------------------------------------------
Permanent Power, Water, Lubricants,
Chemicals, Other Consumables X
- --------------------------------------------------------------------------------
Witness Certification of Emissions
Monitoring Equipment X
- --------------------------------------------------------------------------------
Permanent Power, Fuel, Water for
Commissioning, SU, and Testing X
- --------------------------------------------------------------------------------
34
<PAGE>
EXHIBIT I3
Scope of Services - Infrastructure
TABLE OF CONTENTS
I3.1.0 Terminal Points
I3.1.1 Natural Gas Interconnection
I3.1.2 Process Water Supply
I3.1.3 Waste Water Discharge
I3.2.0 Major Equipment/Systems
I3.2.1 Raw Water System
I3.2.2 Demineralized Water System
I3.2.3 Wastewater Discharge System
I3.2.4 Fire Protection System
1
<PAGE>
I3.1.0 Terminal Points
The following articles identify interfaces and terminal points for the
Contractors scope of supply for utilities and facilities which extend beyond
Project scope. Terminal point locations and conditions are summarized in Table
2-1.
I3.1.1 Natural Gas Interconnection
The Project will interconnect with one or more interstate natural gas
pipelines. Owner will provide pipeline quality gas to site. Owner will be
responsible to provide gas that does not require heaters on site or
filter-separators, or other equipment. Owner to supply gas as described in
Attachment I-5. Contractor will design facility to operate on pipeline quality
gas as described above and will provide scrubbers to ensure the gas as delivered
to site is not affected by the Contractor's piping, and as such, will meet the
combustion turbine manufacturer's requirements. Each of the pipelines under
consideration is located to the west of the Project site.
One or more pipeline laterals will be constructed to the Project site
boundary under a separate contract. The Project Site Interface Drawing
identifies the approximate location of the natural gas metering station to be
constructed by the pipeline company. The minimum natural gas pressure to be
provided by the pipeline is required to be approximately 500 psig at the site
boundary. The Contractor's scope of work includes liquid separation or knockout
drums and piping required to interconnect the Project to the metering station at
the Project site boundary. Pipeline gas conditioning, if required, to be by gas
supplier. The regulating station to maintain the fuel gas pressure within the
limits required for plant operation will be supplied by the Owner.
I3.1.2 Process Water Supply
The process water supply needs for the Project (except potable water
needs) will be pumped to the site via the new water supply pipeline from Lake
Enid. A representative water analyses for water taken from Lake Enid is
indicated in Attachment I-3. Water supply intake structure, pumps, and the water
supply pipeline from Lake Enid to the project boundary will be constructed by
others. The locations of the pumping facilities and the pipeline route are shown
in Figure 8. The Owner has identified on the Project Site and Interface Drawing
the approximate location at which the water supply pipeline will cross the site
boundary. The Contractor's scope of work shall include piping required to
connect the Project with the pipeline at the site boundary.
I3.1.3 Waste Water Discharge
Waste water from the Project, exclusive of sanitary wastes and storm
water, will be discharged via a new outfall to the Tallahatchie River located
approximately one mile northeast of the Project site. The outfall structure and
discharge pipeline from the property boundary to the Tallahatchie River will be
constructed by others. For permitting purposes, separate monitoring will be
performed for cooling tower blowdown and other process waste water
(demineralization waste water, crankwash waste, etc.) with the two streams being
combined prior to discharge. The maximum allowable waste water temperature of
the combined streams, as measured at the site boundary is 90(degree)F. The Owner
has identified on the Project Site and Interface Drawing the approximate
location at which the waste water discharge pipe will cross the site boundary.
The Contractor's scope of work shall include the necessary monitoring equipment
and piping required to connect the Project with the discharge pipe at the site
boundary and sufficient pumping capacity to pump the waste water to the
discharge point at the Tallahatchie River.
2
<PAGE>
Table 2-1
Terminal Point List
- --------------------------------------------------------------------------------
At west site boundary as 0 gpm pumped
shown on Drawing system, 90F
Wastewater 32676-1STA-S1001D, Rev. A. maximum Permit by LSP
- --------------------------------------------------------------------------------
Natural Gas At west site boundary as 0-340,000 Metering station
shown on Drawing lb/hr @500 and associated
32676-lSTA-S1001D, Rev. A. psig minimum instrumentation
- --------------------------------------------------------------------------------
Process Water At west site boundary as 0-5,700 gpm @
shown on Drawing 50 psig
32676-1STA-S1001D, Rev. A. minimum
- --------------------------------------------------------------------------------
3
<PAGE>
I3.2.0 Major Equipment/Systems
The Project will consist of all necessary equipment required to provide
continuous, reliable, economic and easy to maintain operation of the Project.
The following is a list of major equipment:
Raw Water System
Demineralized Water System
Wastewater Discharge System
Control Systems
Electrical Systems
Piping
Pumps
Infrastructure
Fire Protection Systems
I3.2.1 Raw Water System
The raw water supply for the facility will be provided from Lake Enid. A
representative water analysis is included in Attachment I-3. The raw water
system shall include a 500,000 gallon capacity raw/fire water storage tank with
a 120,000 gallon portion dedicated to fire protection. One electrically driven
and one diesel motor driven, 100% capacity each, fire pumps shall be provided.
Two 100% plant service water pumps shall be provided taking suction from the
raw/fire water storage tank.
I3.2.2 Demineralized Water System
The demineralized water shall be produced by two 50% capacity (based on
steam injection for 24 hours per day continuous operation) demineralizer trains.
A 800,000 gallon capacity demineralized water storage tank shall be provided.
A single 5,000 gallon capacity condensate tank shall be provided to serve
all three units. High conductivity condensate which is inappropriate for reuse
shall be pumped to the cooling tower basin. Condensate meeting the conductivity
requirements, shall be pumped to the HRSG. Two sets of 100% capacity condensate
transfer pumps shall be provided.
I3.2.3 Wastewater Discharge System
Non-sanitary wastewater from the Project shall be discharged to the
Tallahatchie River. Treatment of the process wastewater, not including the
cooling tower blowdown shall consist of two-cell neutralization tanks. One tank
shall collect effluent from the Project while the other tank shall adjust the pH
level of the wastewater on a batch basis prior to its discharge. Two 100%
capacity pumps shall be used to transfer and two 100% capacity pumps shall be
used to discharge the wastewater. The temperature of the combined process
wastewater measured at the site boundary shall not exceed 90(degree)F, assuming
a makeup water temperature of less than 82(degree)F.
Oil from the Oil/Water separator shall be held in the oil water separator
for periodic disposal later via an Owner supplied tanker truck.
Sanitary wastewater shall be discharged to the City sanitary sewer system.
I3.2.4 Fire Protection System
A Plant fire protection system shall be provided. The 500,000 gallon
capacity raw water storage tank shall have a 120,000 gallon portion dedicated to
fire protection. One electrically driven and one
4
<PAGE>
diesel motor driven, 100% capacity each, fire pumps shall be provided. In
addition, a connection to the City water main shall be made to provide
additional fire fighting capacity.
5
<PAGE>
EXHIBIT I4
On-Site Infrastructure
Plant Description
I4.1 Mechanical Systems
I4.1.1 Fire Protection. The fire protection system is supplied with water at
adequate flow and pressure by one (1) 100 percent electric motor driven and one
(1) 100 percent diesel engine driven fire pump taking suction from the raw water
storage tank. 120,000 gallons of water within the tank will be dedicated to fire
protection.
A fire main with hydrants is provided around the power plant buildings and site.
Water deluge sprinkler systems are installed to protect the main step-up
transformers, unit auxiliary transformers, steam turbine generator bearings and
the steam turbine lube oil reservoirs. Transformers will be provided with fire
walls in accordance with the requirements of NFPA.
The cooling tower will be protected by a dry pipe sprinkler system. The
combustion turbines are protected by the manufacturer's standard suppression
system.
Portable CO2 and dry chemical fire extinguishers are provided throughout the
multi-purpose building. Automatic sprinkler systems are provided to protect the
administration and warehouse areas. Cross-zoned smoke and heat detection alarm
systems are provided in the control room and control equipment rooms.
I4.1.2 Mechanical/Fluid Equipment
I4.1.2.1 Demineralized Water Storage Tank
One (1) Demineralized water storage tank is provided. The
tank is a field-erected vertical, cylindrical,
cone roof type. The tank is designed and
constructed in accordance with AWWA D100
standards.
Material: Carbon Steel
Capacity: 800,000 gal
[Missing pages 2 and 3]
wastewater while the tank will adjust the pH level of the wastewater prior to
its discharge. A de-chlorination chemical feed system will be provided to reduce
the active chlorine levels in the site waste water discharge to meet chlorine
levels defined in Exhibit A.
Chemical storage areas will be provided with curbed secondary containment, sized
for 110% of the largest single tank volume located within the area.
1
<PAGE>
ATTACHMENT I-1
LS Power, LLC
Batesville Generating Plant
Subsurface Investigation Data Report
July 1998
Black & Veatch-Zachry
Kansas City, Missouri
<PAGE>
Table of Contents
Page
1.0 Introduction ....................................................... 1-1
2.0 Site Location ...................................................... 2-1
3.0 Field Investigation and Laboratory Testing.......................... 3-1
4.0 Groundwater Conditions.............................................. 4-1
List of Appendices
Appendix A Boring Locations
Appendix B Boring Logs
Appendix C Piezometer Logs
Appendix D Laboratory Test Results
Appendix E Soil Resistivity Test Results
TC-1
<PAGE>
1.0 Introduction
This report provides a summary of subsurface site conditions for the
proposed LS Power, LLC combined cycle project near Batesville, Mississippi. The
project consists of constructing a nominal 800 MW combined cycle facility.
The surface investigation was performed by Professional Services
Industries (PSI) of Memphis, Tennessee under the direction of a Black &
Veatch-Zachry (BVZ) geotechnical engineer. BVZ provided the subsurface
investigation plan and boring layout required to characterize site conditions.
This report contains only factual data as determined by the field
investigation and laboratory test program. No analysis, engineering or reduction
of data was performed for this report. The report provides the following
information.
o Description of subsurface investigation program.
o Test locations of subsurface soil investigation.
o Boring and piezometer logs.
o Soil resistivity test results.
o Laboratory test results.
1-1
<PAGE>
2.0 Site Location
The Batesville generating plant site consists of an approximately 60 acre
tract about two miles northeast of Batesville, Mississippi. The site is located
east of State Road 35 and north of Brewer Road.
2-1
<PAGE>
3.0 Field Investigation and Laboratory Testing
The subsurface investigation was performed to determine the site
stratigraphy and pertinent geotechnical engineering properties of the soil which
underlie the proposed locations of the power generation facilities.
The subsurface investigation was performed by Professional Services
Industries (PSI) of Memphis, Tennessee under the direction of a Black &
Veatch-Zachry (BVZ) geotechnical engineer. BVZ provided the subsurface
investigation plan and boring layout required to characterize site conditions.
Field work began May 26, 1998 and was completed June 6, 1998. Survey locations
for the planned field testing were located and staked by Russell & Co. of South
Haven, Mississippi. Test locations are presented in Appendix A of this report.
The subsurface investigation consisted of the following activities.
o 14 soil borings
o 3 piezometers
o 4 soil resistivity tests
o Laboratory tests on selected samples
The soil borings were advanced with a CME 75 truck-mount drill rig using
hollow stem augers to approximately the groundwater table and then switching to
the rotary wash method. Boring depths ranged from 18 feet to 65 feet below
ground surface (bgs) for a total of 614 lineal feet. Drilling fluid containing
bentonite was used to maintain hydrostatic pressure and prevent caving of
uncased holes.
Sampling while drilling consisted of four Standard Penetration Test (SPT)
samples from 0 feet to 10 feet, with subsequent SPT samples obtained at 5 feet
intervals. Cohesive soil, where encountered, was sampled using a combination of
SPT's and shelby tubes. Boreholes were backfilled with bentonite and soil
cuttings. Borehole logging and field classification of samples were performed in
the field by BVZ. The boring logs are presented in Appendix B of this report.
Three piezometers were installed at the site using a 8-inch diameter
hollow stem auger. The riser pipe was a 2 inch O.D. Schedule 40 PVC pipe, with a
10 feet length of 0.02 inch slotted screen attached. The piezometers were
installed to an approximate depth of 20 feet. A medium-grained sand was used as
a filter material in the annular space surrounding the screen. A bentonite chip
seal was placed above the filter material and a bentonite/cement backfill was
placed around the riser pipe to the ground surface. The piezometer logs are
presented in Appendix C of this report.
A series of laboratory tests were performed on samples obtained during the
subsurface investigation. The tests included natural moisture content, density,
Atterberg limits, sieve and hydrometer analysis, unconfined compression
strength, and consolidation. All tests were performed in accordance with ASTM
test procedures, if applicable. Laboratory test results are presented in
Appendix D of this report.
Soil resistivity tests were completed at four locations at the site. The
tests were performed using the Wenner Four-Pin Method. Soil resistivity test
results are presented in Appendix D of this report.
3-1
<PAGE>
4.0 Groundwater Conditions
A total of three piezometers were installed during the subsurface
investigation to monitor groundwater levels. These piezometers were installed in
the proposed general plant area at the site. Piezometer locations are presented
in Appendix A.
Groundwater levels measured are as follows.
Groundwater Groundwater
Piezometer Ground Surface Elevation Elevation
Number Elevation (06/05/98) (06/12/98)
------ --------- ---------- ----------
PZ-1 215.99 ft 206.1 ft 206.1 ft
PZ-9 221.27 ft 210.9 ft 220.5 ft
PZ-10 217.04 ft 206.8 ft 206.6 ft
4-1
<PAGE>
Appendix A
Boring Locations
[map of Boring Locations]
Appendix B
Boring Logs
[Log of Boring]
Appendix C
Piezo meter Logs
[Piezo meter Installation Log]
<PAGE>
Appendix D
Labaratory Test Results
<PAGE>
L.S Power Generating Plant BVZ
Batesville, Mississippi BVZ Project 32676
July 1998
Reduction of Resistivity Data
<TABLE>
<CAPTION>
Ohmic Meter Resistivity
Spacing Value Multiplier Constant (OHM-CM)
------- ----- ---------- -------- --------
<S> <C> <C> <C> <C>
R-1
2.5 1.0 10 191.5 4788
5 1.6 1 191.5 1532
10 1.9 0.1 191.5 364
15 3.3 0.1 191.5 948
20 0.5 0.1 191.5 192
25 4.5 0.1 191.5 2154
30 4.2 0.1 191.5 2413
R-2
2.5 1.9 10 191.5 9096
5 7.0 1 191.5 6703
10 2.5 1 191.5 4788
15 1.6 1 191.5 4596
20 1.5 1 191.5 5745
25 1.4 1 191.5 6703
30 1.4 1 191.5 8043
R-3
2.5 2.4 10 191.5 11490
5 0.2 10 191.5 1915
10 1.9 1 191.5 3639
15 1.5 1 191.5 4309
20 1.3 1 191.5 4979
25 0.9 1 191.5 4309
30 1.0 1 191.5 5745
R-4
2.5 2.5 10 191.5 11969
5 0.9 10 191.5 8618
10 2.9 1 191.5 5554
15 2.2 1 191.5 6320
20 2.1 1 191.5 8043
25 1.7 1 191.5 8139
30 1.7 1 191.5 9767
</TABLE>
<PAGE>
ATTACHMENT I-3
LAKE ENID, MISSISSIPPI WATER ANALYSIS
SAMPLE TAKEN OCTOBER 1, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSTITUENT UNITS LEVEL
- --------------------------------------------------------------------------------
<S> <C> <C>
Calcium ppm 3.28
- --------------------------------------------------------------------------------
Magnesium ppm 1.86
- --------------------------------------------------------------------------------
Sodium ppm 4.53
- --------------------------------------------------------------------------------
Potassium ppm 1.18
- --------------------------------------------------------------------------------
Bicarbonate, as CaCO3 ppm 15.0
- --------------------------------------------------------------------------------
Carbonate, as CaCO3 ppm Less than 0.01
- --------------------------------------------------------------------------------
Sulfate ppm Less than 10.0
- --------------------------------------------------------------------------------
Chloride ppm 4.40
- --------------------------------------------------------------------------------
Nitrate ppm ND
- --------------------------------------------------------------------------------
Alkalinity, as CaCO3 ppm 16.0
- --------------------------------------------------------------------------------
Carbon Dioxide ppm 16.80
- --------------------------------------------------------------------------------
Total Organic Carbon mg/l 6
- --------------------------------------------------------------------------------
Silica, dissolved ppm 4.0
- --------------------------------------------------------------------------------
Silica ppm 4.0
- --------------------------------------------------------------------------------
Hardness, as CaCO3 mg/l 23.35
- --------------------------------------------------------------------------------
Iron ppm 0.80
- --------------------------------------------------------------------------------
Manganese ppm 0.09
- --------------------------------------------------------------------------------
Copper ppb Less than 10.0
- --------------------------------------------------------------------------------
Lead ppb Less than 200.0
- --------------------------------------------------------------------------------
Nickel ppb Less than 50.0
- --------------------------------------------------------------------------------
Zinc ppb 20.0
- --------------------------------------------------------------------------------
Cadmium ppb Less than 10.0
- --------------------------------------------------------------------------------
Chromium ppb Less than 20.0
- --------------------------------------------------------------------------------
Silver ppm Less than 0.02
- --------------------------------------------------------------------------------
Arsenic ppm Less than 0.003
- --------------------------------------------------------------------------------
Beryllium ppb 2.0
- --------------------------------------------------------------------------------
Antimony ppb Less than 5.0
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LETTERHEAD]
July 7, 1998
Mr. Tom O'Brien
Overland Contracting, Inc. on behalf of
Black & Veatch-Zachary
11401 Lamar
Overland Park, KS 66211
Re: Laboratory Testing Program
Proposed LS Power Generating Plant
Batesville, Mississippi
PSI File No. 502-85119
Dear Mr. O'Brien,
Professional Service Industries, Inc. is pleased to transmit our laboratory
testing results for the referenced project. We appreciate the opportunity to
perform these services. If you have any questions pertaining to this report,
or if we may be of further service, please contact our office.
Respectfully submitted,
PROFESSIONAL SERVICE INDUSTRIES, INC.
/s/ Matthew J. Odom
Matthew J. Odom
Geotechnical Staff
MJO/kg
<PAGE>
June 12, 1998
Report of Resistivity Testing
L.S. Power Generating Plant
Batesville, Mississippi
PSI File No. 502-85119
Test Location: R-1
Weather: Cloudy
Ambient Temperature: 93 F
<TABLE>
<CAPTION>
Electrode Spacing (ft) Ohmic Value Meter Multiplier
---------------------- ----------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------
2.5 1.0 10
- --------------------------------------------------------------------------------
5 1.6 1
- --------------------------------------------------------------------------------
10 1.9 0.1
- --------------------------------------------------------------------------------
15 3.3 0.1
- --------------------------------------------------------------------------------
20 0.5 0.1
- --------------------------------------------------------------------------------
25 4.5 0.1
- --------------------------------------------------------------------------------
30 4.2 0.1
- --------------------------------------------------------------------------------
</TABLE>
Test Location: R-2
Weather: Cloudy
Ambient Temperature: 93 F
<TABLE>
<CAPTION>
Electrode Spacing (ft) Ohmic Value Meter Multiplier
---------------------- ----------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------
2.5 1.9 10
- --------------------------------------------------------------------------------
5 7.0 1
- --------------------------------------------------------------------------------
10 2.5 1
- --------------------------------------------------------------------------------
15 1.6 1
- --------------------------------------------------------------------------------
20 1.5 1
- --------------------------------------------------------------------------------
25 1.4 1
- --------------------------------------------------------------------------------
30 1.4 1
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
June 12, 1998
Report of Resistivity Testing
L.S. Power Generating Plant
Batesville, Mississippi
PSI File No. 502-85119
Test Location: R-3
Weather: Cloudy
Ambient Temperature: 93 F
<TABLE>
<CAPTION>
Electrode Spacing (ft) Ohmic Value Meter Multiplier
---------------------- ----------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------
2.5 2.4 10
- --------------------------------------------------------------------------------
5 0.2 10
- --------------------------------------------------------------------------------
10 1.9 1
- --------------------------------------------------------------------------------
15 1.5 1
- --------------------------------------------------------------------------------
20 1.3 1
- --------------------------------------------------------------------------------
25 0.9 1
- --------------------------------------------------------------------------------
30 1.0 1
- --------------------------------------------------------------------------------
</TABLE>
Test Location: R-4
Weather: Cloudy
Ambient Temperature: 93 F
<TABLE>
<CAPTION>
Electrode Spacing (ft) Ohmic Value Meter Multiplier
---------------------- ----------- ----------------
<S> <C> <C>
- --------------------------------------------------------------------------------
2.5 2.5 10
- --------------------------------------------------------------------------------
5 0.9 10
- --------------------------------------------------------------------------------
10 2.9 1
- --------------------------------------------------------------------------------
15 2.2 1
- --------------------------------------------------------------------------------
20 2.1 1
- --------------------------------------------------------------------------------
25 1.7 1
- --------------------------------------------------------------------------------
30 1.7 1
- --------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
L.S. Power Generating Plant BVZ
Batesville, Mississippi BVZ Project 32676
July 1998
Reduction of Resistivity Data
<TABLE>
<CAPTION>
Ohmic Meter Resistivity
Spacing Value Multipler Constant (OHM-CM)
------- ----- --------- -------- --------
<S> <C> <C> <C> <C>
R-1
2.5 1.0 10 191.5 4788
5 1.6 1 191.5 1532
10 1.9 0.1 191.5 364
15 3.3 0.1 191.5 948
20 0.5 0.1 191.5 192
25 4.5 0.1 191.5 2154
30 4.2 0.1 191.5 2413
R-2
2.5 1.9 10 191.5 9096
5 7.0 1 191.5 6703
10 2.5 1 191.5 4788
15 1.6 1 191.5 4596
20 1.5 1 191.5 5745
25 1.4 1 191.5 6703
30 1.4 1 191.5 8043
R-3
2.5 2.4 10 191.5 11490
5 0.2 10 191.5 1915
10 1.9 1 191.5 3639
15 1.5 1 191.5 4309
20 1.3 1 191.5 4979
25 0.9 1 191.5 4309
30 1.0 1 191.5 5745
R-4
2.5 2.5 10 191.5 11969
5 0.9 10 191.5 8618
10 2.9 1 191.5 5554
15 2.2 1 191.5 6320
20 2.1 1 191.5 8043
25 1.7 1 191.5 8139
30 1.7 1 191.5 9767
</TABLE>
<PAGE>
[graphs and charts of test results]
Appendix E
Soil Restivity Test Results
<PAGE>
[Flow Chart of Water Mass Balance]
[map of generating plant]
[map of Batesville Generation Facility Site]
<PAGE>
ATTACHMENT 11-5
Natural Gas Analysis
Natural gas supplied to the project will have energy values calculated by
ASTM methods and listed below. Emissions guarantees are based on the range of
constituents listed below. Performance guarantees are based on the natural
gas analysis contained in Exhibit A. In addition, the gas shall meet the
requirements of the combustion turbine manufacture regarding heavy metals,
other contaminants, and other physical requirements as contained on the Table
1 through Table III.
<TABLE>
<CAPTION>
VOLUME %
Range
Constituent Mean Min Max
---------- ---- --- ---
<S> <C> <C> <C>
C6+ 0.0450 0.00000 0.20000
Propane 0.2662 0.00000 0.15000
I-Butane 0.0569 0.00000 1.00000
N-Butane 0.0629 0.00000 1.00000
NEO C5 0.0005 0.00000 1.00000
I-Pentane 0.0259 0.00000 1.00000
N-Pentane 0.0191 0.00000 1.00000
Nitrogen 0.3185 0.00000 2.00000
Methane 96.4825 90.00000 98.00000
CO2 0.6768 0.00000 2.00000
Ethane 2.0461 0.00000 5.00000
</TABLE>
<PAGE>
TABLE I. MAXIMUM ALLOWABLE TOTAL CONTAMINANT LEVEL FROM
FUEL, AIR, STEAM, AND WATER
<TABLE>
<CAPTION>
- ------------------------------------------------------------=-----
Maximum Permitted
- ------------------------------------------------------------------
<S> <C> <C> <C>
Contaminant Units 501F Comments
FBN wt% 0.015
S wt% 0.5
V ppmw 0.5 Without treatment
Na+K ppmw 1.0 Coated Blades &
Vanes, 3 Rows
Ca ppmw 10.0
Pb ppmw 0.5
Ba ppmw 2.0
Mn ppmw 2.0
P ppmw 2.0
Cl ppmw 6.0
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Definitions
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FBN Fuel Bound Nitrogen The above values are recommended maximums. In some
cases, higher concentrations may be encountered
S Sulfur V Vanadium
Na Sodium K Potassium
Ca Calcium Pb Lead
Ba Barium Mn Manganese
P Phosphorous Cl Chlorides
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Does not apply
- ----------------------
* Environmental requirements usually limit the maximum fuel sulfur
content to a lower limit.
<PAGE>
TABLE II. FUEL REQUIREMENTS
The fuel shall meet the following requirements. If fuel additives are used,
the fuel plus additive mixture shall meet the following requirements:
<TABLE>
<CAPTION>
PROPERTY LIMIT COMMENTS
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Flammability Rich-to Lean ratio=2.0,min Volume basis @ 1 atm,
59 degrees F
- -------------------------------------------------------------------------------------------
Heating Value (LHV) 770 BTU/scf. min DLN combustion systems
- -------------------------------------------------------------------------------------------
Gas Index Variation +/-2% Day-to-day
- -------------------------------------------------------------------------------------------
Gas Pressure 400-500 psig At CT interface
- -------------------------------------------------------------------------------------------
Gas Temperature ** Heated Gas
105 degrees F, max Unheated Pilot
Gas
- -------------------------------------------------------------------------------------------
Condensables 50 degrees F superheat, min.
- -------------------------------------------------------------------------------------------
Oxygen 2% by volume, max. When olefins present in fuel
- -------------------------------------------------------------------------------------------
Olefins 4% by volume, max.
- -------------------------------------------------------------------------------------------
Hydrogen 40% by volume, max. DLN combustors
- -------------------------------------------------------------------------------------------
Higher Hydrocarbons Fuel gases containing more
than 5% ethane (C(2)H(6)),
1.5% propane (C(3)H(8)), or
0.20% higher hydrocarbons
should not be used for DLN
applications.
- -------------------------------------------------------------------------------------------
Fuel Bound Nitrogen see Table I Limits set by environmental
regulation
- -------------------------------------------------------------------------------------------
Sulfur Maximum value of 0.5wt% Environmental regulations
based on equipment usually establish a lower
requirements. value.
- -------------------------------------------------------------------------------------------
</TABLE>
** As required to meet performance guarantees
<PAGE>
TABLE III: PARTICULATE SIZE LIMITATIONS - FUEL GAS
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Particulate Matter < 0.007 lb/MMBTU heat Total acceptable amount for
input erosion/deposit prevention
(use LHV of fuel)
- -------------------------------------------------------------------------------------------
Particulate Size Particulate matter > 10 Downstream of customer
microns ((mu)m) = 0 supplied filtration system
-------------------------------------------------------------------
< 0.00015 lb/MMBTU Large particle limit for
Particulate matter 5 to 10 erosion prevention (use
microns ((mu)m) LHV of fuel)
-------------------------------------------------------------------
< 0.004 lb/MMBTU (use LHV of fuel)
Particulate matter 1 to 10
microns ((mu)m)
-------------------------------------------------------------------
< 0.004 lb/MMBTU Small particle limit for
Particulate matter < 2 prevention of deposits (use
microns ((mu)m) LHV of fuel)
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit J
[Land Survey of LSP Energy Limited
Partnership-Batesville Plot]
<PAGE>
MCBRIDE ENGINEERING COMPANY, INC.
CONSULTING ENGINEERS LAND SURVEYORS
204 BROADWAY STREET, BATESVILLE, MISSISSIPPI 38606 PHONE 563-7314
- --------------------------------------------------------------------------------
PLAT OF SURVEY OF THE PROPERTY OF LSP ENERGY LIMITED PARTNERSHIP LOCATED IN
SECTION 3 & 4 TOWNSHIP 9 S RANGE 7 W PANOLA COUNTY, MISSISSIPPI AND BEING WITHIN
THE CORPORATE LIMITS OF THE CITY OF BATESVILLE MISSISSIPPI TO BE CONVEYED TO
LSP ENERGY LIMITED PARTNERSHIP BY INDUSTRIAL DEVELOPMENT AUTHORITY
- --------------------------------------------------------------------------------
NOT VALID UNLESS AN ORIGINAL SEAL AND SIGNATURE APPEARS HEREON
DESCRIPTION: PAGE 2 OF 2
A part of the Northwest Quarter of Section 3 and a part of the Northeast
Quarter of Section 4, Township 9 South, Range 7 West, in the Second Judicial
District of Panola County, Mississippi, containing 60.00 acres more or less,
and being more particularly described as follows, to wit:
Commencing at the Northwest corner of said Section 3, running thence South 21
degrees, 47 minutes, and 08 seconds East for a distance of 1276.23 feet to a
point on the South right-of-way line of a proposed road being the point of
beginning; running thence Southeasterly around a curve to the left having a
delta angle of 38 degrees, 55 minutes, and 32 seconds; a radius of 388.27
feet; for a distance of 263.78 feet; thence South 89 degrees, 55 minutes, and
32 seconds East for a distance of 1255.49 feet; thence South for a distance
of 1329.92 feet to the North right-of-way line of a paved public road; thence
along the North right-of-way line of said paved public road as follows: North
89 degrees, 47 minutes, and 33 seconds West for a distance of 318.12 feet;
South 89 degrees, 55 minutes, and 10 seconds West for a distance of 1155.99
feet; North 86 degrees, 58 minutes, and 34 seconds West for a distance of
361.74 feet; North 00 degrees, 37 minutes, and 34 seconds East for a distance
of 15.00 feet; in a Northwesterly direction around a curve to the right
having a delta angle of 18 degrees, 14 minutes, and 11 seconds; a radius of
778.51 feet; for a distance of 247.79; thence North 06 degrees, 26 minutes,
and 41 seconds West for a distance of 199.09 feet, thence North 85 degrees,
46 minutes, and 41 seconds West for a distance of 123.00 feet; thence North
26 degrees, 32 minutes, and 25 seconds East for a distance of 704.94 feet;
thence North 39 degrees, 00 minutes, and 00 seconds East for a distance of
650.00 feet to the point of beginning.
BEING SUBJECT TO:
A fifteen (15') foot and a twenty-five (25') strip of land as an easement
being along and with the North property line of the above described property.
CERTIFICATE OF SURVEYOR:
I, James W. Sullivan, Jr. do hereby certify this to be a true and accurate
plat and description of, the lands herein described as surveyed and marked on
the ground by me or under my supervision. I also certify that this property
is not located in a HUD identified Special Flood Hazard Area according to FIA
map no. 280125 0120 B dated June 4, 1980.
Signed at Batesville, Mississippi this the 8th day of July 1998.
[seal]
- -------------------------------------------------------------------------------
DATE OF SURVEY 7/2/98
FILED POOL NUMBER DC page ____
SURVEYED BY P.S.
SCALE 1 INCH EQUALS 300'
DRAWN BY P.S.
CHECKED BY P.S.
CLOSED BY _______________
METHOD CLASS "B"
BASIS OF BEARING: SOLAR OBSERVATION FROM PREVIOUS SURVEY
<PAGE>
EXHIBIT K
LIST OF OWNER PROCURED EQUIPMENT AND SERVICES
Power Island Equipment (PIE):
o Steam Turbine Generators and Condensers.
o Gas Turbine Generators.
o Heat Recovery Steam Generators.
Balance of Plant (BOP) Equipment:
o Transformers and accessories.
o Generator terminal equipment.
o Switchgear.
o Motor Control Centers.
o Distributed Control System.
o CEMS/Vibration Monitoring Equipment.
o Emergency Power equipment and panels.
o Batteries, chargers and UPS.
o ISO phase bus duct.
o Structural & pipe rack steel.
o Air compressors and dryers.
o Fuel gas heaters and separators.
o Shop fabricated tanks,
o Water treatment and chemical feed equipment.
o Cooling Tower.
o Sampling and Analysis system.
o Large pumps.
o Engineering Services.
- --------------------------------------------------------------------------------
1 July 22, 1999
<PAGE>
Exhibit L
List of Common Facilities Equipment
Quantity
- --------------------------------------------------------------------------------
CIVIL/STRUCTURAL EQUIPMENT
- --------------------------------------------------------------------------------
MULTI-PURPOSE BLDG 1
- --------------------------------------------------------------------------------
OIL/WATER SEPARATOR 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MECHANICAL EQUIPMENT
- --------------------------------------------------------------------------------
AIR COMPRESSORS 2
- --------------------------------------------------------------------------------
INSTRUMENT AIR DRYER 1
- --------------------------------------------------------------------------------
WET COOLING TOWER (F&E) 1
- --------------------------------------------------------------------------------
FIRE HOSES, HOSE HOUSES, ETC
- --------------------------------------------------------------------------------
AUTOMATIC FIRE PROTECT (F&E)
- --------------------------------------------------------------------------------
CIRCULATING WATER PUMPS 3
- --------------------------------------------------------------------------------
FIRE WATER PUMP - DIESEL ENGINE DRIVEN 1
- --------------------------------------------------------------------------------
FIRE WATER PUMP - ELECT. MOTOR DRIVEN 1
- --------------------------------------------------------------------------------
DEMIN. WATER TRANSFER 2
- --------------------------------------------------------------------------------
COND. TRANSFER 2
- --------------------------------------------------------------------------------
AUXILIARY COOLING WATER 2
- --------------------------------------------------------------------------------
RAW/FIRE WATER 1
- --------------------------------------------------------------------------------
DEMIN WATER 1
- --------------------------------------------------------------------------------
COMPR. AIR RECEIVER 1
- --------------------------------------------------------------------------------
COND STORAGE 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
- --------------------------------------------------------------------------------
125V STATION BATTERY 1-60 CELL
- --------------------------------------------------------------------------------
BATTERY CHARGERS 2-100%
- --------------------------------------------------------------------------------
UPS 1
- --------------------------------------------------------------------------------
MOTOR CONTROL CENTERS 1-LOT
- --------------------------------------------------------------------------------
MV SWITCHGEAR 1
- --------------------------------------------------------------------------------
SECONDARY UNIT SUBS 2
- --------------------------------------------------------------------------------
AUXILIARY TRANSFORMERS 2-100%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTROL EQUIPMENT
- --------------------------------------------------------------------------------
DIST CONT & INFO SYS 1-LOT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHEMICAL EQUIPMENT
- --------------------------------------------------------------------------------
CIRCULATING WATER CHEMICAL FEED 3 skids
- --------------------------------------------------------------------------------
DEMINERALIZATION SYSTEM 2-50% trains
- --------------------------------------------------------------------------------
PRETREATMENT SYSTEM 1 system
- --------------------------------------------------------------------------------
SAMPLING & ANALYSIS SYS 1 panel
- --------------------------------------------------------------------------------
CHEMICAL WASTE SYSTEM 1
- --------------------------------------------------------------------------------
Page 1
<PAGE>
Exhibit M
Permits
Owner Permits
Federal:
Self Certification of Coal or Alternative Fuel Capability (DOE)
Certification of Exempt Wholesale Generator Status (FERC)
Approval of Rates for sales by LSP Energy Limited Partnership (FERC)
Clean Water Act, Section 404 Permits (COE)
Rivers and Harbors, Section 10 Permit (COE)
Flood Plains Management (COE)
Notification of Construction of Stacks and Transmission Lines (FAA)
Endangered Species (USFWS) [Note: This is an approval and not a permit]
State of Mississippi:
Parks and Recreation (MDEQ)
Certificate of Public Convenience and Necessity (MPSC)
Highway Crossing Permit (MDOT)
PSD - Air Permit for Construction (MDEQ)
PSD - Air Permit for Operation (MDEQ)
NPDES Permit (MDEQ)
Permit to Withdraw Water for Beneficial Use - From Lake Enid (MDEQ)
NPDES Storm Water Multi-Sector General Permit for Industrial Facilities
(MDEQ)
Air Quality - Title IV Operating Permit (MDEQ)
Solid Waste Notification for Operation (MDEQ)
Water Quality Certificates associated with Nationwide and General Permits
issued by COE under the Clean Water Act (MDEQ)
Cultural Resources (MS SHPO)
<PAGE>
Endangered Species (MDEQ) [Note: This is an approval and not a permit]
Oil and Hazardous Substance Control SPCC Plan and Facility Response Plan
(EPA/MDEQ) [Note: This is an approval and not a permit]
Fuel Oil Tank Registration
City of Batesville / County of Panola:
Road Crossing Permit
Railrod Crossing Permit
Zoning Use and Compliance
Occupancy Permit
Contractor Permits & Licenses
State of Mississippi General Contractors license. H.B. Zachry Co. has a
General Contractor's license with all classifications. B&V Contrsuction
Inc. (BVCI) has a General Contractor's license with several
classifications. These licenses will permit BVZ to execute the project.
Registration with the Secretary of State
Building Permit
Construction Privilege License
NPDES - Storm water general permit for discharge associated with
construction. (Includes preparation of a storm water pollution prevention
plan).
<PAGE>
EXHIBIT N
CHANGE ORDER PRICING SCHEDULE
- --------------------------------------------------------------------------------
Page 1
I. PROJECT TEAM UNIT RATES
The following rates shall be used for managerial and engineering cost
adjustments for scope of work changes up to a cumulative 1,000
engineering hours or 10,000 construction hours:
<TABLE>
<CAPTION>
POSITION CATEGORY HOUR1Y BILLING RATE
----------------- -------------------
<S> <C> <C>
A. ENGINEERING TEAM
Project Management $64.83
Project Department Engineer $56.32
Project Control Manager $56.32
Legal/Environment Coordinator $56.32
Senior Engineer $48.87
Design Engineer $42.39
Associate Design Engineer $34.52
Project Secretary $20.61
Planner/Scheduler $47.88
Designer $45.94
Drafter $25.51
B. SITE MANAGEMENT TEAM
Construction Management $88.00
Site Department $76.62
Manager/Superintendent
Senior Engineer $66.17
Engineer $56.85
Associate Engineer $43.23
Field Engineer $56.85
Secretary/Clerical $21.46
</TABLE>
<PAGE>
EXHIBIT N
CHANGE ORDER PRICING SCHEDULE
- -------------------------------------------------------------------------------
Page 2
The above hourly rates are all inclusive of indirect labor costs, but do not
include G&A expenses or profit. Direct expenses such as long distance telephone
expenses, computer charges, prints, reproduction, traveling, and living
expenses, cost paid by the Contractor to third parties, and other direct
expenses associated with scope of work changes shall be charged in accordance
with the Contractor's standard expense rates.
The above hourly rates are valid through a Notice to Proceed of August 20, 1998.
C. CONSTRUCTION RATES
The following rates shall be used for construction cost adjustments for scope of
work changes:
<TABLE>
<CAPTION>
HOURLY BILLING RATES
--------------------
POSITION CATEGORY STRAIGHT TIME OVERTIME RATES
----------------- ------------- --------------
<S> <C> <C>
General Foreman $69.67 $54.19
Foreman $37.88 $51.68
Journeyman $34.31 $46.65
Helper I $22.17 $29.58
Helper II $26.72 $35.98
Helper III $31.28 $42.39
Laborer - Common $17.35 $22.80
</TABLE>
The above rates are all inclusive of indirect costs, hand tools and consumables;
however, these rates do not include construction equipment costs, overhead and
profit. When using the above unit rates, normal changes will be supervised by
on-site staff at no charge. However, in the event the scope of change requires
additional contractor staff to be assigned, or current staff to be assigned
longer to the project, the Owner will be billed at the Site Management Team
rates.
The above rates are valid for a Notice to Proceed date of August 20,
<PAGE>
EXHIBIT N
CHANGE ORDER PRICING SCHEDULE
- -------------------------------------------------------------------------------
Page 3
II. OTHER RATES
On-Site Subcontractor's Work Subcontractor's Invoice + 10%
Construction Equipment: Construction Equipment:
Contractor Owned 100% of Blue Book for operating
cost. 85% of Blue Book for
ownership cost.
Outside Rent Cost + 10%
Engineered Equipment and Material: Invoice + 5%
(Non-Subcontract)
III. SIGNIFICANT CHANGE ORDERS
For change orders involving an aggregate of 1,000 engineering hours
and/or 10,000 construction man-hours, the following engineering rates
which include G&A and profit will apply.
A. ENGINEERING TEAM
<TABLE>
<S> <C>
Project Management $ 139.16
Project Department Engineer $ 120.89
Project Control Manager $ 120.89
Legal/Environment Coordinator $ 120.89
Senior Engineer $ 104.89
Design Engineer $ 90.98
Associate Design Engineer $ 74.10
Project Secretary $ 44.24
Planner/Scheduler $ 102.88
Designer $ 98.60
Drafter $ 54.75
</TABLE>
<PAGE>
SITE MANAGEMENT TEAM
<TABLE>
<S> <C>
Construction Management $ 128.31
Site Department $ 111.71
Manager/Superintendent
Senior Engineer $ 96.49
Engineer $ 82.89
Associate Engineer $ 63.02
Field Engineer $ 82.89
Secretary/Clerical $ 31.29
</TABLE>
The above hourly rates are all inclusive of indirect labor costs, but do
not include G&A expenses or profit. Direct expenses such as long distance
telephone expenses, computer charges, prints, reproduction, traveling,
and living expenses, cost paid by the Contractor to third parties, and
other direct expenses associated with scope of work changes shall be
charged in accordance with the Contractor's standard expense rates.
Also after change orders for reach a cumulative value of 10,000
engineering hours or 10,000 construction hours, the change order value
for construction labor identified in l.C. above will be increased by 30%.
This increase is to cover additional safety supplies, hiring additional
crafts, extra burden on the existing indirect staff and equipment,
additional indirect supplies, and to contribute towards overhead and
profit. In the event the scope of change requires additional contractor
staff to be assigned, or current staff to be assigned longer to the
project, the Owner will be billed at the Site Management Team rates.
<PAGE>
EXHIBIT 0
INSURANCE
PART I -- CONTRACTOR AND SUBCONTRACTOR INSURANCE
1. CONTRACTOR'S COVERAGE
At its own expense, Contractor shall secure and maintain during the term
of the Agreement the following insurance with the coverage amounts
indicated for occurrences during and arising out of Contractor's
performance of the Agreement. Such insurance shall be placed with
responsible and reputable insurance companies in compliance with
applicable Law and be effective as of the issuance of the Notice to
Proceed or an earlier Limited Notice to Proceed. Such insurance shall be
maintained until Final Completion, except Products Liability/Completed
Operations coverage which shall be maintained for three (3) years beyond
Final Completion. Deductible amounts under such coverages provided by
Contractor shall be the responsibility of the Contractor.
A. Workers' Compensation/Employer's Liability Insurance
Contractor shall maintain Workers' Compensation Insurance subject to
statutory limits and Employer's Liability Insurance in an amount of
one million dollars ($1,000,000) per accident.
B. Commercial Automobile Liability Insurance
Contractor shall maintain Commercial Automobile Liability insurance
with a limit of $1,000,000, including coverage for owned, non-owned,
and hired automobiles for both bodily injury (including death) and
property damage liability, uninsured/underinsured motorist
protection endorsements.
C. Comprehensive or Commercial General Liability Insurance
Contractor shall maintain Commercial General Liability insurance on
a project-specific basis covering against insured's legal liability
to others as a result of bodily injury, property damage and personal
injury arising during construction, use, operation and maintenance
of the Facility. Such policy shall be written on an occurrence basis
with a limit of liability of $1,000,000. Coverage shall include, but
not be limited to, premises/operations, explosion, collapse, and
underground hazards, broad form property damage and personal injury
liability.
1
<PAGE>
D. Excess/Umbrella Liability Insurance
Contractor shall maintain Excess/Umbrella Liability insurance which
shall be written on an occurrence basis and providing coverage
limits in excess of the primary limits. The limit of such umbrella
coverage shall be $25,000,000 on a follow form basis.
2. EVIDENCE OF COVERAGE
Contractor shall, on or before the giving of the Notice to Proceed or an
earlier Limited Notice to Proceed, or within five (5) Days after each
written request by Owner or Owner's insurance broker thereafter, provide
certificates of insurance to Owner's insurance broker evidencing all
insurance policies to be procured by Contractor. The Certificates
evidencing commercial General Liability insurance, Commercial Automobile
Liability insurance and Excess/Umbrella Liability insurance shall each
certify that such policies shall provide that
A. As to such coverages, with the exception of the Workers Compensation
and Employer's Liability during Contractor's performance under the
Agreement, Owner's Indemnitees shall be named as additional insureds
under such policies (without any representation or warranty by or
obligation upon such entities) as their interests may appear to the
extent of Contractor's indemnity obligations as set forth in Section
17.1 of the Agreement; "Owner's Indemnities" as respect this
insurance exhibit shall have the meaning set forth in Section 17.1
of the Agreement;
B. The inclusion of more than one person as insured hereunder shall not
in any way affect the rights of any such person as respects any
claim, demand, suit or judgment made, brought or recovered, by or in
favor of any other insured, or by or in favor of any employee of
such other insured;
C. Each person is protected thereby in the same manner as though a
separate policy had been issued to each, but nothing therein shall
operate to increase the insurance company's liability as set forth
elsewhere in the policy beyond the amount for which the insurance
company would have been liable if only one person or interest had
been named as insured; and,
D. Such insurance is primary insurance with respect to the interests of
Owner Idemnitees to the extent of Contractor's contractual
obligations in the Agreement (with the exception of the Owner's
Builder's Risk coverage) and any other insurance maintained by them
is excess and not contributing with this insurance.
2
<PAGE>
3. CONTENTS OF CERTIFICATES
The certificates evidencing all insurance provided under Sections 1 and 2
shall each certify that
A. Under such policy there will be no recourse against Owner's
Indemnitees for payment of a premium and
B. Such policy may not be canceled or materially altered by the
insurance company without giving sixty (60) Days' (or ten (10) Days'
prior notice if such cancellation is due to a failure to pay
premiums) prior written notice of cancellation to Owner and Lender.
C. Contractor shall not request or acquiesce to any material alteration
to any of the insurance coverages required to be maintained by
Contractor under the Agreement and shall give Owner prompt notice of
any material alteration to any of such insurance coverages, but in
no event later than five (5) Days after it learns of such material
alteration.
4. SUBCONTRACTOR'S COVERAGE
Obligations of Contractor. During the term of the Agreement and until the
expiration of the Warranty liability period, each Subcontractor will
maintain or cause to be maintained in full force and effect, during the
time in which they are engaged in performing services to be furnished by
Contractor hereunder at or about the Site at Contractor's or such
Subcontractor's expense, the following insurance:
A. Each Subcontractor shall carry the insurance policies described in
Sections 1 and 2 in a form and amount that complies with applicable
Law and in accordance with Contractor's normal practice or
Contractor shall maintain such coverage under its own insurance
policies.
B. Contractor and each Subcontractor shall be responsible for any loss
of or damage to their own property, including tools, equipment and
vehicles or other property, which does not form part of the
Facility. Owner and Owner's Indemnitees shall be responsible for any
loss of or damage to their own property, including tools, equipment
and vehicles or other property, which does not form part of the
Facility.
C. Contractor shall require evidence of insurance from each
Subcontractor prior to allowing such Subcontractor to commence the
performance of any Work with respect to the Facility.
3
<PAGE>
D. The Contractor shall be responsible for the observance of this
Section 4 by all Subcontractors.
5. ALTERNATIVE COVERAGE
Insurance Coverage required in Sections 1 and 2 may be carried under
insurance policies (1) that insure other assets owned or managed by
Contractor and/or (2) provided separately by each member company of the
Contractor provided, however, such insurance otherwise complies with the
requirements of Sections 1 and 2.
PART II -- OWNER'S INSURANCE
6. OWNER'S COVERAGE
Owner shall procure at its own expense and maintain in full force and
effect from and after the Notice to Proceed, the following insurance with
the coverage amounts indicated. Such insurance shall provide the coverage,
limits, deductibles and exclusions as herein described. Such insurance
shall be maintained with responsible and reputable insurance companies in
compliance with applicable Law. Prior to issuance of the Notice to
Proceed, Owner shall provide Contractor certificates of insurance, and if
requested by Contractor, a true, correct and complete copy of all such
insurance policies, to Contractor evidencing all insurance policies
required under this Section 6. Except as respects loss or damage directly
resulting from testing of a combustion turbine or of a steam turbine,
Contractor will be responsible for deductible amounts up to a maximum of
$50,000 per occurrence for any loss or damage to the Work arising out of
Contractor's performance of activities under the Agreement until such time
as the completion of testing in accordance with the Agreement; provided,
that Contractor shall not be responsible for such deductible amounts to
the extent that any such loss or damage to the Work results solely from
Owner's negligence or willful misconduct. If during the testing period any
physical loss or damage occurs to the Work which is a direct result of the
testing of a combustion turbine or of a steam turbine, then to the extent
such loss or damage is directly attributable to negligence of Contractor
(or anyone performing work on behalf of or at the direction of
Contractor), Contractor shall be responsible for deductible amounts up to
a maximum of $250,000 with respect to the testing of a combustion turbine
and up to a maximum of $100,000 with respect to the testing of a steam
turbine. Notwithstanding the above, Contractor shall not be responsible
for any deductibles under Owner's coverage after the completion of testing
in accordance with the Agreement.
A. All Risk Builder's Risk
The Owner shall maintain all risk builder's insurance covering the
Facility and the transmission lines to the interconnection
facilities (to the extent set forth in
4
<PAGE>
paragraph 2 below), on a 100% replacement cost basis, for physical
loss or damage arising from or in connection with causes or perils,
including, but not limited to, the following:
o Earth movement (including but not limited to earthquake,
landslide, subsidence and volcanic eruption);
o flood;
o wind;
o boiler, turbine and machinery accidents or breakdown;
o All testing.
Contractor, including each entity comprising Contractor and their
respective affiliated and/or associated companies, shall be Named
Insureds under such policy(ies) of insurance. Subcontractors and
suppliers of all tiers shall be additional insureds under insurance
to be maintained by Owner as their respective interests may appear.
1) Such insurance shall cover all property during the term of the
Agreement, including during testing, as well as any and all
materials, equipment, and machinery intended for the Facility
during off-site and inland transit. Such insurance shall be on
a 100% completed value form, with no periodic reporting
requirements, insuring the Equipment and Work and including
coverage for
a) Inland transit with a sub-limit equal to the full
replacement for maximum shipment value, temporary
off-site storage, with a sub-limit at least equal to
full replacement for maximum equipment value in
temporary off-site storage;
b) Pollution clean up and removal caused by fire,
lightning, aircraft impact, explosion, riot, civil
commotion, smoke, vehicle impact, windstorm, hail,
vandalism, or malicious mischief, leakage or accidental
discharge from automatic fire protective systems, under
said policy and for a sub-limit not less than $250,000;
c) extra expenses in an amount not less than $2,000,000;
d) Foundations and other property below the surface of the
ground
e) Expediting expenses with a sublimit of not less than
$5,000,000;
f) Unintentional errors and omissions of any Insured;
g) An endorsement with a marine 50/50 clause; and,
5
<PAGE>
h) Damage to Existing Property with a limit of not less
than $5,000,000
2) The policy is to insure electrical transmission lines and
equipment within the premises of the insured work or within
one thousand feet thereof or while in the course of
construction or installation to the extent Owner or Contractor
has an insurable interest.
3) The policy shall be non-cancellable by the insurer, except for
non-payment of premium (for which at least 10 Days written
notice will be provided to Owner and Contractor for
non-payment of premium).
4) The builder's all-risk coverage shall not contain an exclusion
for physical loss or damage ensuing or resulting from
freezing, mechanical breakdown, loss or damage covered under
any guarantee or warranty, or resultant damage caused by
faulty workmanship, design or materials.
5) Builder's risk insurance coverage shall remain in effect until
the passage of risk of loss to Owner in accordance with
Article 8.2 of the Agreement.
6) The deductible for all such insurance shall not exceed:
a) $500,000 for losses directly arising from operational
testing of the combustion turbine and the steam turbine;
or,
b) $50,000 for losses or damage from all other perils
and/or causes.
Owner shall be responsible for any deductible obligation, if
any, which exceeds Contractor's deductible obligations set
forth in Section 6 above.
7) Coverage shall also be afforded to the property of others
should it be necessary. The all risk builders' risk policy
shall be written on a replacement cost basis and shall contain
an agreed amount endorsement waiving any coinsurance penalty.
The insurer shall waive any subrogation rights it may have
against any insured under the policy (other than a third party
architect/engineer) and where waiver is in writing prior to a
loss. Contractor, including any associated or affiliated
company(ies) of Contractor shall not be subrogated by the
insurer for damage arising from performance of professional
services, caused by error or omission. Under such policy,
occupancy and operation of the Facility is permitted prior to
acceptance by Owner, after completion.
6
<PAGE>
B. Delay in Start-up
As an extension of the coverages set forth in Section 6.A or as a
separate policy(ies), the Owner, at its sole cost and expense, shall
maintain delay in start-up insurance covering continuing expenses
and debt service resulting from delays in Substantial Completion
resulting from:
o physical loss or damage to the Facility during construction or
testing;
o loss or damage to equipment while in transit; or
o loss or damage to equipment while in storage away from the
site.
1) As respects Contractor's interests, Contractor, including each
entity comprising the Contractor and their respective
affiliated and/or associated companies, shall be included as
Named Insured under the delay in opening coverage.
2) This extension or separate policy shall have a period of
indemnity of no less than twelve (12) months (or such other
period as mutually agreed between Owner and Contractor), with
a maximum aggregate limit of not less than $35 million for a
twelve month period.
3) Such extension or separate policy may be subject to
deductibles not to exceed thirty-(30) Days' delay.
4) Delay coverage is extended for expenditures that are necessary
to reduce any insured loss of income, projected loss of
earnings and continuing expenses plus debt service of Owner
caused by damage or loss which occurs during the policy to any
property required to be insured in subsection A. above,
including contingent loss as a result of damage or destruction
of key equipment in transit (whether inland or ocean marine
transit) or while completed and in temporary offsite storage
at any premises, including the manufacture.
5) The policy covering delay in opening coverage shall not
contain any exclusion or provision offsetting amounts payable
under the policy to any insureds by any amounts otherwise
payable to the insured for delay in opening under the
Agreement, including, but not limited to Contractor's
obligations to Owner for liquidated damages due to delay.
6) The delayed opening coverage shall insure, without limitation,
delay due to loss or damage covered by a guaranty or warranty
caused by an insured peril.
7) The delayed opening coverage shall remain in effect until the
earlier of:
7
<PAGE>
a) passage of risk of loss to Owner in accordance with
Article 8.2; or
b) termination of the Agreement;
provided, however, that the applicable period of indemnity
under such policy shall not be terminated by the expiration or
cancellation of the policy with respect to losses payable
hereunder in direct consequence of the insured physical loss
or damage occurring prior to such expiration or cancellation.
Contractor shall make every reasonable effort to protect any
Equipment subject to ocean transit against risk of loss or damage.
This protection may be provided by the terms of delivery of such
Equipment from Subcontractors, or by Contractor-provided insurance.
Delay in opening cover shall protect Owner and Contractor against
delay in opening from any conveyance to the jobsite, including, but
not limited to ocean cargo and air transit, with deductibles not to
exceed 30 Days.
C. Commercial General Liability Insurance
Owner shall maintain third party liability insurance covering
Owner's legal liability to others as a result of bodily injury,
property damage and personal injury arising from the construction,
use, operation and maintenance of the Facility. Such policy shall be
written on an occurrence basis with a limit of liability of
$1,000,000. Coverage shall include, but not be limited to, premises
operations, explosion, collapse, and underground hazards, broad form
property damage, blanket contractual liability, and personal injury
liability.
D. Excess/Umbrella Liability Insurance
Owner shall maintain Umbrella Liability insurance written on an
occurrence basis and providing coverage limits in excess of the
primary limits. The limit of such umbrella coverage shall not be
less than $10,000,000 on a follow form basis.
Owner shall not request or acquiesce to any material alteration to any of
the insurance coverages required to be maintained by Owner and shall give
Contractor prompt notice of any material alteration to any of such
insurance coverages, but in no event later than five (5) Days after it
learns of such material alteration.
7. PROPERTY INSURANCE-LOSS ADJUSTMENT.
Any insured loss provided by Owner thereunder shall be adjusted with Owner
and Contractor and made payable to Owner and Contractor as their interests
may appear, subject to any applicable mortgagee clause.
8
<PAGE>
PART III - GENERAL
8. WAIVER OF SUBROGATION
All insurance policies supplied by any party hereunder shall include a
waiver by the insurers of any right of subrogation against any other party
under such insurance policies and of any right of the insurers for
counterclaim or any other deduction, whether by attachment or otherwise,
in respect of any liability of either party.
9. NO EFFECT ON LIABILITY
The requirement that Contractor or Owner furnish certain minimum insurance
coverage is not to be interpreted as in any way limiting the liability of
Contractor, or Owner as the case may be, nor does either party, by
furnishing or requiring evidence of certain minimum insurance, assume, or
intend to assume, any liability that it would not otherwise have in the
absence of such a requirement.
9
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Air Dryers Zum
Lectrodryer
Hankison
Pneumatic Products Corp.
- ------------------------------------------------------------------------------------------------------
Air Compressors Sull-Air
Ingersoll-Rand
Gardner Denver
Atlas Copco
Joy
- ------------------------------------------------------------------------------------------------------
Architectural H.B. Zachry
- ------------------------------------------------------------------------------------------------------
Batteries & Chargers Exide
GNB
CND
Solidstate Controls
Alcad
Saft-American
- ------------------------------------------------------------------------------------------------------
Boiler Feed Pumps Goulds Pumps, Inc.
Ingersoll-Dresser
KSB Pumps, Inc.
Byron Jackson
Sulzer Bingham
- ------------------------------------------------------------------------------------------------------
Building Construction Carothers
PSI
Roy Anderson Corp.
WG Yates & Sons
Hill Brothers
Four F Corp.
- ------------------------------------------------------------------------------------------------------
Bus Duct Calvert Control Power Limited
Delta-Unibus
CPC
Square D
ABB Power T&D, Inc.
</TABLE>
-1-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Chemical Cleaning GE-Canada
Rust Industrial Cleaning
Hydrochem
Boyle Energy Services & Technology
Astro Pak Corporation
Site Management Services
International
- ------------------------------------------------------------------------------------------------------
Chemical Feed Equipment Johnson March Systems
Sentry
CEGELEC
Waters
- ------------------------------------------------------------------------------------------------------
Chrome Piping Tioga
Von-Leeuwen
Consolidated
Hughes Supply
- ------------------------------------------------------------------------------------------------------
Circulating Water Pumps Suzer Bingham Goulds
Ingersoll Dresser CBI
Byron Jackson (BWIP)
- ------------------------------------------------------------------------------------------------------
Combustion Turbine Gen. Westinghouse
- ------------------------------------------------------------------------------------------------------
Concrete Supply Batesville Concrete Products, Inc.
Panola Ready Mix
- ------------------------------------------------------------------------------------------------------
Condensate Pumps Sulzer Bingham Goulds
Ingersoll Dresser
Byron Jackson (BWIP)
KSB
Peerless
</TABLE>
-2-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Continuous Emissions Johnston
Monitoring System Westinghouse Columbia Scientific
Thermo-Electron Spectrum
Horiba Shamrock
- ------------------------------------------------------------------------------------------------------
Condenser KVB
Foster Wheeler Energy Corp.
Ecolaire
Senior
Yuba
Holtec
Graham
- ------------------------------------------------------------------------------------------------------
Control Valves/Steam Conditioning Fisher Dresser
Desuperheaters Copes Vulcan
Valtek
Masonellan
Yarway
- ------------------------------------------------------------------------------------------------------
Cooling Tower BIG
Marley
Ecodyne
BAC-Pritchard
Hamon
Zum-Balcke-Durr
Thermal Dynamic Cooling Tower
- ------------------------------------------------------------------------------------------------------
Demineralizer Equipment Graver Water
Hungerford & Terry
Glegg Water Conditioning
Aquatech
U.S. Filter
- ------------------------------------------------------------------------------------------------------
Distributed Control System Bailey Controls
Westinghouse
Foxboro Company
Honeywell
- ------------------------------------------------------------------------------------------------------
Engineering Black & Veatch
</TABLE>
-3-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Field Erected Tanks RECO Constructors Columbia Tank
Pitt-Des Moines, Inc. Trumbo
Titan Fabricators
CBI Na-Con, Inc.
Brown-Minneapolis Tank
Buffalo Tank Corp.
National Steel Erection
Advance Tank
- ------------------------------------------------------------------------------------------------------
Fire Protection Graver
F.E. Moran, Inc.
Grinnell Fire Protection
Automatic Sprinkler Corp.
Milton J. Wood
- ------------------------------------------------------------------------------------------------------
Fire Water Pumps Aurora
Fairbanks Morris
Patterson
Johnston Pump
ITT A-C Corp.
- ------------------------------------------------------------------------------------------------------
Heat Recovery Steam Gen. Deltak Corp.
Nooter/Eriksen Cogen Systems, Inc.
ABB/CE
H. Vogt Co.
Foster Wheeler
- ------------------------------------------------------------------------------------------------------
Heavy Haul Equipment H.B. Zachry
American Heavy Rigging and Hauling
Guy M. Turner
Williams Crane and Rigging
Barnhart
- ------------------------------------------------------------------------------------------------------
Insulation H.B. Zachry
The Young Group
Insulation & Refractories Services
- ------------------------------------------------------------------------------------------------------
Miscellaneous Pumps Goulds
Ingersoll Dresser
Peerless
Byron Jackson
Aurora
</TABLE>
-4-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Miscellaneous Electric Equip. Westinghouse Controlled Power
(Incl. Switchgear, Breakers, MCC) Square D PowerCon Corp.
ABB Power Dist. Toshiba International Corp
General Electric Central Electric
Siemens HV Sales
- ------------------------------------------------------------------------------------------------------
Painting H.B. Zachry or "LATER"
- ------------------------------------------------------------------------------------------------------
Pipe Fabrication IPS
Interpro Fabricators
The Shaw Group
BendTec
- ------------------------------------------------------------------------------------------------------
Pipe Supports Lisega
Basic Engineering
Grinnell
- ------------------------------------------------------------------------------------------------------
Heat Exchangers Graham Manufacturing Mueller (Paul)
Yuba Heat Transfer Bos Hatten
Alfa-Laval
Trantor
APV
- ------------------------------------------------------------------------------------------------------
Power Transformers ABB Power T&D Co.
Ferranti-Packard General Electric
Magnetek
North American Trans.
Siemens
Virginia Transformers (For Aux
Transformers Only)
- ------------------------------------------------------------------------------------------------------
Pre-Engineered Buildings Standard Inc. Structures Corp.
United Structurers of America
Parkline, Inc. Steelox
Inland Building Inland
Butler Mid-West Steel
Varco-Pruden Behlen
Star Building Systems Chief
United Steel Structures
</TABLE>
-5-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Rebar Fabrication American Steel Company or "LATER"
- ------------------------------------------------------------------------------------------------------
SCR Joy-Kawasaki
Mitsubishi
Hitachi
Englehard
Peerless
- ------------------------------------------------------------------------------------------------------
Sitework H.B. Zachry or "LATER"
- ------------------------------------------------------------------------------------------------------
Steam Turbine Generator ABB
- ------------------------------------------------------------------------------------------------------
Steel AFCO Steel Smi-Owen
Cives Steel Company Federal Steel Supply
Steel Fabricators of Monroe Qualico
Kline Iron & Steel Co.
Shelby Steel Fabricators
- ------------------------------------------------------------------------------------------------------
UPS SCI
Custom Power Systems
Constant Power Manufacturing Co.
Solidstate Controls, Inc.
- ------------------------------------------------------------------------------------------------------
Valves - Butterfly Keystone
Pratt
Bray
Centerline
</TABLE>
-6-
<PAGE>
EXHIBIT P
List of Approved Subcontractors
<TABLE>
<CAPTION>
======================================================================================================
MAJOR EQUIPMENT SUPPLIERS AND SUBCONTRACTORS
- ------------------------------------------------------------------------------------------------------
EQUIPMENT VENDOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Valves - Forged Steel Vogt
Conval
Edwards
Velan Yarway
- ------------------------------------------------------------------------------------------------------
Valves - General Service Cast Steel Crane Pacific
Zidell
Newco
Velan
- ------------------------------------------------------------------------------------------------------
Valves - HP Cast Steel Velan
Atwood and Morrill
Dresser
Crane Pacific
Edwards
- ------------------------------------------------------------------------------------------------------
Water Treatment Equipment U.S. Filter Glegg
Graver Water
Hungerford Terry
AquaTech
Infilco Degremont
- ------------------------------------------------------------------------------------------------------
Water Quality Control System Johnson March Systems
Sentry
CEGELEC
Waters
- ------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
EXHIBIT Q
PLANS/SPECIFICATIONS
1.0 GENERAL
This Exhibit describes the minimum requirements regarding Contractor's
preparations of the plans and specifications for design, construction, startup,
testing, and operator training of the Facility.
2.0 DESIGN PLANS AND SPECIFICATIONS
The Contractor shall provide to Owner all documents indicated in Table Q-1 of
this exhibit. The submittal of documents shall be in general accordance with the
detailed schedule to be developed by the Contractor as part of the initial
design process for the project. The Owner shall have the right to approve all
documents in the table listed as "approval" and shall have the right to provide
comments on all documents listed as "information." The following subsections
provide detailed requirements for various documents to be developed by the
Contractor.
2.1 Project Instruction Manual or Memorandum
The Contractor shall prepare and submit a Project Instruction Manual or
Memorandum which defines the following items for the project:
(1) Project correspondence and documents shall be addressed to Owner and
the Independent Engineer as follows:
Owner: Independent Engineer:
Later Later
Attention: Later Attention: Later
(2) Document Distribution
(3) Project File Index System
(4) Drawing Numbering System
(5) Specification Numbering System
2.2 Project Design Manual
In the initial stages of the project, the Contractor shall develop and submit a
Project Design Manual which will define the design criteria for the Facility.
Contents of the Project Design Manual shall include the following items as a
minimum:
o Design Criteria for each Engineering Discipline.
o Results of the Site Subsurface Investigation.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 1 of 7 7/6/98
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TABLE Q-1
CONTRACTOR DOCUMENT SUBMITTALS
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Document Submittal Item Number of Copies Owner Review
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Project Submittal Index Approval
Progress Reports Information
Schedules Information
Overall EPC Schedule Information
Procurement Bid/Award/Delivery Schedule Information
Factory Test/Inspection Schedule Information
Short-term Look Ahead Construction Schedule Information
Short-term Look Ahead Startup Schedule Information
Project QA/QC Design and Construction Manual Information
Project Design Manual Approval
Project Instruction Manual or Memorandum Information
Engineering Drawings and Purchase Specifications
Site Arrangement Drawing Approval
Plant Arrangement Drawing Approval
P&IDs Approval
Electrical One-Line Drawings Approval
Control System Logic Diagrams Approval
Control Room, Office, and Warehouse Layout Approval
Plant Communication Drawings (for telephone locations) Approval
Construction Issue Drawings Information
Equipment Fabrication and Shipping Reports Information
Equipment Factory Test Reports Information
Vendor Shop Drawings Information
Engineering Change Notices Information**
Field Change Notices Information**
Construction Safety Manual Information
Material Safety Data Sheets Approval
Construction Test Procedures Information
Construction Test Records Manual Information
Subsystem Startup Turnover Packages Approval
Startup Manual Approval
Startup Testing Procedures Approval
Startup Test Records Manual Approval
Acceptance Test Procedure Approval
System Descriptions (Part of Project Design Manual) Information
Integrated Facility Operating Manual Approval
Instruction Manuals Information
O&M Training Program Manual Approval
</TABLE>
Notes:
** Approval will only pertain to contract change orders.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 2 of 9 7/6/98
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE Q-1 (CONTINUED)
CONTRACTOR DOCUMENT SUBMITTALS - AS BUILT DRAWINGS AND INFORMATION LISTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CIVIL STRUCTURAL
Site Arrangement & Topography
Site Grading and Drainage, Fencing, Site Yard Utilities
Foundations-Generation-Area
Structural Steel & Framing
ELECTRICAL/CONTROL
Overall One-Line Diagram
One-Line Diagrams
Metering and Relaying One-Line Diagrams
BOP One-Line Diagrams
Metering and Relaying Three-Line Diagrams
BOP Three-Line Diagrams
Panelboard Diagrams
Vital AC&DC One-Lines
Schematic Diagrams
Circuit and Raceway List
MECHANICAL DRAWINGS
Plant Arrangement Drawings
Piping and Instrument Diagrams
Pipeline List
Valve List
Equipment List
Accessory Equipment List
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 3 of 9 7/6/98
<PAGE>
o Contractors equipment numbering methods.
o Summary of the facilities design systems and their associated system
codes.
o System descriptions, including system functions.
o Electric utility interface requirements (provided by LSP).
o Architectural finish (paint colors, floor/wall/ceiling, treatments).
o Water/mass balances.
o Cycle heat balances (heat balances should be at various ambient
temperatures, natural gas, and various operating points).
2.3 Project Submittal Index
The Contractor shall develop a project submittal index that will list all
documents and drawings to be provided to the Owner. The document shall include
numbers, titles, revision numbers, and dates (actual and expected) to aid in
monitoring the progress of such submittals. The initial index shall be provided
to the Owner with the third Progress Report. The document shall be revised with
each progress report. This will serve to keep current the status of all
documents and drawings.
2.4 Status Reports
The Contractor shall develop progress reports as defined in the EPC Agreement
for submittal to the Owner and the Independent Engineer. These progress reports
shall include the following information as a minimum:
o Project executives statement.
o Summary of major activities completed since the last status report.
o Summary of significant activities planned for the upcoming period.
o A description of the status of major equipment procurement and delivery.
o Identification of any safety accidents, events, and etc.
o List of any problem areas and a plan for correction.
o Updated project submittal index.
o Updated schedule (Bar Chart).
o Updated action item list (Note: this would be a summary of actions
discussed between Contractor and Owner on a more frequent basis).
o Updated contract status with list of approved and pending change orders.
2.5 Drawings
Submittal of drawings shall generally comply with the following guidelines:
o Vendor shop drawings shall be in sufficient detail to indicate the
kind, size, arrangement, and weights of each component.
o Engineering and vendor shop drawings shall be clearly marked with
the project name, Unit designation, contract number, and
Contractor's name.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 4 of 9 7/6/98
<PAGE>
o Drawing sizes shall be of standard dimensions (8.5xl1, 11x17, etc.).
Drawings shall be folded or rolled to 8.5x11 for submittal based on
Owner's preference. Folded drawings shall be folded in such a manner
that the title block is clearly visible.
2.6 Instruction Manuals
The Contractor shall provide instruction manuals for all Facility equipment. The
instruction manuals shall completely describe the unloading, storage,
installation, operation and maintenance of the equipment. These instruction
manuals shall be of sufficient detail to allow the Owner to monitor construction
and commissioning of the Facility as well as for operation and maintenance.
Minimum content to be included shall be as follows, as applicable for the
equipment:
o Specifications, test data, and performance curves.
o Description of the equipment.
o Pre-installation procedures.
o Installation procedures.
o Operating procedures.
o Maintenance instructions including preventive maintenance schedule.
o Inspection procedures.
o Troubleshooting guide.
o Fluid system schematics.
o Control logic diagrams.
o Electrical wiring diagrams Illustrated parts breakdown.
o Assembly drawings (approved for construction).
o Parts list with manufacturers numbers.
o Lubrication specifications.
o List of maintenance tools furnished with the equipment and required
for maintenance.
The instruction manuals shall be bound in heavy duty three ring binders.
2.7 System Descriptions
The system descriptions will be the final version of system design
specifications and descriptions that were developed for the project design
manual. This document shall be updated following the startup process to reflect
the as-built status of the Facility systems and equipment. The document shall
contain the as-built P&IDs and one-line Drawings (P&IDs and one-line drawings to
be included separately). The document shall contain such items as the system
function, major component descriptions, system description, basis of design and
control and instrumentation philosophy.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 5 of 9 7/6/98
<PAGE>
2.8 Integrated Facility Operating Manual
An Integrated Facility Operating Manual shall be developed that will provide the
Owner with a comprehensive set of instructions for operating the Facility. The
Integrated Facility Operating Manual shall present a logical sequence of
operator actions required to perform the following tasks: (1) place the entire
Facility and individual Units into service, (2) operate the plant (including
procedures for changing loads), and (3) to remove the Facility and/or operating
Unit from service. Major sections of the manual shall include: integrated
operating philosophy, system operating instructions, and overall Facility
startup and shutdown procedures.
2.8.1 System Operating Instructions
The system operating instructions section of the Integrated Facility
Operating Manual shall include detailed operating procedures for each
system in the Facility. These operating instructions shall include as a
minimum: (1) startup instructions for each system, (2) operating
instructions for normal operation of each system, (3) instructions for
system shutdowns, (4) list of all system safety functions.
2.8.2 Overall Facility Startup Procedures
The overall facility startup procedures section of the Integrated Facility
Operating Manual shall include the procedures required to start the entire
Facility and individual Units. These startup procedures shall include as a
minimum: (1) the auxiliary power required to support the various startup
profiles, and (2) a sequence of starting up the various systems in the
plant to support an organized and methodical startup.
2.9 Startup Manual
The startup manual shall contain all administrative and technical guidelines for
conducting the startup program and shall include the following as a minimum:
o Subsystem startup packages, including scoped drawings, cable and
raceway list, equipment list, and instrument list.
o Organization chart.
o Test and operating procedures preparation schedule.
o Startup summary schedule.
o Sample data sheets for instrument, relay and meter calibration,
electrical tests, mechanical systems tests, and construction and
startup sign-off sheets.
o Project safety clearance procedures.
o Equipment/system release and turnover.
o Administrative procedures related to startup activities, including
control of lifted leads and jumpers, test equipment calibration
design/set point change approval, and startup problem reports.
o Clearance and tagging procedures.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 6 of 9 7/6/98
<PAGE>
o Summary of equipment testing.**
o Summary of system testing. **
o Summary of functional testing. **
o Operational testing summary. **
o Work responsibility matrix for startup tasks.
o Description of contractor startup activities.
o Description of environmental compliance tests.
** Note: These items may be described in a narrative format of how the checkout,
startup, and commissioning tasks are carried out.
2.10 Subsystem Turnover Packages
The Contractor shall develop a subsystem turnover package for each startup
system. The subsystem turnover package shall contain all information and data
pertinent to the design, construction, and commissioning of a subsystem. The
information shall be contained in a heavy duty three ring binder and organized
to facilitate optimum access to the design documents and baseline test data
contained within the subsystem turnover packages.
Subsystem boundaries as defined on scoped project P&IDs and one-line drawings
which are used to develop subsystem turnover packages. System design drawings,
acquired equipment and system test data, and system deficiency lists compiled
jointly by the lead startup engineer and the startup manager shall be filed into
the respective subsystem packages for transmittal to the Owner.
Each subsystem turnover package shall contain a turnover control sheet. The
turnover control sheet shall have signature blocks which, when signed and dated,
shall signify the formal transfer of control and responsibility for a system
from the construction manager to the startup manager and from the startup
manager to the Owner.
The subsystem turnover packages shall contain the following:
o Table of Contents.
(A) Outline of contents.
(B) List of all subsystem components.
o Construction test data.
(A) Hydrostatic, pneumatic, and leak tests.
(B) Piping subsystem velocity flushes (procedures, flow paths,
acceptance criteria. and attested results).
(C) High potential and meggar tests.
(D) Initial equipment alignment, lubrication, and adjustment.
(E) Wiring integrity and continuity tests.
o Field equipment/subsystem commissioning data.
o Field equipment trial operation tests.
o System P&IDs with system boundaries marked.
o System control wiring diagrams.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 7 of 9 7/6/98
<PAGE>
o Circuit verification records provided.
o System logic diagrams (turned over separately).
o Subsystem punchlist.
3.0 OPERATOR TRAINING PLAN
The Contractor shall provide formal training and instruction for the Owner's
operating and maintenance personnel. The purpose of the training will be to
familiarize them with equipment/system design philosophy, operation, and routine
maintenance procedures of this Facility. Owner will provide operators familiar
with similar types of combined cycle plants. Lesson shall be developed from the
system descriptions, plant design documents, and vendor supplied equipment
documentation. The training program shall be conducted primarily in an on-site
classroom, supplemented with periodic trips to the field to closely examine the
installed equipment and trace system flowpaths. Applicable vendors shall provide
training on major systems and equipment.
The training program plan shall be based on the appropriate operating
instruction manuals and shall provide specific instructions in the design,
operations, and troubleshooting, of facility equipment. Specifically the program
plan shall include at a minimum:
o Detailed descriptions, including graphic handouts such as charts
and/or sketches, as applicable, or the system and attendant major
components.
o Instructions necessary for the normal startup, operation, and
shutdown of mechanical and electrical equipment, auxiliaries, and
accessories.
o Emergency procedures and unusual operations.
o Routine maintenance and troubleshooting.
o Safety procedures and precautions.
The training program agenda shall include as a minimum:
o Gas and Steam Turbine Operation
o Gas and Steam Turbine Maintenance
o Balance of Plant Systems
o HRSG Operations and Maintenance
o DCS Overview and Operations
Following the formal training program, the Contractor shall direct the Owner's
operating personnel to apply their skill through the active participation in the
normal startup and shutdown of systems and equipment. Specific exercises shall
include pre-operational valve and circuit breaker lineups,
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 8 of 9 7/6/98
<PAGE>
pre-maintenance system and equipment isolation (including placement of safety
clearances), and normal operation of systems and equipment in all modes.
- --------------------------------------------------------------------------------
LS Energy Limited Exhibit Q
Batesville Generation Facility Page 9 of 9 7/6/98
<PAGE>
EXHIBIT R
OWNERS OBLIGATIONS
<TABLE>
<CAPTION>
Date Required
Item After 1-Jul-98
- --------------------------------------------- --------------
<S> <C> <C>
* Potable Water 13
* Municipal Sewage System 13
Wastewater Discharge 48
Electricity - Backfeed Power 61
Operating Personnel for Training 52
Cooling Tower for Chemicals 65
Lube Oil 61
Fuel Gas 73
Boiler Water Chemicals 65
Electricity - Accept Power Generated 75
Raw Water Supply **
</TABLE>
* Potable water, Municipal sewage systems could be supplemented by:
- Portable Toilets
- Bottled Water
** Raw Water Supply Required for:
<TABLE>
<CAPTION>
Week Approximate Usage
<S> <C> <C>
- Underground piping hydrostatic testing 39 150,000 Gallons
- Circulating Water pipe hydrostatic testing 46 100,000 Gallons
- Raw Water Tank Hydrostatic testing 48 750,000 Gallons
- Demineralized Water Tank Hydrostatic Testing 48 1,000,000 Gallons
- Flush of the underground water systems Until piping is clean for
usage
Later requirements for Raw Water Supply
- Demineralizer system in service 64
- Start Boiler hydrostatic testing 68
- Start Boiler Chemical Clean 71
- Site Fire protection in place 68
</TABLE>
If potable water is required to be used instead of raw water supply
provisions may need to be made to increase flows or available quantities.
<PAGE>
EXHIBIT S
REQUIREMENTS OF PROJECT AGREEMENTS
The following table is the understanding between Owner and Contractor regarding
the Contractor's commitment and/or the Facility's design capability to meet the
requirements referenced below as imposed upon Owner and/or the Facility under
the Power Purchase Agreements with Aquila Power Corporation and Virginia
Electric and Power Company and under the Interconnection Agreements with Entergy
and TVA. Capitalized terms used in the Power Purchase Agreements (and referenced
in this Exhibit S) shall have the meanings therein defined and defined at the
end of this Exhibit S unless otherwise noted in this table [Seller and Purchaser
as used in this Exhibit S shall not be related to any such term in Section 1.0
of the EPC Agreement]. Operational and maintenance requirements imposed after
Substantial Completion are riot the responsibility of Contractor.
Aquila Power Corporation
- --------------------------------------------------------------------------------
1 PPA Section 4.3 (a)
Section #
All Net Electrical Output shall be measured at the
Electricity Metering Points and shall meet the
specifications set forth in Appendix E (Requirements of
Exhibit E below).
Appendix E
Electricity generated by the Dedicated Unit and
delivered to Purchaser shall be three (3) phase, 60
cycle, shall be at 161 kV.
--------------------------------------------------------------------------
Contractor/ The Facility will be designed to meet these
Facility requirements.
Compliance
--------------------------------------------------------------------------
Clarification Electrical Metering is not provided as part of the
Contractors Scope of Supply.
- --------------------------------------------------------------------------------
2 PPA Section 5.1 (b)
Section #
Starting sixty (60) Days after the Effective Date,
Seller shall report to Purchaser, each Month, on the
construction status and completion schedule for the
Dedicated Unit and the Common Facilities. Such report
shall, at a minimum, provide a schedule showing items
completed and to be completed, the expected Commercial
Operation Date, and the estimated percent complete.
--------------------------------------------------------------------------
Contractor/ Section 3.13 of the EPC Agreement is deemed to satisfy
Facility this requirement.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
3 PPA Section 6.2 (d)
Section #
The Dedicated Unit shall be capable of operating within
a deviation band of +/- 1% during steady state operation
between 70% of Standard Capacity and the Contract
Capacity.
--------------------------------------------------------------------------
Contractor/ Compliance with Exhibit A is deemed to satisfy this
Facility requirement.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
4 PPA Section 9.5
Section #
Purchaser desires to have remote access to devices wired
to Seller's Distributed Control System ("DCS") related
to the Dedicated Unit. Seller shall provide a
communications port from the DCS in order for Purchaser
to have remote (read-only) access to these DCS data
points.
--------------------------------------------------------------------------
Contractor/ The Facility shall be designed to meet this requirement.
Facility
Compliance
--------------------------------------------------------------------------
Clarification Contractor to provide interface in DCIS manufacturer's
standard format. RTU for interface to be by Owner.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
5 PPA Section 11.1 (a)
Section #
Prior to or on the Commercial Operation Date, Seller
shall establish the Contract Capacity in accordance with
the procedures set forth in Appendix A. Seller shall
provide Purchaser with reasonable notice of and
opportunity to, attend each test of Contract Capacity.
Seller shall bear the costs and expenses of such annual
tests, provided that Purchaser shall be responsible for
any of its own costs or expenses incurred by it in
connection with monitoring or witnessing such tests.
Appendix A
Testing Procedures for Contract Capacity
This Appendix A defines the method for
determining Contract Capacity at reference conditions
of 95 degrees Fahrenheit and sixty percent (60%)
relative humidity (summer conditions) [and 59 degrees
Fahrenheit and sixty percent (60%) relative humidity
(winter conditions) tendered to the Purchaser pursuant
to the terms of this Agreement. [The previous comment
is stricken, as it does not apply to the Contractor].]
A. Requirement for Capability Test Procedure
A test shall be conducted prior to commercial
operation to determine the Contract Capacity. The test
shall be conducted in accordance with a test procedure
to be developed by the Facility contractor, which shall
incorporate all of the test criteria and requirements
specified in this Appendix A.
B. Development of Test Procedure
This procedure shall include, but not be
limited to, the following subjects: arrangement and
form of the test, log sheets, duration, readings to
be taken, instrumentation, and method of data
recording. Development of the test procedure shall
generally follow the guidelines contained in ASME
PTC 46, "Overall Plant Performance". [The annual
Capability Test is to be conducted at an ambient
temperature within 10 degrees Fahrenheit of rating
dry bulb temperature. Retests shall be conducted at
ambient conditions as close to rating conditions as
practicable. [The previous comment is stricken, as it
does not apply to the Contractor.]]
The following general guidelines shall be included
in the development of the test procedure for the
Dedicated Unit:
(a) The combustion turbine shall be subjected to a
full compressor and/or turbine cleaning prior to
conducting the test.
(b) All appropriate auxiliary equipment associated
with the Dedicated Unit shall be in service.
- -------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
(c) Test data shall be collected with plant
instruments, except that Seller shall be allowed
to substitute test instrumentation for plant
instrumentation, provided that the test
instrumentation is of greater accuracy.
Determination of Net Electrical Output shall be
with the metering devices located at the
Electricity Metering Points indicated in Appendix
B. Ambient conditions at the time of running
capability tests shall be recorded so that
appropriate adjustments can be made when
establishing seasonal capabilities. Conditions to
be recorded are: dry-bulb temperature, wet-bulb
temperature, barometric pressure, and condenser
cooling water inlet temperature.
(d) For determination of Standard Capacity, duct
firing shall not be in service and the combustion
turbine shall be operated at its base load rating,
without steam injection.
(e) For determination of Supplemental Capacity,
duct firing shall be in service and the combustion
turbine shall be operated at its base load rating,
with steam injection.
(f) For determination of both Standard Capacity
and Supplemental Capacity, the combustion turbine
evaporative cooler shall be in service.
(g) The results of the tests shall be adjusted to
the Standard Capacity and Supplemental Capacity
reference conditions of 95 degrees Fahrenheit and
sixty percent (60%) relative humidity.
(h) Once steady state conditions have been
established, a two (2) hour performance test
shall be conducted divided into four (4) one-half
hour test periods, with the test results being
the average of the four test periods.
(i) Parameters affecting performance should be
held at steady state conditions during each of the
test periods.
[(j) When the total output of the Facilities is
reduced due to restrictions placed upon the
output of individual Units through the operation
of the Clean Air Act or similar legislation, then
the total of the individual Unit ratings shall not
exceed the modified Facilities capacity. [The
previous comment is stricken, as it does not apply
to the Contractor]
(k) The Fuel used during testing shall be the
general type expected to be used during peak load
conditions. [The previous comment is stricken, as
it does not apply to the Contractor]
(l) The Contract Capacity, Standard Capacity
and Supplemental Capacity shall each be determined
separately for each Unit at the Facility, except
that in the event multiple Unit capability at the
Facility is limited by Fuel limitations,
transmission limitations or other auxiliary
devices or equipment that is considered a Common
Facility, each Unit shall be tested
simultaneously and shall equally share in the
limitation. [The previous comment is stricken, as
it does not apply to the Contractor]]
-------------------------------------------------------------------------
Contractor/ All requirements above are deemed to be satisfied
Facility by compliance with Exhibit A of the EPC Agreement.
Compliance
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
Clarification Contractor shall be responsible for developing the test
procedure referenced in Exhibit A of the EPC Agreement.
- -------------------------------------------------------------------------------
6 PPA Appendix C (b), (c), (f), (g)
Section #
Design Limits
The Design Limits for the Dedicated Unit shall be the
following:
(b) The minimum load for the Dedicated Unit
shall be equal to seventy percent (70%) of
Standard Capacity;
(c) The capacity to ramp in the range of
operations from minimum load to the maximum
Standard Capacity at an average rate shall
be equal to no less than five (5) MW per
minute ("Guaranteed Ramp Rate");
(f) The maximum time from Purchasers notice of
Start-Up to minimum load shall be as follows
("Guaranteed Start-Up Time"):
(i) If a Dedicated Unit has been out of
operation for less than forty-eight (48)
hours, it shall achieve minimum load within
one hundred and thirty (130) minutes
following Purchasers notice of Start-Up; and
(ii) If a Dedicated Unit has been out of
operation for more than forty-eight (48)
hours, it shall achieve minimum load within
two hundred and ten (210) minutes following
Purchasers notice of Start-Up; and
(g) The power factor of Net Electrical Output
from the Dedicated Unit shall be in the
range from 0.90 lagging to 0.95 leading.
-------------------------------------------------------------------------
Contractor/ Compliance with Exhibit A of the EPC Agreement is deemed
Facility to satisfy these requirements.
Compliance
--------------------------------------------------------------------------
Clarification The power factor of a Dedicated Units combustion turbine
generator and steam turbine generator, as determined at
the generator terminals, will meet the requirements of
0.90 lagging to 0.95 leading.
- --------------------------------------------------------------------------------
5
<PAGE>
Virginia Electric and Power Company
- --------------------------------------------------------------------------------
1 PPA Section 4.4 (a)
Section #
All Net Electrical Output shall be measured at the
Electricity Metering Points and shall meet the
specifications set forth in Appendix F.
Appendix F
The specifications for the Net Electrical Output shall
be defined as applicable ranges for acceptable voltage,
frequency and power factor contained in the Entergy
Interconnection Agreement and the TVA Interconnection
Agreement. (Only to the extent that Entergy and TVA
Interconnection Agreement requirements are elsewhere
within this Exhibit S)
--------------------------------------------------------------------------
Contractor/ Compliance with this requirement is deemed to be
Facility satisfied by the requirements of the EPC Agreement.
Compliance
--------------------------------------------------------------------------
Clarification Electrical Metering is not provided as part of the
Contractor's Scope of Supply.
- --------------------------------------------------------------------------------
2 PPA Section 5.3 (a).(i)
Section #
Seller shall provide to Purchaser from time to time the
following information with respect to the Dedicated
Units, the Common Facilities and the Lateral Pipeline:
(i) The notice to proceed for Commencement of
Construction and Monthly reports on the status of
construction through the final Commercial
Operation Date;
--------------------------------------------------------------------------
Contractor/ Compliance with this requirement is deemed to be
Facility satisfied by the requirements of the EPC Agreement.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
3 PPA Section 6.1
Section #
Automatic Generation Control. Each Dedicated Unit shall
be fully Dispatchable by and capable of automatic
generation control within the Design Limits and shall
operate on such control if so directed by Purchaser or
the Control Center on behalf of Purchaser. Purchaser, or
the Control Center on behalf of Purchaser, shall have
the sole discretion to Dispatch the Net Electrical
Output from each Dedicated Unit up to the Actual
Contract Capacity of such Dedicated Unit; provided that
Dispatch shall be consistent with the Design Limits and
(to the extent not inconsistent with the Design Limits)
Prudent Industry Practices and manufacturers' guidelines
and recommendations generally applicable to such
equipment; provided, further, that to the extent that
any Dedicated Unit, as constructed, can utilize a higher
ramp rate than the ramp rate included in the Design
Limits, Seller shall allow such Dedicated Unit to
operate with such higher ramp rate.
--------------------------------------------------------------------------
Contractor/ Compliance with this requirement is deemed to be
Facility satisfied by the requirements of the EPC Agreement.
Compliance
--------------------------------------------------------------------------
Clarification (1) This will only be allowed to the extent that the
units have pre-prepared for transition to steam
augmentation and other power augmentation.
(2) The Contractors scope of supply does not include the
remote terminal units (RTUs).
(3) The Contractor does not recommend the allowance of
remote operation which entails the starting or stopping
of combustion turbines, steam turbines, or HRSG duct
firing.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
4 PPA Section 6.2 (e)
Section #
In the event that the steam turbine of a Dedicated Unit
is not available, Purchaser shall have the right to
Dispatch the gas turbine of such Dedicated Unit;
provided that: (i) such Dispatch shall be consistent
with manufacturers' guidelines, [Governmental Approvals
and Prudent Industry Practices, (ii) Section XII shall
not be applicable with respect to operation in such
mode, (iii) Purchaser shall reimburse Seller for any
additional costs associated with the Dispatch of the
gas turbine in this mode instead of the combined cycle
mode on the basis of actual cost but shall not exceed
110% of Seller's estimate of such additional costs,
provided that Seller shall notify Purchaser of the
estimated amount of any such additional costs prior
to any such Dispatch by Purchaser, and [The previous
comment is stricken, as it does not apply to the
Contractor]] (iv) such Dispatch shall be limited only
to extraordinary circumstances and shall not, in any
event exceed 40 hours per Contract Year.
--------------------------------------------------------------------------
Contractor/ Compliance with this requirement is deemed to be covered
Facility by Exhibit I, Scope of Services and Scope of Supply.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
5 PPA Section 8.6
Section #
Fuel Oil Alternative. It after the Effective Date, the
operation of the Facility becomes economically
infeasible due to the cost or availability of Fuel, but
operation of the Facility on fuel oil would present an
economically viable alternative, then Purchaser shall
have the option to require Seller to construct the
necessary modifications to the Facility to facilitate
operation of the Dedicated Units on fuel oil; provided
that in such a case, Purchaser shall hold Seller
harmless from all capital and incremental operation and
maintenance costs and performance impacts resulting from
such modifications; and provided, further, that any such
modifications shall be made in accordance with, and
subject to, (i) Prudent Industry Practices, (ii)
Governmental Approvals and (iii) manufacturers'
warranties and recommendations. Notwithstanding the
foregoing, Seller shall not be required to incorporate
the capability for fuel oil operation in the original
design or construction of the Facility. Seller shall
designate and set aside an appropriate area within the
Facility Site for fuel oil storage unloading and
handling sufficient to operate each Dedicated Unit at
the Committed Capacity for no less than 24 hours;
provided that Seller shall attempt to designate such
area in such a way as to maximize Seller's capacity to
store fuel oil at the Facility Site.
--------------------------------------------------------------------------
Contractor/ The Contractor has allowed space in the Facility layout
Facility provided area to accommodate fuel oil storage in
Compliance accordance with the above requirements. No other
Contractor provisions are included.
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
6 PPA Section 11.1 (a)
Section #
Prior to or on the Commercial Operation Date of a
Dedicated Unit, Seller shall establish the Contract
Capacity for such Dedicated Unit in accordance with the
procedures set forth in Appendix B. [Each Dedicated
Unit shall thereafter be tested during each Contract
Year in accordance with the procedures set forth in
Appendix B to demonstrate its Contract Capacity. [The
previous comment is stricken, as it does not apply to
the Contractor]] Seller shall provide Purchaser with
reasonable notice of, and opportunity to, attend each
test of Contract Capacity. Seller shall bear the costs
and expenses of such annual tests, provided that
Purchaser shall be responsible for any costs or
expenses incurred by it in connection with monitoring or
witnessing such tests.
Appendix B
Capacity Testing Procedures
This Appendix defines the method for determining
Contract Capacity, Summer Condition Standard Capacity,
Summer Condition Supplemental Capacity, Actual Contract
Capacity, Standard Capacity and Supplemental Capacity
tendered to Purchaser pursuant to the terms of this
Agreement.
A test shall be conducted prior to the Commercial
Operation Date to determine the Contract Capacity. The
test shall be conducted in accordance with a test
procedure to be developed by the Facility contractor,
provided however that such procedure shall incorporate
all of the requirements contained in this Appendix. This
test procedure will be used as the basis for conducting
all subsequent tests to determine the Contract Capacity.
The Facility contractor shall also develop a
formula for adjusting the tested values to ambient
conditions of 95 degrees Fahrenheit and 60 percent
relative humidity for the purposes of determining the
Contract Capacity, Summer Condition Standard Capacity
and Summer Condition Supplemental Capacity and such
formula shall be consistent with formula provided by
such contractor to customers other than Seller for
similar equipment. This same formula shall also be used
to compute the Standard Capacity, Supplemental Capacity
and Actual Contract Capacity for the various ambient
conditions (in increments of 1 degree Fahrenheit and 1
percent relative humidity) rounded to the nearest whole
megawatt, using the most recent tested values for Summer
Condition Standard Capacity and Summer Condition
Supplemental Capacity; provided that after the
Commercial Operation Date Seller shall be allowed to
make refinements to the formula to improve its accuracy
based upon reasonable satisfactory evidence to Purchaser
that the model does not accurately predict actual plant
performance at various ambient conditions. Once the
formula described in this paragraph is developed by the
Facility contractor, such formula shall automatically
become an Appendix of this Agreement.
Testing Procedure Requirements
All tests for a Dedicated Unit shall be conducted
based upon the following:
The Contract Capacity test shall be a seven hour
test made up of the following three parts:
(1) The first three hours shall be a test to
determine the Summer Condition Standard
Capacity ("Standard Capacity Test").
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
(3) The three hour period following the one hour
period in (2) above shall be used to
determine the Summer Condition Supplemental
Capacity ("Supplemental Capacity Test").
The difference between the results of the
Supplemental Capacity Test and the Standard Capacity
Test (both tests corrected to 95 Degrees Fahrenheit and
60 percent relative humidity) shall be the Summer
Condition Supplemental Capacity (for that Dedicated
Unit). In no event shall the Summer Condition
Supplemental Capacity be greater than 20% of the Summer
Condition Standard Capacity.
- Test data shall be collected with plant
instrumentation. Determination of Net Electrical Output
shall be with the metering devices located at the
Electrical Metering Points indicated in Section 9.1(a).
- There shall be one hour between the Standard Capacity
Test and the Supplemental Capacity Test during which
time the duct burners and steam injection may be placed
in service. During the Supplemental Capacity Test the
duct burners shall be operated at no higher fuel flow
then they would be operated at during normal operation
and the steam injection flow rate shall be no higher
then would be used during normal operation.
- During all tests all appropriate auxiliary equipment
associated with the Dedicated Unit shall be in service
similar to how it would be operated under normal
non-test conditions. The auxiliary equipment should
include but not be limited to normal station service
electrical usage equipment, evaporative coolers, etc.
- During all tests the same control algorithm used
during normal Dispatch conditions shall be used. This
shall include normal inlet guide vane angle, compressor
discharge pressure, exhaust gas temperature and
coefficient for exhaust gas temperature.
- During the Standard Capacity Test, duct firing shall
not be in service and the combustion turbine shall be
operated at its base load rating without steam
injection.
- During the Supplemental Capacity Test, duct firing and
steam injection should be in service and the combustion
turbine shall be operated at its base load rating.
- The compressor inlet temperature, compressor discharge
pressure, exhaust gas temperature, duct burner fuel flow
and steam injection flow shall be recorded for each of
the test hours. This information shall be either
integrated average over each hour or recorded by the
distributed control system at least every 5 minutes and
averaged for each hour. The compressor inlet temperature
shall be measured in the inlet ductwork before the
evaporative coolers. This information shall be provided
to Purchaser.
- The Net Electrical Output shall be recorded for each
hour. This information shall be provided to Purchaser.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
- The Net Electrical Output for each test hour shall be
corrected from the corresponding average hour compressor
inlet temperature to 95 Degrees Fahrenheit and 60
percent relative humidity using the correction formula
described above. The average of the three-test hour's
corrected Net Electrical Output for the Summer Condition
Standard Capacity shall be the new Summer Condition
Standard Capacity. The average of the three-test hours
corrected Net Electrical Output for the Supplemental
Capacity Test shall be that test's results.
- The new Summer Condition Supplemental Capacity shall
be the Supplemental Capacity Test result minus the
Standard Capacity Test results. The new Summer Condition
Standard Capacity and Summer Condition Supplemental
Capacity shall be effective on the next Day.
- All measurement and recording devices associated with
the Net Electrical Output, compressor inlet temperature,
compressor discharge pressure, exhaust gas temperature,
duct burner fuel flow and steam injection flow shall be
checked and calibrated at least annually and whenever
there is a reasonable belief that they are out of
calibration. Copies of the test and calibration data
shall be provided to Purchaser.
- Coordination of the testing shall be finalized in the
Operating Procedure.
--------------------------------------------------------------------------
Contractor/ All compliance with this section is deemed to be
Facility satisfied by compliance with Exhibit A of the EPC
Compliance Agreement.
--------------------------------------------------------------------------
Clarification (1) Contractor produces report as described in Exhibit A
of the EPC Agreement.
(2) No special instrumentation shall be supplied by
Contractor, other than specified in Exhibit A of the EPC
Agreement.
(3) No testing required other than that defined in
Exhibit A of the EPC Agreement.
(4) The requirement for formulas shall be satisfied by
formulas associated with the Contractor's correction
curves.
(5) No changes are required to the correction curves
following Acceptance Testing, unless correction curves
are found to be in error.
- --------------------------------------------------------------------------------
7 PPA Section 21.15
Section #
Initial Design. Seller shall require the initial design
of each Dedicated Unit to have an expected Summer
Condition Standard Capacity of no less than 230 MW.
--------------------------------------------------------------------------
Contractor/ All compliance with this section is deemed to be
Facility satisfied by compliance with Exhibit A of the EPC
Compliance Agreement.
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
8 PPA Appendix D-(c), (f)
Section #
(c) For the Standard Capacity, the capability to ramp up
from 70% of the Standard Capacity to 100% of the
Standard Capacity shall be at the rate of no less than
five MW per minute and to ramp down from 100% of the
Standard Capacity to 70% of the Standard Capacity shall
be at the rate of no less than five MW per minute. For
Supplemental Capacity the maximum time allowed to ramp
up from 100% of the Standard Capacity to 100% of the
Actual Contract Capacity shall be thirty minutes and to
ramp down from 100% of the Actual Contract Capacity to
100% of the Standard Capacity shall be thirty minutes;
(f) The maximum time from Purchasers Dispatch notice of
Start-Up to 70% of Standard Capacity shall be as
follows:
(i) if a Dedicated Unit has been out of operation
for less than 48 hours from breaker open, it shall
achieve 70% of the Standard Capacity within 130
minutes following Purchasers notice to Start-Up;
and
(ii) if a Dedicated Unit has been out of operation
for more than 48 hours from breaker open, it shall
achieve 70% of the Standard Capacity within 210
minutes following Purchasers notice to Start-Up.
--------------------------------------------------------------------------
Contractor/ Contractor compliance for this section is defined in
Facility Exhibit A of the EPC Agreement.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
11
<PAGE>
Entergy Interconnection Requirements
- --------------------------------------------------------------------------------
1 Section # 4.4 (b)
--------------------------------------------------------------------------
System Quality. Customer's Facility [and Customer
Interconnection Facilities [The previous comment is
stricken, as it does not apply to the Contractor]]
shall meet the specifications for voltage excursions
and voltage operating range, voltage flicker and
sinusoidal voltage or current waves as specified by
appropriate industrial guidelines consistent with Good
Utility Practice.
--------------------------------------------------------------------------
Contractor/ The requirements will be deemed to be satisfied by
Facility Exhibit I.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
12
<PAGE>
TVA Interconnection Requirements
- --------------------------------------------------------------------------------
1 Section # 6.5
...in no event shall the voltage schedule required the
Facility to be operated at a power factor outside the
range of 0.95 lagging to 0.95 leading.
--------------------------------------------------------------------------
Contractor/ The Facility will be designed to meet the this
Facility requirement.
Compliance
--------------------------------------------------------------------------
Clarification The power factor of a combustion turbine generator and
steam turbine generator, as determined at the generator
terminals, will meet the requirements of 0.95 lagging to
0.95 leading.
- --------------------------------------------------------------------------------
2 Section # 8.4
The Facility Electrical Output delivered to TVA at the
Delivery Point shall be in the form of 3-phase,
alternating current at a frequency of approximately 60
hertz and a nominal voltage of 161,000 as defined in the
latest revision of ANSI C84.1 Standard for Electrical
Power Systems and Equipment - Voltage Ratings (60 Hz).
--------------------------------------------------------------------------
Contractor/ The Facility shall be designed to meet the above
Facility requirements.
Compliance
--------------------------------------------------------------------------
Clarification
- --------------------------------------------------------------------------------
13
<PAGE>
DEFINITIONS
The following terms when used in this Exhibit S shall have the meanings set
forth below.
AQUILA POWER CORPORATION
"Agreement" means this Power Purchase Agreement.
"Appendix" means an appendix attached to this Agreement.
"Commercial Operation Date" means the date on which the Dedicated Unit is
certified pursuant to Section 11.1 to begin commercial operations.
"Common Facilities" means the equipment of the Facility (other than the
Units) necessary for the generation and transmission of Net Electrical Output
from the Dedicated Unit.
"Contract Capacity" means the sum of the Standard Capacity and the
Supplemental Capacity as determined in accordance with Section 11.1. For
purposes of the Reservation Payment, Contract Capacity shall be adjusted to 95
degrees Fahrenheit and 60% relative humidity. This definition shall not restrict
Purchasers right to take all available capacity and associated energy of the
Dedicated Unit at the ambient conditions at the time.
"Contract Year" means the twelve (12)-Month period commencing on the
Delivery Start Date and each twelve(12)-Month period thereafter; provided,
however, that the final Contract Year shall be the period from the first Day of
such Contract Year through the Term of this Agreement.
"Control Center" means the generation control centers of TVA, Entergy or
any other control center, as may be designated in writing by Purchaser from time
to time as being the primary control center for the Dedicated Unit; provided
that such designation shall be reasonably acceptable to Seller.
"Day" means the 24-hour period beginning and ending at 12:00 midnight
(Central Prevailing Time).
"Dedicated Unit" means the designated Unit of the Facility, the Contract
Capacity and Net Electrical Output of which is dedicated to Purchaser pursuant
to this Agreement.
"Design Limits" means the parameters set forth in Appendix C.
14
<PAGE>
"Dispatch" means the ability of the Purchaser to schedule and to control
the electrical output of the Dedicated Unit, through submittal of schedules, in
accordance with this Agreement.
"Dollars" or "$" means the lawful currency of the United States of
America.
"Effective Date" means the date of execution and delivery of this
Agreement by Seller and Purchaser.
"Entergy" means the Entergy Corporation and any of its subsidiaries
including Entergy Mississippi, Inc. and Entergy Services.
"Entergy Interconnection Agreement" means the Interconnection Agreement to
be between Seller and Entergy, providing for the construction and operation of
the Interconnection Facilities between the Facility and the Entergy System.
"Entergy System" means the transmission system of Entergy with a
substation located in Batesville, Mississippi, to be used by Purchaser for the
purpose of transmitting and distributing electricity generated by the Facility.
"Facility" means the natural gas fueled combined cycle electrical
generation plant consisting of three (3) combined cycle Units and having a total
output of approximately 800 MW, to be located in Batesville, Mississippi,
together with any additional facilities and materials, including any additions
or replacements thereof, to be constructed, supplied and delivered at the
Facility Site.
"Fuel" means natural gas, which is the fuel used by the Facility.
"Guaranteed Ramp Rate" has the meaning assigned to such term in Appendix
C.
"Guaranteed Start-Up Time" has the meaning assigned to such term in
Appendix C.
"Interconnection Agreements" means the TVA Interconnection Agreement and
the Entergy Interconnection Agreement.
"MMBtu" means million Btu.
"Month" means a period of Days beginning at Hour Ending 0100 (Central
Prevailing Time) on the first Day of a calendar month and ending at Hour Ending
2400 (Central Prevailing Time) on the last Day of the same calendar month. If
used in connection with a calendar year, a "Month" shall be a calendar month.
"MVAR" means megavolt-ampere reactive.
15
<PAGE>
"MW" means megawatt.
"MWh" means megawatt-hour.
"Net Electrical Output" means, for any period, the net electric energy
output (measured in MWhs), and other services as described in Section 7.4, of
the Dedicated Unit delivered to Purchaser at the Interconnection Points pursuant
to Purchaser's Dispatch of the Dedicated Unit.
"Prudent Industry Practices" means any of the practices, methods,
standards and acts (including, but not limited to, the practices, methods and
acts engaged in or approved by a significant portion of the electric power
generation industry in the United States) that, at a particular time, in the
exercise of reasonable judgment in light of the facts known or that should
reasonably have been known at the time a decision was made, could have been
expected to accomplish the desired result consistent with good business
practices, reliability, economy, safety and expedition, and which practices,
methods, standards and acts generally conform to operation and maintenance
standards recommended by the Facility's equipment suppliers and manufacturers,
the Design Limits and applicable Governmental Approvals and Law.
"Standard Capacity" means the generating capacity of the Dedicated Unit at
full combustion turbine output without duct firing or steam injection. The
Standard Capacity shall be determined in accordance with Section 11.1 and
Appendix A. The Standard Capacity shall adjust with ambient conditions in
accordance with the actual capability of the Dedicated Unit.
"Start-Up" means the successful ignition of the Dedicated Unit pursuant to
a Dispatch order from Purchaser and the operation of the Dedicated Unit up to
its minimum load in accordance with the Design Limits.
"Supplemental Capacity" means any capacity of the Dedicated Unit in excess
of the Standard Capacity. Supplemental Capacity shall be determined in
accordance with Section 11.1 and Appendix A. Supplemental Capacity shall adjust
with ambient conditions in accordance with the actual capability of the
Dedicated Unit.
"TVA" means Tennessee Valley Authority, a Federal generation and
transmission utility.
"TVA Interconnection Agreement" means the Interconnection Agreement to be
between Seller and TVA, providing for the construction and operation of the
Interconnection Facilities between the Facility and the TVA System.
16
<PAGE>
"TVA System" means the transmission system of TVA with a substation
located in Batesville, Mississippi, to be used by Purchaser for the purpose of
transmitting and distributing electricity generated by the Facility.
"Unit" means any of the three (3) gas fueled combined cycle electric
generating trains located at the Facility.
17
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
"Actual Contract Capacity" means, as to a Dedicated Unit, the sum of the
Standard Capacity and the Supplemental Capacity of such Dedicated Unit.
"Agreement" means this Power Purchase Agreement and the Appendices hereto,
which are hereby incorporated herein by reference.
"Commencement of Construction" means the date on which Seller has issued
to its construction contractor an unrestricted notice to proceed for the
construction of the Facility for completion in accordance with the terms of the
construction contract between Seller and such contractor.
"Commercial Operation Date" means, as to a Dedicated Unit, the date on
which (a) Seller has achieved all Milestones listed in Section 3.1 for such
Dedicated Unit, (b) such Dedicated Unit is demonstrated, pursuant to Section
11.1, to meet and maintain the Minimum Dependable Capacity for at least eight
hours, and (c) Seller provides to Purchaser a certificate stating that
Commercial Operation Date has been achieved for such Dedicated Unit; provided
that the Commercial Operation Date for such Dedicated Unit shall occur no
earlier than April 1, 2000.
"Commercially Reasonable" or "Commercially Reasonable Efforts" means, with
respect to any purchase or sale or other action required to be made, attempted
or taken by a Party under this Agreement, such efforts as a reasonably prudent
business would undertake for the protection of its own interest under the
conditions affecting such purchase or sale or other action, including without
limitation, the amount of notice of the need to take such action, the duration
and type of the purchase or sale or other action, the competitive environment in
which such purchase or sale or other action occurs.
"Committed Capacity" means, as to a Dedicated Unit, a capacity of 283 MW.
"Common Facilities" means the equipment of the Facility (other than the
Units) necessary for the generation and transmission of Net Electrical Output
from the Dedicated Units including, but not limited to, control room, machine
shops, warehouse, parking, domestic water supply and waste disposal, switch
yards, electrical bus bars, Interconnection Facilities, natural gas supply lines
and headers.
"Contract Capacity" means, as to any Dedicated Unit, the sum of the Summer
Condition Standard Capacity and the Summer Condition Supplemental Capacity for
such Dedicated Unit; provided that the Contract Capacity for a Dedicated Unit
shall not, in any event, (a) be less than the Minimum Dependable Capacity or (b)
exceed the Committed Capacity.
18
<PAGE>
"Control Center" means the generation control center of TVA, Entergy or
Independent System Operator, as may be designated in writing by Purchaser from
time to time as being the primary control center for the Dispatch of the
Dedicated Units; provided that such designation shall be reasonably acceptable
to Seller.
"Dedicated Units" means the two Units of the Facility, as designated
pursuant to Section 4.1(a), the Actual Contract Capacity of each of which is
dedicated to Purchaser pursuant to this Agreement.
"Design Limits" means the parameters set forth on Appendix D.
"Dispatch" means the right of Purchaser or the Control Center on behalf of
Purchaser to schedule and to control the delivery of Net Electrical Output of a
Dedicated Unit in accordance with this Agreement. Any form of the term Dispatch
(e.g., "Dispatched" or "Dispatching") shall refer to the exercise of such right
by Purchaser.
"Effective Date" means the date of execution and delivery of this
Agreement by Seller and Purchaser.
"Entergy" means Entergy Mississippi, Inc.
"Entergy Interconnection Agreement" means the Interconnection Agreement
between Seller and Entergy, providing for the construction and operation of the
Interconnection Facilities between the Facility and the Entergy System.
"Facility" means the natural gas fueled electrical generation plant
consisting of three combined cycle Units and having a total output of
approximately 800 MW, to be located in Batesville, Mississippi, together with
the Common Facilities, including any additions or replacements thereof, to be
constructed, supplied and delivered at the Facility Site.
"Facility Site" means the approximately 60 acre parcel of land upon which
the Facility is located, in the Batesville Industrial Park in Batesville, Panola
County, Mississippi.
"Fuel" means natural gas, which is the primary fuel used by the Facility.
"Interconnection Agreements" means the TVA Interconnection Agreement and
the Entergy Interconnection Agreement.
"Interconnection Points" means the physical points at which the Facility
is connected with the Entergy System and the TVA System, as more fully described
in the Interconnection Agreements, or such other point as the Parties may agree.
"Law" means any statute, law, rule or regulation imposed by a Government
Agency, whether in effect now or at any time in the future.
19
<PAGE>
"Minimum Load" means, with respect to a Dedicated Unit, 70% of the
Standard Capacity of such Dedicated Unit.
"MMBTU" means million BTU.
"Month" means a calendar month.
"MW" means Megawatt.
"MWh" means megawatt-hour.
"NERC" means the North American Electric Reliability Council.
"Net Electrical Output" means, for any Dedicated Unit for any period, the
net electric energy output (as measured in KWhs at the Electricity Metering
Points) of such Dedicated Unit during such period.
"Prudent Industry Practices" means any of the practices, methods,
standards and acts (including, but not limited to, the practices, methods and
acts engaged in or approved by a significant portion of the electric power
generation industry in the United States) that, at a particular time, in the
exercise of reasonable judgment in light of the facts known or that should
reasonably have been known at the time a decision was made, could have been
expected to accomplish the desired result consistent with good business
practices, reliability, economy, safety and expedition, and which practices,
methods, standards and acts generally conform to operation and maintenance
standards recommended by the Facility's equipment suppliers and manufacturers,
the Design Limits and applicable Governmental Approvals and Law.
"Standard Capacity" means, for each Dedicated Unit, the generating
capacity of such Unit without duct firing or steam injection, as such capacity
is determined in accordance with Section 11.1 and Appendix B.
"Standard Capacity Test" has the meaning assigned to such term in Appendix
B.
"Start-Up" means, with respect to a Dedicated Unit, the ignition of such
Dedicated Unit pursuant to a Dispatch order and the operation of such Dedicated
Unit up to the Minimum Load; provided that for purposes of this Agreement, there
shall be deemed to be only one Start-Up per Dispatch order, unless delivery of
energy is delayed, terminated or reduced by Purchaser, a Dispatch order, a Force
Majeure Event or a Delivery Excuse.
"Summer Condition Standard Capacity" means the Standard Capacity adjusted
in accordance with Appendix B to ambient conditions of 95 degrees Fahrenheit and
60% relative humidity.
20
<PAGE>
"Summer Condition Supplemental Capacity" means the Supplemental Capacity
adjusted in accordance with Appendix B to ambient conditions of 95 degrees
Fahrenheit and 60% relative humidity.
"Supplemental Capacity" means, for each Dedicated Unit, any capacity of
such Unit in excess of the Standard Capacity achieved with duct firing or steam
injection, as such capacity is determined in accordance with Section 11.1 and
Appendix B.
"Supplemental Capacity Test" has the meaning assinged to such term in
Appendix B.
"TVA" means Tennessee Valley Authority.
"TVA Interconnection Agreement" means the Interconnection Agreement
between Seller and TVA, providing for the construction and operation of the
Interconnection Facilities between the Facility and the TVA System.
"Unit" means any of the three gas-fueled combined cycle electric
generating units of the Facility.
21
<PAGE>
Exhibit 10.9
BLACK & VEATCH LLP
- --------------------------------------------------------------------------------
8400 Ward Parkway, P.O. Box 8405, Kansas City, Missouri 64114; (913) 458-2000
Batesville July 28, 1998
LSP Energy Limited Partnership FACSIMILE: (314) 993-2790
c/o LS Power LLC FEDERAL EXPRESS
655 Craig Road, Suite 336
St. Louis, Missouri 63131
Subject: Off-Site Infrastructure
Engineering Services Agreement
Attention: Mr. Mike Vogt
Gentlemen:
Based on our discussions today, we are express mailing two revised copies of the
Engineering Services Agreement between LSP Energy Limited Partnership and Black
& Veatch LLP for the Batesville Project Off-Site Infrastructure work.
I have signed both copies of the Agreement. Please sign both copies, keep one
copy for your records, and return the second copy to me. Upon receipt of your
acceptance, we will initiate the work. Mark A. Vance will be the Project Manager
for this work.
We are please to be able to provide you with this service. If you have any
questions, call me at (913) 458-2300, or Mark at (913) 458-2666.
Very truly yours,
BLACK & VEATCH LLP
/s/ Ronald J. Ott
------------------
Ronald J. Ott
Partner-in-Charge
bg
Enclosures
cc: Ms. Carolyn Worsley (L&W) - FAX: 212-751-4864
Ms. Carolyn Worsley (L&W) - FAX: 914-962-8379
Mr. M.A. Vance
<PAGE>
ENGINEERING SERVICES AGREEMENT
THIS AGREEMENT, for the performance of professional engineering services, is
executed and made effective as of July 24, 1998, between LSP Energy Limited
Partnership, a Delaware limited partnership ("Client") and Black & Veatch LLP, a
limited liability partnership organized under the laws of the State of Missouri
("Engineer").
IN CONSIDERATION of the covenants hereinafter set forth, Client and Engineer
mutually agree as follows:
ARTICLE 1 - SCOPE OF WORK
1.1 Description of Work; Request(s) for Services
Engineer shall perform professional engineering services ("Services")
for a fee ("Fee") in connection with various of Client's facilities
("Facilities") in accordance with the Scope of Services attached hereto
as Exhibit A, for the compensation as set forth in Exhibit B hereto.
1.2 Engineer's Responsibilities
Engineer shall, subject to the terms and conditions of this Agreement:
1.2.1 Furnish the services of all necessary engineers, designers,
draftsmen, and other personnel necessary for the performance of
the Services;
1.2.2 If procurement services are requested, furnish the services of
all buyers, inspectors, expediters, and other personnel
necessary to procure or oversee procurement of all materials,
supplies, and equipment and place all contracts requested to be
procured by Engineer on behalf of Client;
1.2.3 If construction observation services are requested, furnish the
services of personnel as necessary to periodically observe the
work of the construction contractors as independent contractors;
and
1.2.4 Appoint one or more individuals who shall be authorized to act
on behalf of Engineer sand with whom Client may consult at all
reasonable times, and whose instructions, requests, and
decisions will be binding upon Engineer as to all matters
pertaining to this Agreement and the performance of the parties
hereunder.
1.3 Client's Responsibilities
Client shall at such times as may be required by Engineer for the
successful and expeditious completion of the Services:
<PAGE>
1.3.1 Obtain all permits and licenses required to be taken out in the
name of Client which are necessary for the performance of the
Services;
1.3.2 Provide Engineer with all specifications necessary for the
completion of the Services;
1.3.3 Provide Engineer with soil data with respect to the site.
1.3.4 Advise Engineer of the existence of, and any plans to undertake
the abatement and disposal of, all hazardous materials,
including, but not limited to, asbestos, polychlorinated
biphenyls (PCB) and radioactive material and other toxic
substances, encountered by Engineer in the performance of the
Services; and
1.3.5 Appoint an individual who shall be authorized to act on behalf
of Client, with whom Engineer may consult at all reasonable
times, and whose instructions, requests, and decisions will be
binding upon Client as to all matters pertaining to this
Agreement and the performance of the parties hereunder.
ARTICLE 2 - COMPENSATION AND TERMS OF PAYMENT
Client shall pay and Engineer shall accept in full consideration for the
Services the compensation described in Exhibit B.
ARTICLE 3 - WARRANTY
3.1 Engineer's Services
Engineer warrants that it will perform the Services in accordance with
the standards of care and diligence normally practiced by recognized
engineering firms in performing services of a similar nature in
existence at the time of performance of the Services. If, during the one
year period following completion of the Services, it is shown there is
an error in the Services caused solely by Engineer's failure to meet
such standards and Client has notified Engineer in writing of any such
error within that period, Engineer shall re-perform, at no additional
cost to Client, such Services within the original scope of Services as
may be necessary to remedy such error.
3.2 Reliance on Data
Engineer shall have no liability for defects in the Services
attributable to Engineer's reliance upon or use of data, design
criteria, drawings, specifications, or other information furnished by
Client or third parties retained by Client.
-2-
<PAGE>
3.3 Limitations
The obligations and representations contained in this Article 3 are
Engineer's sole warranty and guarantee obligations and Client's
exclusive remedy in respect of quality of the Services. Client's failure
to properly operate and maintain the Facilities shall relieve Engineer
of its guarantee relative to such improper operation and maintenance.
EXCEPT AS PROVIDED IN THIS ARTICLE 3, ENGINEER MAKES NO OTHER WARRANTIES
OR GUARANTEES, EXPRESS OR IMPLIED, RELATING TO ENGINEER'S SERVICES AND
ENGINEER DISCLAIMS ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. This Article 3 governs, modifies, and supersedes any other
terms in this Agreement which may be construed to address warranties or
guarantees or the quality of the Services.
ARTICLE 4 - INDEMNIFICATION
4.1 Bodily Injury and Property Damage Liability
Engineer shall indemnify and hold Client harmless from any and all
claims, liabilities, damages, and costs (including reasonable attorney's
fees directly related thereto) for bodily injury to or death of any
person and for damage to or destruction of property (excluding, however,
the items referred to in Sections 5.3 and 8.3 herein) if and to the
extent caused by the negligence or willful misconduct of Engineer.
ARTICLE 5 - INSURANCE
5.1 Commitment
During the performance of the Services, Engineer shall maintain
insurance policies as follows:
5.1.1 Workers' Compensation and/or all other social insurance in
accordance with the statutory requirements of the state,
province, or country having jurisdiction over Engineer's
employees who are engaged in the Services, with Employer's
Liability with a limit of One Hundred Thousand Dollars
($100,000) each accident.
5.1.2 Commercial General Bodily Injury and Property Damage Liability
Insurance, and Automobile Liability Insurance including owned,
non-owned, or hired, each in a combined single limit of One
Million Dollars ($1,000,000) each occurrence for bodily injury
and property damage liability. This policy shall include
Contractual Liability coverage. Engineer agrees to name Client
as Additional Insured on this policy, but
-3-
<PAGE>
only to the extent of Engineer's negligence under this Agreement
and only to the extent of the insurance limits specified herein.
5.1.3 Professional Liability Insurance with limits of $1,000,000 in
the aggregate covering Engineer against all sums which Engineer
may become legally obligated to pay on account of any
professional liability arising out of the performance of this
Agreement.
5.2 Certificates
Engineer agrees to provide Client with certificates of insurance
evidencing the above described coverage prior to the start of Services,
and annually thereafter, if required by Client. Such certificates shall
provide that the applicable insurance policies have been endorsed to
provide a minimum of thirty days advance notice to Client in the event
of cancellation, material change, or non-renewal.
5.3 The Project and Existing Property
As between Engineer and Client, Client assumes responsibility for all
loss of or damage to property owned by or in the custody of Client and
any items at the job site or in transit thereto (including, but not
limited to, construction work in progress) however such loss or damage
shall occur, including the fault or negligence of Engineer. Client
agrees to maintain appropriate property insurance and does hereby waive
all rights (and, to the extent required, shall require its insurers to
waive all rights or subrogation) against Engineer for claims covered
under any insurance which Client may carry. If Client purchases, or
causes a construction contractor to purchase, a builders-all risk or
other property insurance policy for a Project, Client shall require that
Engineer be included as a named insured on such policy without liability
for the payment of premiums.
5.4 Project Contractors
Client shall require all project contractors under contract with Client
to include Client and Engineer as additional insureds on their General
Liability insurance policies. Further, Client shall obtain and maintain
for the benefit of Engineer the same indemnities and insurance benefits
obtained for the protections of the Client from any construction
contractor and subcontractor working on the project and shall obtain
from that contractor and subcontractor insurance certificates evidencing
the required coverages.
ARTICLE 6 - COMPLETION AND ACCEPTANCE
6.1 Scheduled Completion
Engineer shall commence the Services at the time stated herein and shall
use all reasonable efforts to prosecute the Services continuously and
with due diligence.
-4-
<PAGE>
6.2 Acceptance
When Engineer deems it has completed the Services, it shall so notify
Client in writing. Within ten working days thereafter, Client shall
advise Engineer in writing of any deficiencies in the Services for which
Engineer is responsible under this Agreement. As soon as any such
deficiencies are corrected (or as soon as the ten working day period for
such notice has expired, if Client does not advise Engineer of any such
defects within the period), Client shall accept the Services in writing
or they shall be deemed accepted.
ARTICLE 7 - TERMINATION AND CANCELLATION
7.1 Termination by Client
Should Engineer become insolvent or bankrupt, or commit a substantial
breach of this Agreement, and thereafter fail to commence proceedings in
good faith to remedy such breach within ten days after receipt of
written demand by Client, Client may terminate this Agreement. Upon any
such termination, Engineer shall be compensated for all costs incurred
and Fee earned for Services then performed in accordance Exhibit B.
7.2 Termination by Engineer
Should Client become insolvent or bankrupt, or commit a breach or
default of any of the covenants or obligations hereunder, and thereafter
(a) fail to remedy the same within ten days after written notice thereof
from Engineer if the breach constitutes a failure to pay money or (b)
fail to commence proceedings to remedy the same within ten days after
written notice thereof from Engineer and thereafter fail to proceed
diligently in remedying the same if the breach is other than to pay
money, then Engineer may terminate this Agreement. Should Engineer so
terminate this Agreement, it shall be paid for all costs incurred and
Fee earned for Services performed to the date of termination and through
demobilization, including any cancellation charges by subcontractors or
vendors, all in accordance with Exhibit B.
7.3 Cancellation for Convenience
Client reserves the right to cancel, for convenience, the Services upon
notice in writing to Engineer. Should the Services be so canceled by
Client, Engineer shall be paid for all Fee earned for Services performed
to the date of cancellation and through demobilization, including any
cancellation charges by vendors and subcontractors, all in accordance
with Exhibit B.
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ARTICLE 8 - GENERAL PROVISIONS
8.1 Independent Contractor
Engineer shall be an independent contractor with respect to the Services
to be performed hereunder, except that any contracts and purchase orders
for materials, equipment, supplies and related services pursuant to
Sections 1.2.2 and 8.3 will be issued by Engineer as agent for Client.
Except as hereinabove noted, neither Engineer nor its subcontractors or
vendors, nor the employees of either, shall be deemed to be the
servants, employees, or agents of Client.
8.2 Safety and Environmental Regulations
Engineer shall perform the Services in a manner consistent with the
Facilities being capable of complying with all applicable safety
legislation and with applicable environmental laws, rules and
regulations in force at the time of development of designs. Engineer
shall also be responsible for the safety of its own employees at all
times during the performance of the Services. Engineer shall not,
however, have control or charge of and shall not be responsible for
construction means, methods, techniques, sequences, or procedures of
construction or the safety precautions and programs in connection with
the construction work performed by Client's construction contractors.
Engineer shall not be responsible for the adequacy or completeness of
any construction contractor's safety programs, procedures, or
precautions, and Engineer shall not have the authority to stop work.
8.3 Pre-Existing Conditions
8.3.1 In the event there is a discovery of any archaeological remains,
artifacts or any hazardous or toxic substance, material, or
condition present at the site or sites concerned, Engineer shall
not have or exert any control over Client in Client's
obligations for removal, handling, transportation or disposing
of such pre-existing items.
8.3.2 For Engineer's Services requiring drilling, boring, excavation,
or soils sampling, Client shall approve selection of the
contractors to perform such services and all site locations, and
provide Engineer with all necessary information regarding the
presence of underground hazards, utilities, structures, and
conditions at the site.
8.4 Force Majeure
Any delays in or failure of performance by Client or Engineer, other
than payment of money, shall not constitute default hereunder if, and to
the extent, such delays or failures of performance are caused by
occurrences or circumstances beyond the control of Client or Engineer,
as the case may be, including, but not limited to:
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acts of God or the public enemy; expropriation or confiscation of
facilities; compliance with any order or request of any governmental
authority; act of war, rebellion, or sabotage or damage resulting
therefrom; fires, floods, explosions, accidents; riots or strikes or
other concerted acts or workmen, whether direct or indirect; or any
other causes, whether or not of the same class or kind as those
specifically above named, which are not within the control of Client or
Engineer respectively, and which by the exercise of reasonable
diligence, Client or Engineer are unable to prevent.
8.5 Rights to Intellectual Work Product
8.5.1 Except as otherwise provided herein, sealed original drawings,
specifications, final project specific calculations, and other
engineering documents which Engineer prepares and delivers to
Client pursuant to this Agreement shall become the property of
Client when Engineer has been compensated for Services rendered.
Nothing contained in this paragraph shall be construed as
limiting or depriving Engineer of its rights to use its basic
knowledge and skills to design or carry out other projects or
work for itself or others, whether or not such other projects or
work are similar to the work to be performed pursuant to this
Agreement. Rights to intellectual property developed, utilized,
or modified in the performance of the Services shall remain the
property of Engineer.
8.5.2 Engineer shall have the right to retain and use copies of
drawings, documents, and engineering and other data furnished or
to be furnished by Engineer and the information contained
therein. Client shall not use in a written prospectus or other
investment memorandum any Engineer report constituting or
including Engineer's professional opinion, except with
Engineer's prior written consent, which shall not be
unreasonably withheld. Client shall not acquire any rights to
any of Engineer's, its subcontractors' or vendors' proprietary
computer software that may be used in connection with the
Services except as expressly provided in the Scope of Services
or as may be separately agreed.
8.5.3 All documents, including drawings, specifications, and computer
software prepared by Engineer pursuant to this Agreement are
instruments of service in respect to the Services. They are not
intended or represented to be suitable for reuse by Client or
others. Any reuse without prior written verification or
adaptation by Engineer for the specific purpose intended will be
at Client's sole risk and without liability or legal exposure to
Engineer. Client shall defend, indemnify, and hold harmless
Engineer and its subcontractors, vendors, employees, agents,
officers and/or assignees, their respective employees, agents,
officers, partners and directors and anyone else acting for or
on behalf of them and any of their respective assigns against
all claims, losses, damages, injuries, and expenses, including
attorneys' fees, arising out of or resulting from such reuse.
Any
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verification or adaptation of documents will entitle Engineer to
additional compensation at rates to be agreed upon by Client and
Engineer.
8.5.4 Engineer hereby grants to Client an irrevocable, nonexclusive,
royalty-free license for use solely in connection with
operation, maintenance, repair, or alteration of the Facilities,
with respect to any invention based wholly or in part on or
derived from proprietary information received from Client and
conceived or first reduced to practice by Engineers, its
employees or agents, during the course of the Services.
8.5.5 Any files delivered in electronic medium may not work on systems
and software different than those with which they were
originally produced. Engineer makes no warranty as to the
compatibility of these files with any other system or software.
Because of the potential degradation of electronic medium over
time, in the event of a conflict between the sealed original
drawings and the electronic files, the sealed drawings will
govern.
8.6 Confidentiality
8.6.1 Engineer covenants and agrees that, during continuance of this
Agreement, it will not, except insofar as may be reasonably
necessary for the performance of work done hereunder or as
required by law, without the prior permission of Client use,
disclose, or permit to be disclosed, or, in case of documents,
reproduce or permit to be reproduced to any person confidential
information acquired from or given by the Client to Engineer in
the Course of carrying out Services under this Agreement.
8.6.2 For the purpose of this Article 8.6, "confidential information"
shall include designs, drawings, plans, calculations, formulae,
techniques and/or trade secrets or like information which has
not been previously disclosed or reproduced without restriction
by Client or has not become public knowledge; provided, Engineer
shall be under no liability to treat the information received as
confidential unless Client advises Engineer at the time of
disclosure that said information is confidential.
8.6.3 All confidential information disclosed by Client shall remain
the property of Client, shall be returned on termination of
Services, and shall be used by Engineer strictly for the
performance of this Agreement and no other purpose; provided,
Engineer may retain a record copy of all such information for
archival purposes.
8.6.4 Engineer's confidentiality obligation hereunder shall not extend
to information which (i) at the time of disclosure, is or
becomes a part of the public domain by publication or otherwise
through no fault of Engineer; (ii) Engineer can show was in its
possession at the time of disclosure; or (iii) is subsequently
disclosed to Engineer by a third-party, which
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information Engineer reasonably believes has not been wrongfully
acquired, directly or indirectly, from Client.
8.6.5 Engineer shall not be restricted in any way from releasing
information, including confidential information, in response to
a subpoena, court order, or other legal process, or as may be
legally compelled by any tribunal or governmental or regulatory
authority, but in such event, shall notify Client of the demand
for information before Engineer responds to such demand.
8.7 Representations and Remedies
Engineer makes no representations, covenants, warranties, or guarantees,
express or implied, other than those expressly set forth herein. The
parties' rights, liabilities, responsibilities and remedies with respect
to the Services shall be exclusively those expressly set forth in the
Agreement and are in lieu of any others available at law or otherwise.
8.8 Damages
Having considered the risks and potential liabilities that may arise out
of the Services, the benefits of the Services and in specific
consideration of the promises contained in this Agreement and other
valuable consideration receipt of which is acknowledged, Client and
Engineer allocate and limit such liabilities in accordance with this
provision. Notwithstanding any other provision of this Agreement, and to
the fullest extent permitted by law:
8.8.1 Client and Engineer and any of Engineer's related companies
shall not be liable to each other for any special, incidental,
indirect, punitive, exemplary, or consequential damages,
including, but not limited to, loss of profits or revenue; loss
of use; loss of opportunity; loss of goodwill; cost of
substitute facilities, goods or services; cost of capital; cost
of replacement power; governmental and regulatory sanctions; and
claims of customers for such damages.
8.8.2 The total cumulative liability of Engineer and any of Engineer's
related companies to Client for all claims, losses, damages, and
expenses resulting in any way from the performance of this
Agreement shall not be greater than compensation received by
Engineer under this Agreement.
8.8.3 Client hereby releases, indemnifies, and agrees to hold Engineer
harmless from any liability arising from Client's or Client's
assignee's, ownership, use or operation of the Facilities, or
any part thereof.
8.8.4 Except as provided in any express warranty to the Client
provided by Engineer's direct or indirect subcontractors and
vendors of any tier, such subcontractors and vendors, and their
directors, officers, partners,
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employees, and agents shall not be liable to the Client for any
claim, loss, damage, expense, or injury of any kind (hereafter
"Claims"), and Client waives all such Claims.
8.9 Audit and Maintenance of Records
Client shall have the right to audit and inspect Engineer's records and
accounts covering direct costs hereunder at all reasonable times during
the performance of the Services and for a period of one year after the
acceptance thereof pursuant to Section 6.2; provided, however, that the
purpose of any such audit shall be only for verification of such costs.
Engineer shall not be required to keep records of or provide access to
those of its costs covered by the Fee or expressed as fixed rates, a
lump sum, or of costs which are expressed in terms of percentages of
other costs.
8.10 Assignment
This Agreement shall not be assignable by either party without the prior
written consent of the other party hereto, except that it may be
assigned without such consent to the successor of either party, or to a
person, firm, or corporation acquiring all or substantially all of the
business assets of such party, or to a related entity, an affiliate or
wholly owned subsidiary of either party, but such assignment shall not
relieve the assigning party of any of its obligations under this
Agreement, and Client may assign as collateral security this Agreement
without consent to any lender or government entity providing financing
for the Facility. No assignment of this Agreement shall be valid until
this Agreement shall have been assumed by the assignee. When duly
assigned in accordance with the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the assignee.
8.11 Subcontracts
Engineer may subcontract any portion of the Services to a subcontractor
approved by Client. In no case shall Client's approval of any
subcontract relieve Engineer of any of its obligations under this
Agreement. Notwithstanding the above, Engineer may have portions of the
Services performed by its related and affiliated entities or their
employees, in which event Engineer shall be responsible for such
Services and Client shall look solely to Engineer as if the Services
were performed by Engineer.
8.12 Notices
All notices pertaining to this Agreement shall be in writing and shall
be sufficient when sent by registered mail, or by U.S. mail or facsimile
(with oral confirmation) to:
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Client:
LSP Energy Limited Partnership
655 Craig Road, Suite 336
St. Louis, MO 63141
Engineer:
Mark Vance
Black & Veatch
11401 Lamar
Overland Park, Kansas 66211
8.13 Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any oral or written representations,
understandings, proposals, or communications heretofore entered into by
or on account of the parties and may not be changed, modified, or
amended except in writing signed by the parties hereto. In the event of
any conflict between this contract document and any of the exhibits
hereto, the terms and provisions of this contract document shall
control. In the event of any conflict among the exhibits, the exhibit of
the latest date shall control.
8.14 Interpretation
8.14.1 This Agreement shall be governed by and interpreted in
accordance with the laws of Missouri, notwithstanding the
operation of any conflict or choice of law statutes or
decisional law to the contrary.
8.14.2 Headings and titles of Articles, Sections, paragraphs, and other
subparts of this Agreement are for convenience of reference only
and shall not be considered in interpreting the text of this
Agreement.
8.14.3 Indemnities against, releases from, and limitations on
liability, and limitations on remedies expressed in this
Agreement, as well as waivers of rights, including, but not
limited to, 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 against
whose remedies have been limited and shall extend to the
officers, directors, employees, licensors, agents,
subcontractors, vendors and related entities of such party.
8.14.4 In the event any portion or all of this Agreement is held to be
void or unenforceable, the parties agree to negotiate in good
faith to reach an
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equitable agreement which shall effect the intent of the parties
as originally set forth in this Agreement.
8.14.5 The prevailing party, in whole or in part, shall be entitled to
reimbursement for all costs and reasonable attorneys' fees in
any legal action brought against the other party based on a
breach of this Agreement.
8.14.6 In the event Client uses a purchase order form to administer
this Agreement, the use of such form shall be for convenience
purposes only and any typed provision in conflict with the terms
of this Agreement and all pre-printed terms and conditions
contained in or on such forms shall be deemed stricken and null
and void.
8.14.7 The provisions of this Agreement are intended for the sole
benefit of Client and Engineer, and subcontractors, vendors and
others to the extent expressly provided in this Agreement. The
parties agree there are no third-party beneficiaries to this
Agreement other than those subcontractors, vendors and others
expressly contemplated by the terms herein.
IN WITNESS WHEREOF, the parties hereto have executed this contract document as
of the date and year first above written.
Client Black & Veatch LLP
By: /s/ Clarence J. Heller By: /s/ Ron J. Ott
---------------------------- --------------------------
By: Clarence J. Heller By: Ron J. Ott
---------------------------- --------------------------
(Name Printed) (Name Printed)
Title: Executive Vice President Title: Senior Partner
------------------------- -----------------------
Date: July 24, 1998 Date: July 24, 1998
-------------------------- ------------------------
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EXHIBIT A
SCOPE OF SERVICES
ENGINEERING SERVICES AGREEMENT
Between
LSP Energy Limited Partnership ("Client")
And
Black & Veatch LLP ("Engineer")
Pursuant to the terms and conditions of the Engineering Services Agreement
executed and made effective as of the 24 day of July, 1998, by and between LSP
Energy Limited Partnership ("Client") and Black & Veatch LLP ("Engineer"), the
Services to be performed by Engineer are:
A. Requested Services
Perform the Consulting Services required to perform the following support
activities associated with the Batesville Generation Facility:
o Conceptual Design to Support Preparation of the below EPC Bid
Specifications, including that Engineer will develop the conceptual
design for the interconnection with the Facilities to the gas
pipeline, the water pipeline, the wastewater discharge line, and the
substation/transmission and distribution line in accordance and
consistent with the specifications for such interconnections
developed by the Client's EPC Contractor under its Turnkey
Engineering, Procurement and Construction Agreement.
o Develop EPC Bid Specification packages for the following packages:
- Gas pipe line
- Water intake at Lake Inid
- Water pipe line
- Waste water discharge line
- Substation/Transmission and Distribution Line
o Perform evaluation of the above EPC Bid packages
o Perform Contract Administration related to the above EPC Bid
Packages
o Perform Engineering Consultation during the construction associated
with the above packages.
B. Disputes
In the event Client disputes any invoice item, Client shall give Engineer
written notice of such disputed item within ten days after receipt of such
invoice and shall pay to Engineer the undisputed portion of the invoice
according to the provisions hereof. If Client fails to
<PAGE>
pay any invoiced amounts when due, interest will accrue on each unpaid amount at
the rate of ten percent per annum, or the maximum amount allowed by law if less,
from the date due until paid according to the provisions of this Agreement.
Interest shall not be charged on any disputed invoice item which is finally
resolved in Client's favor. Payment of interest shall not excuse or cure any
default or delay in payment of amounts due.
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EXHIBIT B
COMPENSATION
ENGINEERING SERVICES AGREEMENT
Between
LSP Energy Limited Partnership ("Client")
And
Black & Veatch LLP ("Engineer")
Client shall pay to the Engineer for the performance of the Services the sum of
the following amounts.
(1) The amount of 2.10 times payroll costs for the actual time of personnel
applied to the Services.
(2) An amount equal to the actual out-of-pocket cost or standard charges for
all expenses incurred by Engineer directly chargeable to the Services
rendered pursuant to this Agreement. Such expenses shall specifically
include, but are not necessarily limited to, the following:
(a) Long distance telephone expenses.
(b) Standard charges for operating time actually applied to the Services
of Engineer's computer center, other computer centers, and
Engineer's automated drafting systems.
(c) Prints, reproductions, word processing, and printed documents at
standard rates.
(d) Reasonable traveling and living expenses for personnel.
(e) The actual cost paid by the Engineer to third parties.
(f) Other direct expenses related to the Services.
Payroll costs include actual salary plus allowances for holidays, vacation, sick
leave, FICA and unemployment taxes, worker's compensation insurance, and
employee benefits including medical insurance, supplemental retirement programs,
life insurance, incentive compensation, tuition reimbursements, and other
miscellaneous benefits.
The payroll allowance shall be fixed for the term of this Agreement at 1,358
times the hourly salary rate. Hourly salary rates shall be equal to the annual
salary divided by 2,080.
Engineer will periodically submit to Client invoices for Services performed.
Each invoice will be submitted by about the tenth day of the period following
the period during which such Services were performed. Client agrees to pay
Engineer's period invoice upon receipt and to pay Engineer a carrying charge of
1 1/2 percent per month (18 percent
<PAGE>
per year) or the maximum rate allowed by law, if less, on all amounts remaining
unpaid after 30 days following an invoice date.
In addition to the monthly invoice specified above, Engineer may bill a
reasonable amount to cover the next month's expected expenses for
Salary/Labor/Payroll, subcontractors, equipment, and other direct costs. Such
request for advance will include substantiation for the amount requested. The
subsequent monthly invoice will reconcile actual expenses for the month against
the amount advanced, and an amount will be added or credited, to make the
reconciliation if expenses were above or below the previously estimated advance
request. Engineer will make all reasonable efforts to minimize instances of
advances exceeding actual expenses.
Client has the right to audit the time records and salaries of personnel and
charges for direct expenses for assignments for which cost-plus compensation is
provided.
In addition to the price for Services, Client shall pay or reimburse Engineer
for the amount of any present or future sales, use, excise, or other similar tax
applicable to the furnishing of any Services hereunder levied by the state of
Mississippi.
In the event of nonpayment, the Client shall be liable for any collection costs
including attorney's fees.
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Exhibit 10.10
CONSTRUCTION CONTRACT GUARANTY
This CONSTRUCTION CONTRACT GUARANTY (this "Guaranty") dated as of
July 22, 1998, by BLACK & VEATCH LLP, a Missouri limited liability partnership
("Guarantor"), to and for the benefit of LSP Energy Limited Partnership, a
Delaware limited partnership ("Owner").
W I T N E S S E T H
WHEREAS, Owner proposes to develop, own and operate a nominal 800
megawatt gas-fired, electric generation plant (the "Facility"), to be located in
Batesville, Mississippi;
WHEREAS, BVZ Power Partners-Batesville, a Mississippi joint venture
("Contractor") and Owner are parties to the Turnkey Engineering, Procurement and
Construction Agreement, dated as of July 22, 1998 (the "Contract"); and
WHEREAS, Black & Veatch Construction Inc., a Missouri Corporation,
is a member of Contractor, jointly and severally liable for the obligations of
Contractor arising under the Contract ("BVCI"); and
WHEREAS, BVCI is a wholly owned subsidiary of Guarantor; and
WHEREAS, Section 19.20 of the Contract requires that Guarantor enter
into and delivers this Guaranty.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, receipt of which is hereby acknowledged,
and as an inducement to Owner to enter into the Contract, Guarantor hereby
agrees as follows:
1. Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and performance when due and observance when due of all
covenants, terms and agreements to be performed and observed by Contractor under
the Contract (including without limitation the payment of any Liquidated Damages
due by Contractor thereunder) and all other present or future agreements and
instruments between Owner and Contractor in connection with the performance of
the Contract (such obligations of Contractor, collectively, the "Obligations").
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2. Guarantor covenants to Owner that if at any time Contractor
should default in the punctual payment or performance when due and observance
when due of, or should commit a breach of, the Obligations, Guarantor shall,
promptly upon written notice by Owner, pay or perform in Contractor's stead, or
cause the payment or performance of, such covenants, terms or agreements.
3. (a) It is expressly understood and agreed by Guarantor that to
the extent Guarantor's obligations hereunder relate to obligations of Contractor
which require performance other than the payment of money, Owner may proceed
against Guarantor to effect specific performance thereof (to the extent such
relief is available) or for payment of damages (as limited by the Contract)
resulting from Contractor's nonperformance. Guarantor hereby covenants and
agrees to assume the Contract and to perform all of the terms and conditions
thereunder for the balance of the term thereof should the Contract be
disaffirmed by the trustee in bankruptcy for Contractor, or at the option of
Owner, Guarantor shall, in the event of Contractor's bankruptcy, make and enter
into a new contract for the balance of the term of the Contract, which said new
contract shall be in form and substance identical to the Contract.
(b) Without prejudice to Owner's rights against the Contractor
as principal obligor, Guarantor shall, as between Owner on one hand and
Guarantor on the other, be deemed principal obligor in respect of its
obligations under this Guaranty, and not merely surety. Accordingly, Guarantor
shall not be discharged, and its liability shall not be affected, by any act,
thing, omission or means whatsoever whereby its liability would not have been
discharged, if it had been principal obligor.
4. All payments by Guarantor to Owner shall be made in the United
States in United States Dollars and shall be paid within thirty (30) days after
receipt by Guarantor from Owner of written demand for such payment and shall not
be the subject of any offset against any amounts which may be owed by Owner to
Guarantor for any reason whatsoever. Each and every default or failure by
Contractor in making a payment or otherwise discharging or performing any of the
covenants, terms or agreements set forth in the Contract shall give rise to a
separate liability of Contractor to Owner and a separate cause of action
hereunder and a separate suit may be brought hereunder as each liability or
cause of action arises.
5. Guarantor agrees to pay all costs, expenses and fees, including
all reasonable attorneys' fees, which may be incurred by Owner in successfully
enforcing this Guaranty, whether by suit or otherwise.
6. The obligations of Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional and shall remain in full force and
effect until such time as all the covenants, terms and agreements of any kind or
nature whatsoever set forth in the Contract shall have been absolutely and
completely discharged and performed; and the obligations of Guarantor shall not
be affected, modified or impaired upon the happening from time to time of any
event, including without limitation, any one or more of the following (unless
based upon performance by Contractor), whether or not with notice to or consent
of either the Guarantor or Contractor:
(a) the compromise, settlement, release, change, modification
or
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termination of any of the covenants, terms or agreements of Contractor set
forth in the Contract;
(b) the waiver by Owner of the payment, performance or
observance of any of the covenants, terms or agreements of Contractor set
forth in the Contract;
(c) the extension of time for payment of any amounts due or of
the time for performance of any of the covenants, terms or agreements of
Contractor set forth in the Contract;
(d) the modification or amendment (whether material or
otherwise) of any covenants, terms and agreements set forth in the
Contract;
(e) the failure, omission, delay or lack on the part of Owner
to enforce, ascertain or exercise any right, power or remedy under or
pursuant to the terms of the Contract or this Guaranty;
(f) the fact that Guarantor may at any time in the future
dispose of all or any part of its interest in Contractor, or otherwise
alter its investment in Contractor in any manner;
(g) the bankruptcy, insolvency or other similar or dissimilar
failure or financial disability of either Contractor or Owner;
(h) the addition, substitution or partial or entire release of
any guarantor, maker or other party (including Contractor) primarily or
secondarily liable or responsible for the performance and observance of
any of the covenants, terms or agreements set forth in the Contract or by
any extension, waiver, amendment or thing whatsoever which may release a
guarantor (other than performance);
(i) the invalidity, nonbinding effect or unenforceability of
any covenant, term or agreement set forth herein or in the Contract (other
than with respect solely to such covenant, term or agreement);
(j) the addition, substitution, subordination, or partial or
entire release of any security for the performance and observancy of any
of the covenants, terms or agreements set forth in the Contract.
7. Guarantor hereby agrees that it will not exercise, and hereby
irrevocably and absolutely waives any and all rights of subrogation,
contribution, indemnification, reimbursement or similar rights against
Contractor with respect to this Guaranty, whether such rights arise under an
express or implied contract or by operation of law, it being the intention of
Guarantor and Owner that Guarantor shall not be deemed to be a "creditor" (as
defined in Section 101 of the U.S. Bankruptcy Code) of Contractor by reason of
the existence of this Guaranty in the event that Contractor becomes a debtor in
any proceeding under the U.S. Bankruptcy Code; provided, that such agreement not
to exercise such rights and such waiver
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thereof shall not apply to the extent that Owner, in its reasonable discretion,
determines that the exercise of such rights by Guarantor could not reasonably be
expected to materially and adversely affect Owner's rights and interests under
the Contract and this Guaranty. In addition, Guarantor will not exercise any
rights which it may acquire by way of subrogation under this Guaranty by any
payment made hereunder or otherwise, until all of the liabilities and
obligations or Contractor to Owner under the Contract shall have indefeasibly
been paid in full. If any amount shall be paid to Guarantor on account of such
subrogation rights at any time when all such liabilities and obligations shall
not have been indefeasibly paid in full, such amounts shall be held in trust for
the benefit of the Owner and shall forthwith be paid to Owner and applied to
such liabilities and obligations, whether matured or unmatured.
8. Owner shall have the right, in its sole judgment and discretion,
from time to time, to make demand for payment or performance and to proceed
against Guarantor for recovery of the total of any and all amounts due, or for
the performance or any nonmonetary obligation owed, to Owner pursuant to this
Guaranty, or to proceed from time to time against Guarantor for such portion of
any and all such amounts, or for the performance of any and all such nonmonetary
obligations, as Owner may determine.
9. Notwithstanding any other provision to the contrary set forth
herein, Guarantor retains the right to assert any and all claims, defenses and
limitations of liability possessed by Contractor under the terms of the Contract
(including without limitation Article 13 of the Contract, but excluding any
defense based upon absence of binding effect of the Contract) or arising from
the parties' performance or failure to perform thereunder; provided, that if any
such defense or circumstance has been asserted and the validity thereof has been
resolved under the Contract, then Guarantor shall not be entitled to reassert
such defense or circumstance.
10. (a) So long as any Obligations are owed to Owner, Guarantor
shall not, without the prior written consent of Owner, commence, or join with
any other Person in commencing, any bankruptcy, reorganization, or insolvency
proceeding against Contractor. The obligations of Guarantor under this Guaranty
shall not be altered, limited or affected by any proceeding, voluntary or
involuntary, involving the bankruptcy, reorganization, insolvency, receivership,
liquidation or arrangement of Contractor, or by any defense which Contractor may
have any reason of any order, decree or decision of any court or administrative
body resulting from any such proceeding.
(b) Any settlement or discharge between Owner and Contractor
shall be conditional upon no security or payment to Owner by or on behalf of
Contractor or any other person being avoided or reduced by virtue of any
provision or enactment relating to bankruptcy, insolvency, administration or
liquidation for the time being in force, and Owner shall be entitled to recover
the value or amount of any such security or payment from Guarantor subsequently
as if such settlement or discharge had not occurred.
11. Guarantor hereby waives and relinquishes all rights and remedies
accorded by applicable law to sureties or guarantors and agrees not to assert or
take advantage of any such rights or remedies, including without limitation:
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(a) any right to require Owner to proceed against Contractor
or any other person or to proceed against or exhaust any security held by
Owner at any time or to pursue any other remedy in Owner's power before
proceeding against Guarantor;
(b) the defense of the statute of limitations in any action
hereunder or in any action for the collection or performance of any
obligations hereby guaranteed;
(c) any defense that may arise by reason of the incapacity,
lack of authority, death or disability of any other person or the failure
of Owner to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person;
(d) demand, presentment, protest and notice of any kind,
including without limitation notice of the existence, creation or
incurring of any new or additional indebtedness or obligation or of any
action or non-action on the part of Contractor, Owner, any creditor of
Contractor or Guarantor or on the part of any other person under this or
any other instrument in connection with any obligation or evidence of
indebtedness held by Owner as collateral or in connection with any
Obligations hereby guaranteed;
(e) any defense based upon an election of remedies by Owner
which destroys or otherwise impairs the subrogation rights of Guarantor,
the right of Guarantor to proceed against Contractor for reimbursement, or
both;
(f) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal;
(g) any duty on the part of Owner to disclose to Guarantor any
facts the Owner may now or hereafter know about Contractor, regardless of
whether Owner has reason to believe that any such facts materially
increase the risk beyond that which Guarantor intends to assume, or has
reason to believe that such facts are unknown to Guarantor, or has a
reasonable opportunity to communicate such facts to Guarantor, since
Guarantor acknowledges that Guarantor is fully responsible for being and
keeping informed of the financial condition of Contractor and of all
circumstances bearing on the risk of non-payment of any Obligations hereby
guaranteed;
(h) any defense arising because of Owner's election, in any
proceeding instituted under the Federal Bankruptcy Code, of the
application of Section 1111(b)(2) of the Federal Bankruptcy code; and
(i) any defense based upon any borrowing or grant of a
security interest under Section 364 of the Federal Bankruptcy Code.
12. Guarantor makes the representations and warranties set forth
below to Owner as of the date hereof:
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(a) Guarantor is a limited liability partnership duly
organized, validly existing and in good standing under the laws of the
State of Missouri and has the power and authority to execute and deliver
this Guaranty and to perform its obligations hereunder.
(b) Guarantor has taken all necessary action to authorize its
execution and delivery of this Guaranty and the performance of its
obligations hereunder.
(c) This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally and subject to general equitable
principles.
(d) All governmental authorizations and actions necessary in
connection with the execution and delivery by Guarantor of this Guaranty
and the performance of its obligations hereunder have been obtained or
performed and remain valid and in full force and effect.
(e) Execution, delivery and performance of this Guaranty (i)
do not and will not contravene any provisions of Guarantor's partnership
agreement or bylaws, or any law, rule, regulation, order, judgment or
decree applicable to or binding on Guarantor or any of its Affiliates or
properties; (ii) do not and will not contravene, or result in any breach
of or constitute any default under, any agreement or instrument to which
Guarantor is a party or by which Guarantor or any of its properties may be
bound or affected; or (iii) do not and will not require the consent of any
Person under any existing law or agreement which has not already been
obtained.
(f) There is no pending or, to the best of Guarantor's
knowledge, threatened action or proceeding affecting Guarantor before any
court, governmental agency or arbitrator, which might reasonably be
expected to materially and adversely affect the financial condition,
results of operations, business or prospects of Guarantor or the ability
of Guarantor to perform its obligations under this Guaranty.
(g) All quarterly and annual financial statements heretofore
delivered by Guarantor to Agent are true, correct and complete, do not
fail to disclose any material liabilities, whether direct or contingent,
fairly present the financial condition of Guarantor as of the date
delivered and are prepared in accordance with generally accepted
accounting principles consistently applied.
13. Covenants of Guarantor. Guarantor agrees that:
(a) It will maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it
with respect to this Guaranty and will obtain any that may become
necessary in the future.
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(b) It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations
under this Guaranty.
(c) From time to time, Guarantor will deliver to Owner such
other information or documents regarding Guarantor as Owner may reasonably
request and as may be available to Guarantor without undue cost or effort;
provided, however, that Guarantor may impose reasonable confidentiality
requirements in connection with the disclosure of such information and
documents in the nature of those set forth in Section 19.7 of the
Contract.
(d) Guarantor shall not sell, assign, transfer, convey,
mortgage, encumber, hypothecate, pledge or otherwise dispose of or grant
any interest in Contractor.
14. (a) This Guaranty shall inure to the benefit of the successors
or assigns of Owner who shall have, to the extent of their interest, the rights
of Owners hereunder; provided, however, that the rights of hereunder, if any be
retained by them, shall have priority over and be senior to the rights of their
respective successors or assigns unless Owner shall otherwise elect.
(b) This Guaranty is binding upon Guarantor and its successors and
assigns.
Guarantor shall not assign its obligations hereunder to any other person without
the written consent of Owner, and any purported assignment in violation of this
provision shall be void.
15. The section headings in this Guaranty are for the convenience of
reference only and shall not affect the meaning or construction of any provision
hereof.
16. Notices. All notices in connection with this Guaranty shall be
given by notice in writing, hand-delivered or sent by facsimile transmission, or
by certified mail return-receipt requested (airmail, if overseas), postage
prepaid. All such notices shall be sent to the appropriate telecopier number or
address, as the case may be, set forth below or to such other number or address
as shall have been subsequently specified by written notice to the other party,
and shall be sent with copies, if any, as indicated below. All such notices
shall be effective upon receipt. The addresses for notice shall be as follows:
(a) The address of Guarantor is:
Black & Veatch LLP
8400 Ward Parkway
Kansas City, Missouri 64114
Attention: Chairman
Telephone No.: (913) 458-2000
Telecopier: (913) 458-2934
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(b) The address of Contractor is:
BVZ Power Partners - Batesville
11401 Lamar Avenue
Overland Park, Kansas 66211
Attention: Mr. Ron Ott
Telephone No.: (913) 458-2300
Telecopier: (913) 458-2934
(c) The address of Owner is:
LSP Energy Limited Partnership
c/o LSP Energy, Inc,
655 Craig Road
Suite 336
St. Louis, Missouri 63141
Attention: ____________________________
Telephone No.: (314) 993-2700
Telecopier: (314) 993-2790
With a copy to:
LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Telephone No.: (732) 249-6750
Telecopier: (732) 249-7290
17. Notwithstanding anything contained herein that may be construed
to the contrary, as between Guarantor and Owner, this Guaranty may be amended
only with the written consent of Owner and the parties herein.
18. This Guaranty shall in all respects be interpreted, and
construed and governed by and in accordance with, the internal, substantive laws
of the State of New York (other than Section 5-1401 of the General Obligations
Law) and the United States of America. Guarantor irrevocably consents to the
jurisdiction of the state and federal courts located in New York, New York,
agrees that any action, suit or proceeding by or among Owner and Guarantor may
be brought in any court in New York, New York, and waives any objection which
Guarantor may now or hereafter have regarding the choice of forum whether on
personal jurisdiction, venue, forum non convenience or on any other ground
(except that Guarantor may remove the action to the Federal District Court in
the Southern District of New York). Guarantor irrevocably consents to the
service of process outside of the territorial jurisdiction of such courts by
mailing copies thereof by registered or certified United States mail, postage
prepaid, to
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Guarantor's last known address as shown in the records of Owner with the same
effect as if Guarantor were a resident of the State of New York and had been
lawfully served in such state. Nothing in this Guaranty shall affect the right
to service of process in any other manner permitted by law. Guarantor further
agrees that final judgment against it in any action or proceeding shall be
conclusive and may be enforced in any other jurisdiction within or outside the
State of New York by suit on the judgment, a certified or exemplified copy of
which shall be conclusive evidence of the fact and the amount of such judgment.
19. This Guaranty contains the entire agreement between Guarantor
and Owner relating to the subject matter hereof and supersedes all oral
statements and prior writing with respect hereto.
20. (a) Subject to the provisions of Section 20(b) hereof, this
Guaranty shall terminate upon termination of the Contract and the payment and
performance in full of the Obligations thereunder, other than a termination
resulting from Contractor's breach of the Contract.
(b) Notwithstanding the provisions of Section 20(a) hereof,
this Guaranty shall be reinstated if at any time following the termination of
this Guaranty under Section 20(a) hereof, any payment by Guarantor or Contractor
under this Guaranty or pursuant hereto is rescinded or must otherwise be
returned by or other Person upon the insolvency, bankruptcy, reorganization,
dissolution or liquidation of Owner, Contractor, Guarantor or otherwise, and is
so rescinded or returned to the party or parties making such payment, all as
though such payment had not been made. Such period of reinstatement shall
continue until satisfaction of the conditions contained in, and shall continue
to be subject to, the provisions of this Section 20.
21. Any invalid or unenforceable provisions in this Guaranty shall
be deemed severed herefrom, and such whole or partial invalidity shall not
affect the enforceability or validity of the balance of this Guaranty.
22. Any capitalized terms used herein and not herein defined shall
have the meanings given to them in the Contract.
23. This Guaranty may be signed in one or more duplicate
counterparts, and when executed and delivered by all of the parties listed below
shall constitute a single binding agreement.
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IN WITNESS WHEREOF, Guarantor has caused this Construction Contract
Guaranty to be duly executed and delivered as of the day and year first written
above.
BLACK & VEATCH LLP,
a Missouri limited liability partnership
By: /s/ Wayne F. Hall
By /s/ Wayne F. Hall
-----------------------------------------
Name: Wayne F. Hall
Title: CFO & Managing Partner
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Exhibit 10.11
Batesville
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT is made as of August 24, 1998, by and
between LS POWER MANAGEMENT, LLC, a Delaware limited liability company
("Manager"), and LSP ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership
("Owner").
RECITALS
WHEREAS, Owner is in the business of developing, constructing, owning
and operating an electric power plant in Batesville, Mississippi (the
"Facility");
WHEREAS, Owner and BVZ Power Partners-Batesville (the "Contractor") have
entered into a Turnkey Engineering, Procurement and Construction Agreement dated
as of July 22, 1998, (as amended, modified or otherwise supplemented from time
to time, the "Construction Contract") whereby Contractor shall design and
construct the Facility;
WHEREAS, Owner and Cogentrix Batesville Operations, LLC (the "Operator")
have entered into an Operation and Maintenance Agreement [dated as of August 24,
1998 (as amended, modified or otherwise supplemented from time to time, the
"Operating Agreement") whereby Operator shall operate and maintain the Facility;
WHEREAS, Owner desires to engage Manager to manage the general business
affairs of the Owner, in accordance with the terms and conditions set forth
herein; and
WHEREAS, Manager wishes to so perform such management services.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, unless otherwise defined in the
text, the terms set forth below shall have the following meanings:
1.1. Agreement: This Management Services Agreement between Owner and
Manager as amended, modified or otherwise supplemented from time
to time.
1.2. Credit Facilities: The senior loan financing agreements relating
to the Facility entered into by Owner and the senior lenders
party thereto as amended, supplemented and modified and any
subsequent refinancing agreements related thereto.
1.3. Escalation Factor: The ratio of GDP-IP August Previous Year over
GDP-IP August 1998, where "GDP-IP August Previous Year" equals
the published index value in August of the operating year
immediately preceding the operating year
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for which the adjustment is due, "GDP-IP August 1998" equals the
published index for August 1998 and "GDP-IP" means the final
published Implicit Price Deflator for Gross Domestic Product as
determined quarterly and reported monthly by the Bureau of
Economic Analysis of the U.S. Department of Commerce in the
Publication "Survey of Current Business". In the event this
index is discontinued or its basis is substantially modified,
Owner and Manager shall agree on a substitute index.
1.4. Infrastructure Use Agreement: The Infrastructure Use Agreement
to be entered into among the Mississippi Department of Economic
and Community Development, the Mississippi Business Finance
Corporation, the Mississippi Major Economic Impact Authority,
Panola County, Mississippi, the City of Batesville, the Panola
Partnership, a Mississippi corporation, the Industrial
Development Authority of the Second Judicial District of Panola
County, Mississippi, and the Owner.
1.5. Management Account(s): Any bank account(s) opened by Manager at
the direction of and on behalf of Owner with a licensed
financial institution on which Manager will be permitted to draw
checks in payment of Management Expenses.
1.6. Management Expenses: The reasonable and necessary direct
out-of-pocket expenses incurred by Manager on Owner's behalf in
performance of the Services, including, but not limited to,
usual and customary costs of managing the business affairs of
the Owner as herein set forth. Such expenses shall not include
any costs or expenses owed by Owner to any third party unless
and to the extent the Manager shall have paid or satisfied such
costs or expenses from its own funds. Management expenses shall
generally include the cost of supplies required by Manager,
travel, lodging, subsistence of Management Personnel incurred in
connection with the performance of services and fees for
independent contractors that are hired by Manager, with the
approval of Owner, to assist it in performing the Services
hereunder. Management Expenses shall not include the Management
Fee or Reimbursable Management Costs or any other amounts in the
nature of overhead or general and administrative expenses of
Manager.
1.7. Management Fee: The fixed compensation to be paid by Owner to
Manager for the performance of the Services in accordance with
Section 9 of this Agreement.
1.8. Management Personnel: The personnel employed by Manager to
perform the Services, provided, that such personnel are not also
compensated by Owner to perform the same or similar services for
Owner. Management Personnel may be employed on a full-time,
flexi-time or part-time basis. In no event shall Management
Personnel include Mikhail Segal.
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1.9. Notice: A written communication delivered personally or sent by
registered mail, postage prepaid, or by nationally recognized
overnight courier service, as follows:
Owner: LS Power Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center, 10th Floor
East Brunswick, NJ 08816
Attn: General Counsel
Manager: LS Power Management, LLC
c/o LS Power, LLC
Two Tower Center, 10th Floor
East Brunswick, NJ 08816
or to such other address as shall be furnished by Notice from
time to time by any party hereto. Such Notice shall be deemed to
have been given as of the date personally delivered or on the
third day after being so mailed or sent by nationally recognized
courier unless otherwise specified herein.
1.10. Notice to Proceed: The written Notice to Proceed issued by Owner
to Contractor under the Construction Contract.
1.11. Partnership Agreement: Amended and Restated Limited Partnership
Agreement of Owner dated as of August 24, 1998.
1.12. Power Purchase Agreements: (i) the Power Purchase Agreement
dated as of May 18, 1998, as modified by the First Amendment to
the Power Purchase Agreement dated as of July 22, 1998 and the
Second Amendment to the Power Purchase Agreement dated as of
August 11, 1998, by and between Owner and Virginia Electric and
Power Company, as amended, modified or otherwise supplemented
from time to time, (ii) the Power Purchase Agreement dated as of
May 21, 1998, as modified by the letter agreement dated as of
July 16, 1998 among Owner, Aquila Power Corporation and
Utilicorp United Inc., as amended, modified or otherwise
supplemented from time to time and (iii) any other agreement for
the sale of all or a portion of the net electric capacity and
generation from the Facility entered into by Owner from time to
time.
1.12.1. Prudent Utility Practice: At any given time, any of the
practices, methods and acts generally engaged in or approved by
the electric power generation industry at the time the decision
was made to utilize such practices, methods or acts or any of
the practices, methods and acts that, in the exercise of
reasonable judgment in light of the facts known at the time when
the decision was made, would have reasonably been expected to
accomplish the desired result at a reasonable cost consistent
with reasonable reliability, safety, expedition and
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protection of the environment, but in any event a "Prudent
Utility Practice" shall comply with the requirements of the
Power Purchase Agreements and the Operating Agreement. "Prudent
Utility Practice" is not intended to be limited to the optimum
practice, method or act to the exclusion of all others, but
rather to a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers'
warranties, engineering and operating considerations, and the
requirements of governmental authorities and the requirements of
all material documents relating to the Services to be rendered
hereunder to which Owner is party.
1.13. Reimbursable Management Costs: The properly allocable portion of
annual direct salaries of Management Personnel, which costs
shall be based upon actual payrolls (showing the time expended
by employees in providing services under this Agreement), costs
of holidays, taxes, fringe benefits, vacations and other
statutory contributions (including, but not limited to, workers'
compensation insurance) as a percentage allowance, an allocation
for overhead pertaining to Management Personnel, relocation
expenses, travel and transportation and other expenses which are
reasonable and necessary for the management of the business
affairs of Owner. Reimbursable Management Costs shall be
consistent with (a) the levels of staffing set forth in Appendix
A, together with other employees who may be added from time to
time on an "as needed" basis in respect of particular or
discrete matters and (b) levels of compensation, benefits and
expense reimbursement applicable in arms-length employment
arrangements in the independent power industry for employees of
similar stature, seniority and experience. Reimbursable
Management Costs shall not include the Management Fee or
Management Expenses.
1.14. Services: All of the management services to be provided by
Manager pursuant to this Agreement.
2. Engagement of Manager. Owner hereby engages Manager to perform the
Services with such powers, authorities and duties as are specified in
this Agreement. Manager shall act at all times pursuant to and under the
specific control and direction of the general partner of the Owner.
Manager agrees to act as Manager under the terms and conditions, and for
the period specified herein.
3. Management Services. Manager shall perform certain tasks related to
managing the business affairs of the Owner in accordance with Prudent
Utility Practice and in all cases standards at least as high as those
Manager would employ for the management of its own business affairs.
Such Services shall include, but not be limited to, the following:
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3.1. Perform all bookkeeping and other handling of financial matters
for Owner.
3.2. Perform all accounting tasks necessary to maintain accurate
financial records of the business of Owner in accordance with
generally accepted accounting principles, including, but not
limited to, the obligations required under Article V of the
Partnership Agreement.
3.3. In connection with an independent public accounting firm,
prepare and file all necessary tax returns for Owner.
3.4. Prepare and submit all filings of any nature which are required
to be made by Owner under any laws, regulations, ordinances or
otherwise applicable to Owner or the Facility.
3.5. Cause to be procured and maintained all governmental approvals
of any nature required for Owner to carry out its business
affairs, including, but not limited to, any permits required for
the operation of the Facility (excluding any such approvals
which are expressly the responsibility of a third party (other
than Owner) under any documents relating to the Facility).
3.6. Engage and supervise such independent contractors as Manager may
deem necessary and Owner shall approve in advance in writing for
assisting in the performance of the Services.
3.7. Purchase any materials, supplies and equipment necessary for the
performance of the Services.
3.8. Keep accurate records of all business transactions entered into
by Manager in connection with the Services.
3.9. Procure and maintain all insurance required to be maintained by
Owner (but not the Contractor or Operator) pursuant to the Power
Purchase Agreement, the Construction Contract, the Operating
Agreement, or any agreement providing financing for the Facility
and all insurance required to be maintained by the Manager
pursuant to Section 15 of this Agreement.
3.10. Supervise and monitor Owner's and each counterparty's compliance
with, and, to the extent within its control, ensure Owner's
compliance with, the terms and conditions of all contracts under
which Owner has any obligations or rights (except this
Agreement), including, but not limited to, the Construction
Contract, the Operating Agreement, the Credit Facilities, any
other agreement providing for financing of the Facility and the
Power Purchase Agreements.
3.11. Manager shall provide Owner with identifiable office space at
Manager's principal place of business in East Brunswick, New
Jersey.
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3.12. Prepare, or cause to be prepared, all documents required to be
submitted pursuant to the Credit Facilities.
3.13. Do any and all other activities as directed in writing by Owner.
4. Term. The Manager's services under this Agreement shall commence on the
date of the delivery of the Notice to Proceed and shall extend for the
period ending on the twenty seventh (27th) anniversary of the
Commencement Date (as defined in the Operating Agreement), subject to
the provisions of Section 14. Such Notice shall be delivered
contemporaneously with the Notice to Proceed under the Construction
Contract.
5. Manager's Covenants.
5.1. Manager shall perform the Services in a proper and businesslike
manner in accordance with Prudent Utility Practice.
5.2. Manager shall, at all times, perform the Services in accordance
with the terms of this Agreement, the requirements of the Credit
Facilities, all Project Documents (as defined pursuant to the
Credit Facilities documentation) relating to the Facility and in
compliance with instructions provided by Owner.
5.3. Manager shall comply in all material respects with all
applicable federal, state, and local laws, rules and regulations
in the performance of the Services.
5.4. Manager shall take such action as may be necessary or
appropriate to ensure that the business of the Owner relating to
the Facility is conducted in accordance with all applicable
material federal, state and local laws, rules and regulations
and permits, including environmental laws, as well as all
contracts under which Owner has any rights or material
obligations, including but not limited to, the Power Purchase
Agreements, the Construction Contract, the Operating Agreement,
the Credit Facilities, and any other material agreement
providing for financing of the Facility.
5.5. The Manager shall perform, as and to the extent requested by
Owner, the Owner's obligations under the Infrastructure Use
Agreement.
6. Owner's Covenants.
6.1. Owner shall, upon Manager's reasonable request, promptly provide
to any third party any necessary evidence of Manager's authority
to act pursuant to this Agreement.
6.2. Owner shall fund the Management Account in amounts sufficient to
permit Manager to make the payments and transfers contemplated
by this Agreement.
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7. Authority to Contract.
7.1. Manager shall, subject to the following limitations, be
authorized to enter into contracts and amendments to contracts
on behalf of Owner which contracts are necessary for the
performance of the Services; provided (i) any such contract or
amendment, as the case may be, shall be in writing and in the
name of Owner; (ii) any such contract or amendment, as the case
may be, shall be approved in advance by Owner in writing; (iii)
any necessary consents under, or conditions specified in,
Owner's financing and project documents relative to the
execution by Owner of such contract or amendment, as the case
may be, shall have been obtained and satisfied; and (iv) a true
copy of each such contract shall be maintained by Manager.
8. Negative Covenants of Manager. Manager shall not, without prior written
authorization from Owner, do or perform any of the following:
8.1. Borrow or lend money on behalf of Owner or create any lien or
encumbrance on the Facility.
8.2. Do any act or fail to take any action which, if performed or
omitted by Owner, would be a breach of any agreement in any
material respect relating to the business of the Owner.
8.3. Retain the services of any attorney, or certified public
accountant on behalf of Owner, without Owner's prior written
consent.
8.4. Make any relinquishment of its rights as Manager or appoint any
sub-manager.
8.5. Pay any amounts in excess of One Thousand Dollars ($1,000.00) in
the settlement of any claim for injury or death of persons or
for loss of or damage to property.
8.6. Sell, hypothecate, mortgage or otherwise encumber or dispose of
any property of Owner.
9. Payments to Manager.
9.1. During the term of this Agreement, Owner shall pay to Manager
(i) monthly, its Management Expenses and the Reimbursable
Management Costs incurred by Manager during the preceding month
in accordance with the Management Budget and (ii) monthly,
beginning on the date of the Notice to Proceed, a Management Fee
in the amount of Thirty Three Thousand Three Hundred
Thirty-three Dollars and Thirty-three Cents ($33,333.33) during
the operation of the Facility, each such amount expressed in
1998 United States dollars; provided, that if the Commencement
Date (as defined in the Operating Agreement) shall not have
occurred on or prior to the Scheduled
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Commencement Date (as defined in the Operating Agreement), no
Management Fee shall be payable for the period commencing on the
Scheduled Commencement Date and ending on the Commencement Date.
Such fee shall compensate Manager for the time expended by the
executive officers of Manager while performing the Services.
Late payments shall incur interest at a rate equal to 1% per
month. The aforementioned Management Fee shall be escalated each
year at a rate equivalent to the Escalation Factor.
9.2 Manager shall submit a statement to Owner at the end of each
month itemizing the Management Expenses and Reimbursable
Management Costs incurred by Manager during the preceding month,
together with any invoices, bills of sale or other appropriate
documentation evidencing the payment due. Manager shall provide
such additional documentation evidencing the payment due as
Owner shall reasonably request.
10. Management Budgets.
10.1. A written estimate of Management Expenses and Reimbursable
Management Costs, including a schedule of the costs of
management personnel (the "Management Budget") for the period
ending December 31, 1998 is attached hereto as Appendix B.
Manager shall prepare and submit to Owner for its review and
approval on or before October 1 of each year during the term of
this Agreement, commencing with October 1, 1998, a Management
Budget for the following year. Owner shall approve such
Management Budget or shall promptly provide Manager with
comments on such Management Budget. Manager shall promptly
incorporate or jointly with Owner resolve such comments. Owner's
right to approve the Management Budget shall not operate to
relieve Manager of its obligations under this Agreement;
provided however, that Manager shall not be obligated to
undertake any activity or provide any service which is to be
paid for by Owner hereunder and which is not provided for in the
Management Budget or otherwise authorized for payment by Owner.
In the event of any dispute over the Management Budget
applicable to any year which is not resolved prior to the
commencement of such year, then until resolution of such dispute
the Management Budget applicable to such year shall be the prior
year's Management Budget escalated by the lesser of (i) the
percentage increase in GDP-IP from January 1 to December 31 of
the prior year or (ii) the additional incremental amount that
has been requested for the Management Budget for each year over
the past year by Manager.
10.2. Manager shall provide its Services to Owner as defined herein
each year within the Management Budget. Should Manager determine
that the monthly Management Expenses or Reimbursable Management
Costs may exceed the amount for any month set forth in the
Management Budget, Manager shall notify
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Owner within ten (10) days of such determination and shall
follow Owner's instructions regarding future expenditures on
Owner's behalf.
11. Employment Relations. Manager shall have sole and exclusive control over
Management Personnel. Manager shall pay all wages, benefits, withholding
taxes and insurance relating to such employment.
12. Supplies. All supplies purchased for performance of the Services shall
be the sole property of Owner and purchased as such on behalf of Owner
by Manager.
13. Audit and Records. Manager shall, upon request, furnish to Owner
invoices and other documents and records substantiating all Management
Expenses and Reimbursable Management Costs billed to or paid by Manager
on behalf of Owner under this Agreement. The Owner shall have the right,
at Owner's expense, upon reasonable prior notice, to audit the records
of Manager relating to the Manager's obligations under this Agreement.
14. Termination.
14.1. Each party shall have the right to terminate this Agreement in
the event the other party materially breaches any obligation
hereunder and, in the case of obligations which are not curable
through the payment of money, fails to cure such a breach or
take reasonable steps toward curing said breach within thirty
(30) days of receiving Notice thereof except that (i) failure by
Owner to pay any disputed amount shall not constitute a breach
of Owner's obligations hereunder (provided that any such
disputed amounts not paid shall be placed by Owner into an
interest-bearing escrow account which provides for payment of
such amounts to Owner or Manager, as the case may be, upon
resolution of the dispute) and (ii) no cure period shall apply
to wilful defaults.
14.2. Manager shall have the right to terminate this Agreement for its
convenience after the first ten (10) years following completion
of construction of the Facility. Manager shall give Notice of
its intent to so terminate at least nine (9) months in advance
of the date of termination.
14.3. Owner, in addition to its other termination rights under this
Section 14, shall have the right to terminate this Agreement
forthwith upon the occurrence of an Event of Default (as defined
below).
14.4. Following the reduction of the aggregate direct or indirect
ownership interests of the Manager and its Affiliates in the
Partnership to a percentage less than or equal to 10% of the
total aggregate ownership interests thereof (other than due to a
foreclosure on Manager's or its Affiliates' interest in Owner or
the Facility), Owner shall, upon thirty (30) days written notice
thereof, be entitled to terminate this Agreement without
penalty, provided that for 12 months after the effectiveness of
any such termination, Owner shall be obligated to pay, and
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Manager shall be entitled to receive, the Management Fee that
would have been payable to Manager had this Agreement remained
in effect. Manager acknowledges that payment of such Management
Fees shall be subordinate to Owner's debt service payments under
the Credit Facilities.
15. Insurance. Manager shall, at Manager's expense, provide a fidelity bond
covering all Management Personnel who shall have authority to handle any
funds of the Owner.
16. Events of Default.
16.1. Manager shall fail to perform or observe in any material respect
any term, covenant or agreement contained in this Agreement on
its part to be performed or observed and, in the case of
obligations which are not curable through the payment of money,
such failure shall remain unremedied for 45 days (or such other
period as is specified in this Agreement) during which time
Manager shall be engaged in reasonably diligent efforts to cure
(except that no cure period shall apply to willful defaults).
16.2. There shall be a Bankruptcy of Manager; "Bankruptcy" shall mean
and refer to (i) the filing of any petition by such person to
commence a case under the Bankruptcy Code (title 11, U.S.C.) or
any other federal, state or foreign law for the relief of
debtors or the protection of creditors (any such law, a
"Bankruptcy Law"), (ii) the filing of a petition by any third
party with respect to such person under any Bankruptcy Law,
which petition is not opposed within 120 days after filing,
(iii) the failure or inability of such person to pay its debts
as they become due (or any admission in writing by such person
of any such failure or inability), (iv) the appointment of a
receiver or trustee for such person or any substantial portion
of the property of such person or (v) the making by such person
of any general assignment for the benefit of creditors.
16.3. There shall be an "Event of Default" under and as defined in the
Credit Facilities and the lenders under the Credit Facilities
shall have foreclosed on this Agreement and assumed the rights
and obligations of Owner hereunder.
17. Indemnity.
17.1. Manager shall indemnify, hold harmless and defend Owner, any
party providing senior debt financing for the Facility and any
affiliate of Owner (for the purposes of this Section 17, the
"Indemnitees") from and against any claims, demands, suits,
proceedings, liabilities, judgments, awards, losses, damages,
costs or expenses (including reasonable legal fees) ("Indemnity
Claim") whatsoever in connection with or arising out of acts or
omissions by Manager, whether or not brought or sought by or in
favor of a governmental agency, a third party or the Indemnitee,
and whether or not based on contract, tort (including
negligence),
10
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theory of strict contract, theory of strict liability, or
infringement of proprietary rights, for bodily injury, sickness,
death, injury to or destruction of third-party tangible property
arising out of or in any manner caused or occasioned, in whole
or in part, by any act, omission, error, fault or willful act or
gross negligence of Manager, or anyone acting on Manager's
behalf, including, without limitation, subcontractors and
vendors. Notwithstanding any provision in this Agreement to the
contrary, Manager's liability under this Agreement shall in no
event exceed $500,000.
17.2. Manager agrees to fully indemnify, save harmless and defend each
Indemnitee from claim, liabilities, expenses (including legal
fees), penalties, interest, demands and causes of action for
nonpayment of amounts due subcontractors, vendors or others as a
result of providing Services which amounts are payable by
Manager, provided Manager has been or will be paid by Owner, to
the extent Manager is entitled to receive such payment, in
accordance with-the provisions of this Agreement for such
Services.
17.3. Owner shall indemnify, hold harmless and defend Manager, its
affiliates and employees (for the purposes of this Section 17,
the "Indemnitees") from and against any claims, demands, suits,
proceedings, liabilities, judgments, awards, losses, damages,
costs or expenses (including reasonable legal fees) ("Indemnity
Claim") whatsoever in connection with or arising out of acts by
Owner, whether or not brought or sought by or in favor of a
governmental agency, a third party or the Indemnitee, and
whether or not based on contract, tort (including negligence),
theory of strict contract, theory of strict liability, or
infringement of proprietary rights, for bodily injury, sickness,
death, injury to or destruction of third-party tangible property
arising out of or in any manner caused or occasioned, in whole
or in part, by any act, omission, error, fault or negligence of
Owner, or anyone acting on Owner's behalf (including the Manager
by virtue of providing Services hereunder; provided that this
indemnity shall not extend to any act, omission, error, fault or
negligence of Manager that is caused or occasioned in whole or
in part, by (i) any breach by Manager of this Agreement, or (ii)
any gross negligence or wilful misconduct of Manager.
Notwithstanding any provision in this Agreement to the contrary,
Owner's liability under this Agreement shall in no event exceed
$500,000.
17.4. In the event that any Indemnitee seeking indemnification from
Manager or Owner, as the case may be, pursuant to this Section
17 is found to have actively contributed to the cause of the
loss for which it is seeking to be indemnified, such Indemnitee
shall bear its losses and costs arising out of such claim in
proportion to the degree to which it shall be found to have been
negligent in causing such loss.
17.5. The obligations of Manager and Owner referred to in this Section
17 shall be limited or reduced to the extent of the proceeds of
any insurance actually
11
<PAGE>
received (or any self-insurance retentions) by Owner or Manager,
respectively, as the case may be.
17.6. This Section 17 shall remain in full force and effect and shall
survive the termination of this Agreement until the later of (i)
the time during such a claim or cause of action may be brought
is barred by the applicable statute of limitations or (ii) the
satisfaction or payment of such claim or liability and of all
expenses and charges incurred by Indemnitee relating to the
enforcement of this Section.
18. Miscellaneous Provisions.
18.1. Governing Law. This Agreement shall be interpreted in accordance
with, and governed by, substantive and procedural law of the
State of New York. The parties hereby consent to the
jurisdiction of the courts of the State of New York in resolving
any dispute arising under or concerning this Agreement.
18.2. Subcontracts and Assignment. This Agreement may be freely
assigned by Owner at any time (including as collateral security
for financing). Manager may not assign this Agreement or
delegate, assign, or subcontract all, or any part of its duties
under this Agreement without the express written consent of
Owner.
18.3. Integration. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof;
supersedes all prior agreements and understandings, whether oral
or written, which the parties may have in connection herewith
and may not be modified except by written agreement of the
parties.
18.4. Severability. If any provision of this Agreement is determined
by a court of competent jurisdiction to be void or unenforceable
in whole or in part, such determination shall not affect or
impair the enforceability or validity of this Agreement.
Notwithstanding any provision to the contrary herein, Section
14.4 shall survive a termination of this Agreement.
18.5. Limitation on Liability. In no event shall Manager be liable to
Owner for any consequential or incidental damages of any nature,
including, but not limited to, lost profits or revenues which
may arise in any manner as a result of Manager's performance of
its duties hereunder, whether based upon a claim for a breach of
contract or in tort. In no event shall Owner be liable to
Manager for any consequential or incidental damages of any
nature, including, but not limited to, lost profits or revenues
which may arise in any manner as a result of Owner's performance
of its duties hereunder, whether based upon a claim for a breach
of contract or in tort. No recourse for the payment of any sums
or the performance of any obligations hereunder, or for any
claim based thereon or otherwise in respect therefor relating
thereto, shall be had against any employee, incorporation,
shareholder, officer or director, past, present or future, of
any
12
<PAGE>
general or limited partner or member of either of Owner or
Manager, each in its capacity as such.
18.6. Dispute Resolution and Arbitration.
(a) In the event a dispute arises between Owner and Manager
regarding the application or interpretation of any
provision of this Agreement and such dispute involves
matters of accounting treatment, the aggrieved party
shall promptly notify the other party to this Agreement
of the dispute within two (2) days after such dispute
arises. Manager shall immediately appoint its own third
party accountant who, together with the Owner's
accountant, shall choose a third accountant. Said three
accountants shall jointly review such evidence as they
deem necessary and shall render a decision (concurrence
of two of the three accountants) on such dispute within
ten (10) days. Such decision shall be binding on the
Owner and the Manager.
(b) In the event a dispute arises between Owner and Manager
regarding the application or interpretation of any
provision of this Agreement (other than disputes over
matters referred to in Section 18.6(a)), the aggrieved
party shall promptly notify the other party to this
Agreement of the dispute within ten (10) days after such
dispute arises. If the parties shall have failed to
resolve the dispute within ten (10) days after delivery
of such notice, each party, within five (5) days
thereafter, nominate a senior officer of its management
to meet at the Facility, or any other mutually agreed
location, to resolve the dispute. Should the parties be
unable to resolve the dispute to their mutual
satisfaction within twenty (20) days after such
nomination, each party shall have the right to pursue
any legal remedies which may exist or may, with the
concurrence of the other party, refer such matter for
arbitration.
(c) Except as expressly provided elsewhere in this
Agreement, any controversy, claim or dispute arising out
of or relating to this Agreement shall in the first
instance be presented by written notice to the party
against or from whom relief or corrective action is
desired. Thereafter, within ten days of receipt of said
notice, the receiving party shall respond in writing to
the other party setting forth its position on the issue.
Thereafter, without further effort to resolve the
matters privately, either party may pursue its other
legal remedies.
18.7. The provisions of Section 17 and Section 18.5 hereof shall
survive termination of this Agreement.
18.8. Proprietary Information. Manager shall maintain as secret and
treat as confidential all proprietary information supplied by
Owner and may not disclose
13
<PAGE>
such information to a third party (other than to a party or
parties providing financing for the Facility) without Owner's
prior consent. Proprietary information shall be deemed to
include any and all information on the business affairs of Owner
or any partner of Owner, which is not otherwise available in
public. Manager shall return to Owner any proprietary
information upon Owner's request.
18.9. The terms of this Agreement may not be modified or waived orally
but only by an instrument in writing signed by the parties
hereto.
18.10. The headings of the several sections of this Agreement are
inserted for convenience only and shall not in any way affect
the meaning or construction of any provisions of this Agreement.
18.11. Notwithstanding any provision of this Agreement to the contrary,
any payment which is due pursuant to any provision of this
Agreement on any day which is a Saturday, Sunday or legal
holiday or on any day on which banking institutions in New York
City are authorized or required by law to close, shall be paid
on the next succeeding day.
18.12. Each party represents and warrants to the other party that: (i)
such party has the full power and authority to execute, deliver
and perform this Agreement and to carry out the transactions
contemplated hereby; (ii) the execution and delivery of this
Agreement by such party and the carrying out by such party of
the transactions contemplated hereby have been duly authorized
by all requisite corporate (or, if applicable, partnership)
action, and this Agreement has been duly executed and delivered
by such party and constitutes the legal, valid and binding
obligation of such party, enforceable against it in accordance
with the terms hereof, subject as to enforceability of remedies
to limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors rights generally and
general principles of equity; (iii) no authorization, consent,
approval or order, or notice to or registration, qualification,
declaration or filing with any Governmental Authority is
required for the execution, delivery and performance by such
party of this Agreement or the carrying out by such party of the
transactions contemplated hereby, other than regulatory and
similar approvals needed with respect to the operation and
maintenance of the Facility; and (iv) none of the execution,
delivery and performance by such party of this Agreement, the
compliance with the terms and provisions hereof, and the
carrying out of the transaction contemplated hereby, conflicts
or will conflict with or result in a breach or violation of any
of the terms, conditions, or provisions of any law, governmental
rule or regulation or the charter document (or partnership
agreement, if applicable), as amended, supplemented, or
otherwise modified, or bylaws, as amended, supplemented, or
otherwise modified, of such party or any applicable order, writ,
injunction, judgment or decree of any court or
14
<PAGE>
Governmental Authority against such party or by which it or any
of its properties is bound, or any loan agreement, indenture,
mortgage, bond, note, resolution, contract or other agreement or
instrument to which such party is a party or by which it or any
of its properties is bound, or constitutes or will constitute a
default thereunder or will result in the imposition of any lien
upon any of its properties.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers with the intent to be legally bound.
LS POWER MANAGEMENT, LLC
By:/s/ Mikhail Segal
---------------------------------
Name: Mikhail Segal
Title: President
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By:/s/ Frank Hardenbergh
---------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President and Secretary
16
<PAGE>
Appendix A to Management Services Agreement
Project Staffing
Number of
Persons Title
- ------- -----
1 General Manager
1 Project Manager
1 Controller
1 Administrative Assistant
Note 1: Job titles are for information only. Actual titles and duties may vary.
Note 2: Additional LS Power personnel will be available on an as-needed basis
as permitted under the Management Services Agreement.
17
<PAGE>
Appendix B to Management Services Agreement
Management Budget
[To be Attached]
18
<PAGE>
Exhibit 10.12
OPERATION AND MAINTENANCE AGREEMENT
by and between
LSP ENERGY LIMITED PARTNERSHIP
as Owner
and
COGENTRIX BATESVILLE OPERATIONS, LLC
as Operator
Dated as of August 24, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................1
ARTICLE II - SCOPE; PROJECT AGREEMENTS; REPRESENTATIVES......................8
SECTION 2.1 - SCOPE OF WORK..................................................8
SECTION 2.2 - EXAMINATION OF PROJECT AGREEMENTS, PROJECT PERMITS AND SITE....8
SECTION 2.3 - COMPLIANCE WITH PROJECT AGREEMENTS AND PERMITS.................9
SECTION 2.4 - PARTY REPRESENTATIVES..........................................9
ARTICLE III - OPERATOR RESPONSIBILITIES......................................9
SECTION 3.1 - INDEPENDENT CONTRACTOR.........................................9
SECTION 3.2 - PRE-COMMENCEMENT PHASE SERVICES................................9
SECTION 3.3 - SITE PROCEDURES...............................................11
SECTION 3.4 - OPERATIONAL PHASE SERVICES....................................12
SECTION 3.5 - STANDARDS OF PERFORMANCE......................................13
SECTION 3.6 - PRE-COMMENCEMENT PHASE BUDGET.................................14
SECTION 3.7 - ANNUAL OPERATING BUDGET AND PLAN; THREE YEAR PROJECTION.......15
SECTION 3.8 - PROCUREMENT OF MATERIALS AND SERVICES.........................16
SECTION 3.9 - INVENTORY.....................................................17
SECTION 3.10 - PERSONNEL....................................................18
SECTION 3.11 - TRAINING PROGRAMS............................................19
SECTION 3.12 - REPORTS......................................................20
SECTION 3.13 - EMERGENCY AND OUTAGE PROCEDURES..............................21
SECTION 3.14 - IMPROVEMENTS.................................................21
SECTION 3.15 - ANNUAL REVIEW................................................21
SECTION 3.16 - NOT USED.....................................................21
SECTION 3.17 - ADMINISTRATION...............................................22
SECTION 3.18 - TAXES........................................................22
SECTION 3.19 - FACILITY PERFORMANCE.........................................22
SECTION 3.20 - LOAN AGREEMENT...............................................22
SECTION 3.21 - FUEL SUPPLY..................................................22
SECTION 3.22 - SAFETY.......................................................23
SECTION 3.23 - BOOKS AND RECORDS............................................23
SECTION 3.24 - SCHEDULING MAINTENANCE.......................................24
SECTION 3.25 - COOPERATION WITH OTHERS......................................24
SECTION 3.26 - ACCESS.......................................................24
SECTION 3.27 - OPERATOR LICENSES; PERMITS...................................24
SECTION 3.28 - ENFORCEMENT OF WARRANTIES....................................24
SECTION 3.29 - COMPLIANCE WITH LAWS.........................................25
SECTION 3.30 - NO LIENS OR ENCUMBRANCES.....................................25
SECTION 3.31 - NO ACTION....................................................25
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Batesville O&M Agreement Page i
<PAGE>
TABLE OF CONTENTS
SECTION 3.32 - LITIGATION; PERMIT LAPSES....................................25
ARTICLE IV - OWNER RESPONSIBILITIES.........................................25
SECTION 4.1 - FUEL SUPPLY...................................................25
SECTION 4.2 - REASONABLE ACCESS.............................................26
SECTION 4.3 - ACCOMMODATIONS................................................26
SECTION 4.4 - UTILITIES.....................................................26
SECTION 4.5 - MANUALS AND DRAWINGS..........................................26
SECTION 4.6 - TAXES.........................................................26
SECTION 4.7 - MAINTENANCE OF PERMITS........................................27
SECTION 4.8 - PAYMENT.......................................................27
ARTICLE V - LIMITATIONS ON AUTHORITY........................................27
SECTION 5.1 - GENERAL LIMITATIONS...........................................27
ARTICLE VI - PAYMENT AMOUNT AND TERMS.......................................28
SECTION 6.1 - PAYMENT.......................................................28
SECTION 6.2 - REIMBURSABLE COSTS............................................28
SECTION 6.3 - FEES..........................................................30
SECTION 6.4 - NOT USED......................................................30
SECTION 6.5 - NOT USED......................................................30
SECTION 6.6 - DISPUTES......................................................30
SECTION 6.7 - EXCLUSION.....................................................31
SECTION 6.8 - AUDIT RIGHTS..................................................31
SECTION 6.9 - PAYMENT OF FINES AND PENALTIES................................31
SECTION 6.10 - INTEREST.....................................................32
SECTION 6.11 - PAYMENT ADJUSTMENT...........................................32
ARTICLE VII - INSURANCE.....................................................32
SECTION 7.1 - GENERAL REQUIREMENTS..........................................32
SECTION 7.2 - OPERATOR PROVIDED INSURANCE...................................33
SECTION 7.3 - OWNER PROVIDED INSURANCE......................................35
SECTION 7.4 - OPTIONAL INSURANCE RESPONSIBILITIES...........................37
ARTICLE VIII - DISPUTE RESOLUTION...........................................37
SECTION 8.1 - PROCEDURE.....................................................37
SECTION 8.2 - ARBITRATION PROCEDURE.........................................37
SECTION 8.3 - QUALIFICATIONS OF ARBITRATORS; EXPENSES.......................38
SECTION 8.4 - INDEPENDENT ARBITRATION AGREEMENT.............................39
SECTION 8.5 - CONTINUATION OF WORK..........................................39
ARTICLE IX - COMMENCEMENT AND TERMINATION...................................39
SECTION 9.1 - COMMENCEMENT OF WORK..........................................39
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Batesville O&M Agreement Page ii
<PAGE>
TABLE OF CONTENTS
SECTION 9.2 - TERM..........................................................39
SECTION 9.3 - RENEWALS......................................................40
SECTION 9.4 - EARLY TERMINATION.............................................40
SECTION 9.5 - TERMINATION PROCEDURE.........................................41
SECTION 9.6 - SUSPENSION OF PERFORMANCE.....................................41
ARTICLE X - REPRESENTATIONS.................................................42
SECTION 10.1 - REPRESENTATIONS AND WARRANTIES...............................42
ARTICLE XI - CONFIDENTIALITY................................................43
SECTION 11.1 - GENERAL......................................................43
SECTION 11.2 - EXCEPTIONS...................................................43
SECTION 11.3 - REQUIRED DISCLOSURE..........................................43
SECTION 11.4 - RETURN OF CONFIDENTIAL INFORMATION...........................44
ARTICLE XII - DEFAULT.......................................................44
SECTION 12.1 - EVENTS OF DEFAULT............................................44
SECTION 12.2 - RIGHTS UPON DEFAULT..........................................45
ARTICLE XIII - INDEMNITY....................................................46
SECTION 13.1 - OPERATOR'S INDEMNITY.........................................46
SECTION 13.2 - OWNER'S INDEMNITY............................................46
SECTION 13.3 - SURVIVAL OF INDEMNITY........................................47
SECTION 13.4 - LITIGATION...................................................47
ARTICLE XIV - LIABILITY OF THE PARTIES......................................48
SECTION 14.1 - LIMITATION OF LIABILITY......................................48
SECTION 14.2 - SURVIVAL.....................................................49
SECTION 14.3 - NO WARRANTIES OR GUARANTEES..................................49
ARTICLE XV - FORCE MAJEURE..................................................49
SECTION 15.1 - FORCE MAJEURE; EVENTS LIMITATION.............................49
ARTICLE XVI - TITLE, DOCUMENTS AND DATA.....................................50
SECTION 16.1 - MATERIALS AND EQUIPMENT......................................50
SECTION 16.2 - REVIEW BY OWNER..............................................50
ARTICLE XVII - HAZARDOUS MATERIALS..........................................50
SECTION 17.1 - OWNER'S INDEMNITY............................................50
SECTION 17.2 - COLLECTION AND REMOVAL.......................................51
SECTION 17.3 - MATERIAL SAFETY DATA SHEETS..................................51
SECTION 17.4 - OPERATOR'S INDEMNITY.........................................51
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Batesville O&M Agreement Page iii
<PAGE>
TABLE OF CONTENTS
ARTICLE XVIII - MISCELLANEOUS PROVISIONS....................................52
SECTION 18.1 - ENTIRE AGREEMENT.............................................52
SECTION 18.2 - CHANGES TO PROJECT AGREEMENTS................................52
SECTION 18.3 - AMENDMENTS...................................................52
SECTION 18.4 - JOINT EFFORT.................................................52
SECTION 18.5 - CAPTIONS.....................................................53
SECTION 18.6 - NOTICE.......................................................53
SECTION 18.7 - EFFECTIVE DATE OF NOTICE.....................................53
SECTION 18.8 - PARTIAL INVALIDITY...........................................54
SECTION 18.9 - ASSIGNMENT...................................................54
SECTION 18.10 - NO WAIVER...................................................54
SECTION 18.11 - COUNTERPARTS................................................55
SECTION 18.12 - PUBLICITY...................................................55
SECTION 18.13 - APPLICABLE LAW..............................................55
SECTION 18.14 - SUCCESSORS AND ASSIGNS......................................55
SECTION 18.15 - EXHIBITS AND SCHEDULES......................................55
SECTION 18.16 - THIRD PARTY BENEFICIARIES...................................55
SECTION 18.17 - OPERATOR LIENS AND ENCUMBRANCES.............................55
SECTION 18.18 - EFFECT OF APPROVAL RIGHTS...................................56
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Batesville O&M Agreement Page iv
<PAGE>
ATTACHMENTS
A. Description of Facility and Site
B. Typical List of Site Procedures
C. Typical Pre-Commencement Phase and Annual Operating Budget
D. Services Included with Pre-Commencement and Management Fees
E. Project Agreements and Project Permits Delivered to Operator
- --------------------------------------------------------------------------------
Batesville O&M Agreement Page v
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
This OPERATION AND MAINTENANCE AGREEMENT dated as of August 24, 1998 (the
"Effective Date"), is by and between LSP Energy Limited Partnership, a Delaware
limited partnership ("Owner"), and Cogentrix Batesville Operations, LLC, a
Delaware limited liability company ("Operator").
RECITALS:
1. Owner intends to construct, own and operate the Facility (as
hereinafter defined) to be located in Batesville, Mississippi.
2. Owner has entered into a Construction Contract (as hereinafter defined)
for the design and construction of the Facility.
3. Operator, by itself and through suppliers and subcontractors, desires
to provide certain operation, maintenance and management services for the
Facility.
4. Operator is knowledgeable in the operation and maintenance of thermal
energy equipment and electrical generation equipment of the types to be used at
the Facility, and has reviewed certain Project Agreements (as hereinafter
defined) and has determined it is able and willing to perform the services
described herein.
5. Owner desires to engage Operator to perform such work as is necessary
to operate and maintain the Facility in accordance with the terms and conditions
expressed in this Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein, IT IS AGREED:
ARTICLE I - Definitions
"Affiliate" means, in relation to any Person, any Person which directly or
indirectly controls, or is under common control with, or is controlled by such
other Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a Person solely by reason of his or her being a director, committee member,
officer or employee of such Person.
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Batesville O&M Agreement Page 1
<PAGE>
"Agreement" means this Operation and Maintenance Agreement (including all
exhibits and schedules attached hereto), as it may be amended, supplemented, or
otherwise modified from time to time.
"Annual Operating Budget" shall have the meaning as set forth in Section
3.7.
"Annual Operating Plan" shall have the meaning as set forth in Section
3.7.
"Commencement Date" means the date of Substantial Completion (as such term
is defined in the Construction Contract) of the first Unit to achieve
Substantial Completion.
"Construction Contract" means the Turnkey Engineering, Procurement and
Construction Agreement for the Project dated as of July 22, 1998 by and between
Owner and Contractor for the engineering, procurement, construction and start-up
of the Facility, as amended, supplemented, or otherwise modified from time to
time.
"Contractor" means BVZ Power Partners - Batesville, a joint venture
between Black & Veatch Construction, Inc., a Missouri Corporation, and H. B.
Zachry Company, a Delaware Corporation, including its representatives,
successors and permitted assigns acting in its capacity as contractor pursuant
to the Construction Contract.
"Day" shall mean a calendar day, unless otherwise specified. In the event
that any monetary obligation or obligation to deliver any report or budget falls
due on a Saturday, Sunday or legal holiday in the locality where such Work is
being performed, such obligation shall be deemed due on the next business day
thereafter.
"Effective Date" means the date on which this Agreement is entered into by
Owner and Operator, as first above written.
"Electrical Interconnection Agreements" means collectively the
Interconnection and Operating Agreement dated May 18, 1998, as amended by the
Letter of Amendment dated August 18, 1998 between Owner and Entergy Mississippi,
Inc. ("Entergy") and the Interconnection Agreement between Owner and the
Tennessee Valley Authority ("TVA") dated July 22, 1998, as such agreements may
be amended, supplemented or otherwise, modified from time to time.
"Emergency" means any event or condition relating to or affecting the
Facility which may result in injury to persons or damage to property, including,
without limitation, any person or property at the Facility.
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Batesville O&M Agreement Page 2
<PAGE>
"Facility" means the natural gas fired combined cycle power generation
facility, as more fully described in Exhibit A, having an intended nominal net
rating of approximately 830 MW to be constructed on the Site pursuant to the
Construction Contract, including without limitation, all equipment and machinery
integral or related to the operation of the facility, the Facility Equipment
including without limitation the gas pipeline and interconnection equipment
referred to in the Fuel Agreements, the electrical interconnection facilities
referred to in the Electrical Interconnection Agreements, the water supply
pipeline, pumping and associated facilities, and the wastewater discharge
pipeline and associated facilities (each to the extent owned by or operated by
Owner pursuant to any Project Agreement), and all other equipment, systems, and
facilities associated therewith.
"Facility Equipment" means all equipment owned or leased by Owner or which
Owner has the responsibility to operate under any Project Agreement, and used in
the operation and maintenance of the Facility.
"Force Majeure" shall have the meaning as set forth in Article XV.
"Fuel Agreements" means collectively the Facilities Agreement between
Owner and Tennessee Gas Pipeline Company, dated June 23, 1998 and the
Interconnection Agreement between Owner and ANR Pipeline Company, dated July 29,
1998 along with all agreements as shall be in effect from time to time between
Owner and any other entity for the provision, sale, transportation, balancing or
delivery of fuel to the Facility as such agreements shall be amended,
supplemented, or otherwise modified from time to time.
"Governmental Authority" means the United States of America, the State of
Mississippi, or any local or special district agency, department, authority,
political subdivision, court, judicial or administrative authority or
instrumentality of either.
"Hazardous Materials" means asbestos or any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), the Hazardous
Materials Transportation Act as amended (49 U.S.C. Sections 1801 et seq.),
"hazardous wastes" as defined in the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 9601 et seq.), "toxic substances" as defined in the
Toxic Substance Control Act as amended (15 U.S.C. Section 2601 et seq.), and in
the regulations adopted and publications promulgated pursuant thereto, or in any
other federal, state or local environmental governmental requirements.
"Inducement Agreement" means the Inducement Agreement to be entered into
among the Mississippi Department of Economic and Community Development
("MDECD"), acting for and on behalf of the State of Mississippi ("State"); the
Mississippi Business Finance Corporation
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("MBFC"); the Mississippi Major Economic Impact Authority ("Authority"), a
division of the MCECD also acting for and on behalf of the State; Panola County,
Mississippi ("County"), acting through the Board of Supervisors; the City of
Batesville, Mississippi ("City"), acting by and through its Mayor and Board of
Aldermen; the Panola Partnership, Inc. a Mississippi corporation
("Partnership"); the Industrial Development Authority of the Second Judicial
District of Panola County, Mississippi, acting for and on behalf of the County
("IDA") and Owner, as amended, supplemented or otherwise modified from time to
time.
"Infrastructure Use Agreement" means the Infrastructure Use Agreement to
be entered into among the State of Mississippi, Panola County, Mississippi, City
of Batesville, Mississippi, Industrial Development Authority of the Second
Judicial District of Panola County, Mississippi and Owner, as amended,
supplemented or otherwise modified from time to time.
"Interconnecting Utilities" shall mean Entergy and TVA.
"Law(s)" means any constitution, charter, act, statute, law, ordinance,
code, rule, regulation, order, permit, condition, specified standards or
criteria contained in any applicable permit, approval, order, decision,
determination or ruling of any Governmental Authority having jurisdiction, all
as in effect from time to time, including without limitation, environmental laws
pertaining to air and water emissions relating to the Facility and the operation
thereof, which standards or criteria must be met in order for the Facility to be
operated lawfully, or other legislative, administrative or judicial action,
final decree, judgment or order of any Governmental Authority having
jurisdiction relating to the Facility.
"Loan Agreement" means the promissory notes, loan agreements, guarantees,
assignments, security agreements, mortgages and other agreements between Owner
and any Project Lender for the development, construction and/or permanent
financing or refinancing of the Facility, and any documents relating thereto, as
the same may be amended, supplemented, or otherwise modified from time to time.
"Major Equipment" means the combustion turbine generator, steam turbine
generator and heat recovery steam generator.
"Major Maintenance" means the Major Equipment disassembly, inspections,
overhauls, reassembly and significant capital improvements which require an
outage of the Major Equipment.
"Management Fee" means the amount that Owner shall pay to Operator as
provided in Section 6.3(b).
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"Materials" means all supplies, spare parts, materials, tools,
consumables, chemicals and equipment (excluding fuel oil and natural gas)
necessary for the operation and maintenance of the Facility.
"Milestone Schedule" shall have the meaning set forth in Section 3.2
(a)(8).
"Notice to Proceed" means the written notice from Owner to Operator
requesting commencement of the Pre-Commencement Phase Services.
"Notice to Proceed Date" means the date that Owner issues the Notice to
Proceed.
"Operating Account" means the account established by Owner pursuant to
Section 6.2(b) for the payment by Operator of Reimbursable Costs.
"Operating Year" means the period commencing on the Commencement Date and
ending on the first anniversary of the Commencement Date, and each succeeding
year thereafter.
"Operation and Maintenance Manuals" means the operating manuals for the
Facility provided by Contractor pursuant to the Construction Contract, and the
operating data, design drawings, specifications, vendor manuals, and similar
materials provided by Owner to Operator with respect to the Facility.
"Operational Phase" means the period beginning on the Commencement Date
and ending on the earlier of the expiration or termination date of this
Agreement.
"Operational Phase Services" means the services to be performed by the
Operator pursuant to Section 3.4.
"Operator" means Cogentrix Batesville Operations, LLC, its successors
and/or assigns.
"Owner" shall mean LSP Energy Limited Partnership, its successors and/or
assigns.
"Party" means Owner or Operator and in the plural, both Owner and Operator
together.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personnel" means the persons employed by the Operator and assigned to the
Site to operate and maintain the Facility and generally to perform the Work, as
described in Section 3.10.
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"Plant Manager" shall mean the individual designated by Operator and
approved by Owner pursuant to Section 3.10 (c) that is empowered by Operator to
direct and manage the Work and with whom Owner may consult at all reasonable
times. Such individual shall not be empowered to execute any amendments to this
Agreement.
"Power Purchase Agreements" means collectively the Power Purchase
Agreement dated as of May 18, 1998, as amended by the First Amendment to Power
Purchase Agreement dated as of July 22, 1998 and the Second Amendment to Power
Purchase Agreement dated as of August 11, 1998 between Virginia Electric and
Power Company and Owner, and the Power Purchase Agreement dated May 21, 1998, as
amended by the letter agreement dated July 16, 1998, between Aquila Power
Corporation and Utilicorp United, Inc. and Owner and any other power purchase
agreement entered into by Owner for the sale by Owner and the purchase by a
Power Purchaser of all or any portion of the net electric energy and/or capacity
produced by the Facility such agreements may be amended, supplemented, or
otherwise modified from time to time.
"Power Purchasers" means Virginia Electric and Power Company and/or Aquila
Power Corporation and Utilicorp United, Inc., and such other entities as may
enter into power purchase agreements with Owner, and their successors and/or
assigns, each acting pursuant to its agreement with Owner for the purchase and
sale of electrical power generated by the Facility.
"Pre-Commencement Phase" means the period from the Notice to Proceed Date
to the Commencement Date.
"Pre-Commencement Phase Budget" shall have the meaning as set forth in
Section 3.6.
"Pre-Commencement Phase Services" shall have the meaning as set forth in
Section 3.2.
"Pre-Commencement Phase Services Fee" shall have the meaning as set forth
in Section 6.3 (a).
"Project" means the Facility, the Site, the Project Permits, the Project
Agreements and other real or personal property interests relating to the
Facility and/or the Site which are owned by Owner or in which Owner has any
rights.
"Project Agreements" means, collectively, the collective reference to the
Construction Contract, the Water Supply Storage Agreement, the Infrastructure
Use Agreement, the Inducement Agreement, the Electrical Interconnection
Agreements, the Fuel Agreements, the Power Purchase Agreements, this Agreement,
the Loan Agreement and any other agreement relating to the Facility or its
operation, maintenance or servicing designated by Owner as a Project Agreement
to the extent Operator has been provided notice and a copy thereof. "Project
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Agreement" shall include any amendment, modification, supplement or addition to
any Project Agreement and any new agreements designated by Owner as a Project
Agreement, executed after the date of this Agreement to the extent Operator has
been provided notice and a copy thereof.
"Project Lender" or "Lender" means any bank, financial institution or
other Person providing development, construction or permanent financing or
refinancing, working capital financing and/or other credit enhancements for the
Facility, whether such financing is provided directly to the Owner or to any
Affiliate thereof.
"Project Permits" means any permit, license, exception, action, order,
authorization, assent, consent or approval for the Facility and any amendments,
modifications, supplements or additions thereto, of which Operator has been
provided notice by Owner.
"Prudent Operating Practice" means those practices, methods,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by experienced, knowledgeable and
professional firms performing operation and maintenance services on facilities
of the type and size similar to the Facility in the electric generation
industry, which in the exercise of reasonable judgment and in the light of the
facts known at the time decisions are made, are considered good, safe and
prudent practice in connection with the operation and maintenance of electrical,
steam generating and other related equipment, facilities and improvements, with
commensurate standards of safety, performance, dependability, efficiency and
economy.
"Reference Rate" means the interest rate established by The Chase
Manhattan Bank, N.A. from time to time as its "prime rate" plus one percent
(1%).
"Reimbursable Costs" shall have the meaning as set forth in Section 6.2.
"Scheduled Commencement Date" means July 1, 2000.
"Services" means those services to be provided by Subcontractors in
connection with Owner's obligations under Section 2.1 ( c ) of this Agreement.
"Site" means the site where the Facility is located as described in
Exhibit A.
"Site Procedures" means those on-Site rules, regulations and procedures to
which Operator shall adhere in the performance of its obligations pursuant to
this Agreement, as prepared or revised and approved pursuant to Section 3.3.
"Standards of Performance" means the standards for Operator's performance
of the Work as set forth in Section 3.5.
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"Subcontractor" means a person or entity having a direct contractual
relationship with Owner to provide Materials and Services.
"Unit" means each of the three (3) combined cycle trains comprising the
Project.
"Unscheduled Outage" means an unplanned Facility failure or other
condition that requires either (i) the Facility to be removed from service, or
from a state in which the Facility is available for service but not in service,
or, (ii) the load of the Facility (or the Facility's capacity level) available
for dispatch to be reduced but does not require that the Facility be removed
from service.
"Water Supply Storage Agreement" means the Water Supply Storage Agreement
dated June 8, 1998 between Owner and the United States of America, as amended,
supplemented and otherwise modified from time to time.
"Work" shall have the meaning as set forth in Section 2.1.
ARTICLE II - Scope; Project Agreements; Representatives
Section 2.1 - Scope of Work.
(a) Operator will operate and maintain the Facility and perform
certain other duties, including certain activities during construction, start-up
and testing of the Facility, as hereinafter set forth (the "Work").
(b) Without limiting the generality of Section 2.1(a), the Work is
divided into two separate phases - the Pre-Commencement Phase and the
Operational Phase. During the Pre-Commencement Phase, Operator shall provide the
Pre-Commencement Phase Services. During the Operational Phase, Operator shall
provide the Operational Phase Services. All Work shall be performed in
accordance with the Standards of Performance set forth in Section 3.5.
(c) Owner shall, at its expense during the term of this Agreement,
provide Operator with the information, services, Materials and authorizations as
Operator may reasonably require from Owner to perform the Work in accordance
with this Agreement.
Section 2.2 - Examination of Project Agreements, Project Permits and Site.
Prior to the Effective Date, Owner has provided Operator with copies of the
Project Agreements and Project Permits listed in Exhibit F. Upon execution
and/or receipt by Owner of any new Project Agreements, Project Permits, or any
amendments to Project Agreements or Project Permits previously transmitted to
Operator, Owner shall provide Operator with executed copies thereof. Operator
represents that, prior to signing this Agreement, it has carefully examined the
Site and each of the Project Agreements and the Project Permits, or applications
relating thereto,
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which it has been provided and has determined the acceptability of each of the
foregoing for the purposes of Operator's performance of its obligations
hereunder. Such Project Agreements and Project Permits given to Operator as of
the Effective Date are listed in Exhibit F. The Parties hereto recognize and
agree that this Agreement is intended, in part, to fulfill Owner's operating and
maintenance obligations under the Project Agreements and, consistent with the
Project Permits, to optimize the operation of the Facility consistent with
Owner's objective to maximize its net profit reasonably attainable under the
Project Agreements.
Section 2.3 - Compliance with Project Agreements and Permits.
Operator shall abide by all terms and conditions of the Project Agreements and
Project Permits applicable to the operation and maintenance of the Facility in
performing any part of the Work. If Operator's compliance with this Agreement
would cause Owner to be in default or otherwise in breach or violation of any of
its obligations under any Project Agreement or any Project Permit, the
requirements of such agreements shall control Operator's performance hereunder
to the extent necessary to avoid such default, breach or violation, subject to
Operator's obligation to comply with all Laws. Each Party shall notify the other
as soon as it knows or believes that compliance with this Agreement will result
in such a default, breach or violation.
Section 2.4 - Party Representatives.
Within thirty (30) Days after the Notice to Proceed Date, Owner and Operator
shall each notify the other in writing of its designation of an individual to
act as its representative with respect to matters which may arise during the
performance of the Work. At any time after the initial designation by any Party
of its representative, such Party may designate a successor representative by
similar written notice to the other Party. After such time as the Plant Manager
has been approved pursuant to Section 3.10 (c), such Plant Manager shall be
Operator's representative and shall be located at the Site.
ARTICLE III - Operator Responsibilities
Section 3.1 - Independent Contractor.
In performing the Work hereunder, Operator is and shall remain an independent
contractor. As such, Operator shall not be entitled or eligible to participate
in any benefits or privileges given or extended by Owner to its employees and
shall be responsible for all employer tax, withholding, insurance, and other
payments and filings required as a result of the performance of Operator's
obligations pursuant to this Agreement. Nothing contained in this Agreement
shall be construed as creating a joint venture or partnership relationship
between Operator and Owner.
Section 3.2 - Pre-Commencement Phase Services.
(a) Commencing on the Notice to Proceed Date and subject to the approval
by Owner of the necessary budget pursuant to Section 3.6, Operator shall perform
the services necessary to
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provide for the efficient and safe transition of the Facility from construction
through the Commencement Date including the following services (the
"Pre-Commencement Phase Services"):
(1) prepare a staffing plan and schedule for hiring the Personnel
within ten (10) Days after the Notice to Proceed Date;
(2) recruit and provide orientation for the Personnel to insure that
each of the Personnel satisfactorily completes the training required under
Section 3.11; such Personnel shall be hired and trained by the date required to
enable such Personnel to perform their respective roles in start-up, testing,
and subsequent operation and maintenance of the Facility. No later than the
Commencement Date, the staff shall be comprised of fully trained, qualified and
licensed Personnel meeting the requirements of Section 3.11;
(3) develop a list of Site Procedures, similar to Exhibit B, within
thirty (30) Days after the Notice to Proceed Date;
(4) prepare an initial draft of each of the Site Procedures in
accordance with Section 3.3 and transmit to Owner within one hundred eighty
(180) Days after the Notice to Proceed Date;
(5) not later than one hundred twenty (120) Days prior to the
Scheduled Commencement Date, staff the on-Site office provided by Owner;
(6) respond in a timely manner (but in no event shall the time to
make such a response exceed five (5) Days) to written requests by Owner for
information about the Work;
(7) perform the operation and maintenance for the Facility (that are
not the obligation of Contractor to perform) during the Pre-Commencement Phase
including providing support for the start-up and testing of the Facility under
the direct supervision of the Contractor;
(8) provide the Owner with a written schedule for the performance of
the Pre-Commencement Phase Services within thirty (30) Days after the Notice to
Proceed Date; such schedule to be updated periodically to incorporate changes
requested by the Owner and those requested by the Contractor as necessitated due
to changes in the schedule prepared by Contractor pursuant to the Construction
Contract (the "Milestone Schedule");
(9) provide monthly progress reports on the first of each month in a
format reasonably acceptable to Owner;
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(10) prepare, not later than thirty (30) Days following the Notice
to Proceed Date a proposed Pre-Commencement Phase Budget in accordance with
Section 3.6;
(11) interface with Contractor to coordinate the performance of this
Agreement with Contractor's performance of the Construction Contract. To that
end, Operator shall review the Milestone Schedule, as the same may be modified
from time to time, and appropriately coordinate its duties hereunder with such
Milestone Schedule. Operator shall review any revisions of such Milestone
Schedule and the monthly progress reports generated by Contractor under the
Construction Contract and provided to Operator and Operator shall adjust its
performance of its obligations hereunder accordingly and provide Owner with
written adjustments to the Schedule, together with any change to the
Pre-Commencement Phase Budget, pursuant thereto;
(12) prepare, not later than one hundred twenty (120) Days after the
Notice to Proceed Date a preliminary list of Materials and Services needed to be
procured. The list should identify the approximate date when an item is needed;
(13) arrange for the procurement of Materials and Services in
accordance with Section 3.8 to assure they are available when needed to support
the start-up, operation, and maintenance of the Facility;
(14) with Owner and Contractor develop a "punch list" of
Contractor's uncompleted and/or deficient work; and
(15) review Contractors' training program and Operation and
Maintenance Manuals and provide comments and a recommendation to Owner within
one hundred eighty (180) Days after the Notice to Proceed Date.
Items 1, 2, 3, 4, 8, 9, 10, 11, 12, 13, 14, and 15 shall each be subject
to the review and approval of Owner, which approval shall not be unreasonably
withheld. If Operator is notified that any such item is unsatisfactory, it will
promptly prepare a revision based on Owner's comments and the requirements of
this Agreement.
(b) No review or approval by Owner under this Section 3.2 shall relieve or
limit Operator's responsibility and liability as set forth in this Agreement for
the item so reviewed or approved.
Section 3.3 - Site Procedures.
Operator shall prepare, pursuant to Section 3.2(a)(3), detailed Site Procedures
to be applicable after the Commencement Date and, as necessary, during the
Pre-Commencement Phase.
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Operator shall submit such documents to Owner for review, comment and approval,
and to Contractor for review and comment for purposes of maintaining
Contractor's warranty obligations pursuant to the Construction Contract, within
one hundred eighty (180) Days after the Notice to Proceed Date. Owner's review,
comment, and approval of any proposed Site Procedures presented to it by
Operator shall not be unreasonably withheld or delayed. Owner shall notify
Operator in writing of its comments or approval of each Site Procedure within
thirty (30) Days following Operator's submittal of such proposed Site Procedure
to Owner. In addition, Owner may require Operator to prepare additional Site
Procedures as Owner deems necessary. Subsequent modifications to Site
Procedures, including any revisions required by Owner's rejection of such Site
Procedures, shall likewise be submitted to Owner and Contractor for approval and
comment, as applicable, prior to implementation.
Section 3.4 - Operational Phase Services.
On and after the Commencement Date and subject to the approval by Owner of
the necessary budget pursuant to Section 3.7, the Operator shall be responsible
for the operation and maintenance of the Facility, including the following
services (the "Operational Phase Services"). Operator shall:
(a) perform all operation and maintenance of the Facility, and, in
accordance with Section 3.8, arrange for the procurement of all Materials and
Services required to operate and maintain the Facility in accordance with the
provisions of this Agreement (except as expressly reserved to Owner under
Article IV and subject to the limitations on Operator's authority set forth in
Article V).
(b) perform or coordinate and supervise the performance of all
maintenance in such a manner to minimize the loss of electrical output and
damage to the Facility to optimize the operation of the Facility consistent with
the Owner's objective to maximize its net profit. Furthermore, Operator shall,
consistent with the other terms of this Agreement and with such objective,
maintain the Facility to optimize its useful life and to minimize down-time
because of maintenance.
(c) perform the daily administration and coordination of the Power
Purchase Agreements and Electrical Interconnection Agreements including, but not
limited to, daily communication with the Power Purchasers and the
Interconnecting Utilities and preparation of monthly invoices and supporting
data for the Owner's review and submittal under such agreements.
(d) identify the need for, schedule, arrange for the procurement,
coordinate and supervise the Subcontractor's performance of Services or other
work.
(e) perform the daily administration and coordination of the fuel
supply in accordance with Section 3.21;
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(f) provide, for submittal by Owner with the appropriate Person, all
reports, data and other information required by the Project Permits and Project
Agreements;
(g) provide the Annual Operating Budget and the Annual Operating
Plan and the Three year Projection in accordance with Section 3.7;
(h) provide periodic technical and administrative reports in
accordance with Section 3.12;
(i) maintain, update as necessary, and comply with the Site
Procedures;
(j) respond in a timely manner (but in no event shall the time to
make such a response exceed five (5) Days) to written requests by Owner for
information about the Work; and
(k) verify completion of items on "punch list" compiled pursuant to
Section 3.2.
Section 3.5 - Standards of Performance.
Operator shall perform each item of the Work in a careful, clean, safe,
professional, prudent, efficient and environmentally acceptable manner in
accordance with the following requirements (collectively, "Standards of
Performance"):
(a) Prudent Operating Practice;
(b) the terms of the Operation and Maintenance Manuals and other
operating instructions provided by Contractor pursuant to the Construction
Contract or provided by any other vendors, suppliers or contractors (and, with
regard to any Facility Equipment acquired subsequent to the Commencement Date,
in accordance with the operating instructions provided by the respective
equipment suppliers, vendors or manufacturers);
(c) all operational and maintenance obligations imposed on the Owner
pursuant to any Project Agreement;
(d) the requirements of the providers of insurance described in
Article VII, and any and all insurance coverage documents maintained by Owner
for the protection of the Facility and its revenues, copies of which are
provided to Operator;
(e) any and all warranties received from Contractor or any
manufacturer of the Facility Equipment or Materials, which are not part of any
Project Agreements, but which copies have been provided to Operator;
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(f) the Project Permits and all applicable Laws;
(g) the Site Procedures; and
(h) to operate the Facility consistent with Owner's objective to
maximize its net profits from the operation of the Facility.
In the case of any conflict between any such standards, the most stringent
applicable standard shall govern.
Section 3.6 - Pre-Commencement Phase Budget.
Within thirty (30) Days after the Notice to Proceed Date, Operator
shall submit a proposed budget for the Pre-Commencement Phase Services,
substantially in the form of Exhibit C, for Owner's review and approval. The
Pre-Commencement Phase Budget shall contain an itemized estimate by month of all
Reimbursable Costs, Management Fee costs, the cost for all Materials and
Services needed to be procured in accordance with Section 3.8, and supporting
data and assumptions, if any. The proposed Pre-Commencement Phase Budget shall
be based on Operator's assessment of the required Pre-Commencement Phase
Services and reflects the most economical and reasonable means of performing
such Services in accordance with the Standards of Performance. Such assessment
by Operator shall take into consideration those items of goods and services that
are to be supplied by the Contractor under the Construction Contract. Within
thirty (30) Days after receipt of the proposed Pre-Commencement Phase Budget,
Owner shall notify Operator in writing of its approval or any proposed
additions, deletions or modifications as Owner may deem necessary or
appropriate. Operator shall promptly either confirm to Owner its ability to
perform the Pre-Commencement Phase Services during such period in accordance
with Owner's proposed changes, or object to Owner's proposed changes, stating in
detail the reasons for such objection. Owner and Operator shall use their best
efforts to agree upon a Pre-Commencement Phase Budget, which shall be approved
in writing by both Parties, which approval shall not be unreasonably withheld.
If Owner and Operator are unable to agree upon a Pre-Commencement Phase Budget,
Owner and Operator shall present the dispute for dispute resolution in
accordance with Article VIII hereof. If the Operator determines that the
Pre-Commencement Phase Budget needs to be changed after the Notice to Proceed
Date, or that any category within an Annual Operating Budget will vary for such
Operating Year by more than ten percent (10%) or twenty-five thousand dollars
($25,000), whichever is greater, Operator shall immediately notify Owner and
shall follow Owner's instructions regarding further expenditures for the
operation and maintenance of the Facility pursuant to this Agreement. Until such
time as Operator receives such instructions, Operator shall continue to perform
the Pre-Commencement Phase Services according to the terms of this Agreement as
permitted under the Pre-Commencement Phase Budget then in effect. At no time,
without Owner consent, shall Operator be entitled to make expenditures in any
Annual Operating Budget which exceed the amount
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allocated for such category; provided, however, that the foregoing limitation
shall not apply in the case of Emergencies, which shall be governed by Section
3.13.
Section 3.7 - Annual Operating Budget and Plan; Three Year Projection.
(a) Annual Operating Budget. No later than one hundred twenty
(120) Days prior to the beginning of each Operating Year, Operator shall submit,
for Owner's review and approval, a proposed budget on a monthly basis for the
Operational Phase Services to be performed in the next succeeding Operating
Year, substantially in the form of Exhibit C (the "Annual Operating Budget").
The proposed Annual Operating Budget shall be based on Operator's assessment of
such Services for such Operating Year and shall reflect the most economical and
reasonable means of performing such activities in accordance with the Standards
of Performance. The proposed Annual Operating Budget shall include:
(i) the proposed amount to be spent annually for Reimbursable
Costs and the Management Fee then in effect;
(ii) the proposed amounts to be spent for the purchase of Materials
and Services in accordance with Section 3.8, identifying the
items to be purchased; and
(iii) a proposed inventory plan.
Each proposed Annual Operating Budget shall identify and list separately capital
items.
Within thirty (30) Days after Owner receives Operator's proposal for
such Annual Operating Budget, Owner shall notify Operator in writing of Owner's
approval or any proposed changes to the Annual Operating Budget, and projections
reflected therein as Owner may deem necessary or appropriate. Within fifteen
(15) Days following receipt of any such notice of proposed changes from Owner,
Operator shall either confirm to Owner its ability to perform the Work during
such period in accordance with Owner's proposed changes, or object to Owner's
proposed changes, stating in detail the reasons for such objection. Owner and
Operator shall use their best efforts to agree upon an Annual Operating Budget,
which shall be approved in writing by both Parties, which approval shall not be
unreasonably withheld. If Owner and Operator are unable to agree upon an Annual
Operating Budget, Owner and Operator shall present the dispute for dispute
resolution in accordance with Article VIII. Each Annual Operating Budget shall
remain in effect throughout the applicable Operating Year, subject to updating,
revision and amendment as may be proposed by either Party and consented to in
writing by the other Party, which consent may not be unreasonably withheld.
If, during any Operating Year, Operator determines that any category
within an Annual Operating Budget will vary for such Operating Year by more than
ten percent (10%) or
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twenty-five thousand dollars ($25,000), whichever is greater, Operator shall
immediately notify Owner and shall follow Owner's instructions regarding further
expenditures for the operation and maintenance of the Facility pursuant to this
Agreement. Until such time as Operator receives such instructions, Operator
shall continue to operate and maintain the Facility according to the terms of
this Agreement as permitted under the Annual Operating Budget then in effect. At
no time, without Owner consent, shall Operator be entitled to make expenditures
in any Annual Operating Budget category which exceed the amount allocated for
such category; provided, however, that the foregoing limitation shall not apply
in the case of Emergencies, which shall be governed by Section 3.13.
(b) Annual Operating Plan. With the Annual Operating Budget
submitted in accordance with this Section 3.7(a), Operator shall submit to Owner
for Owner's approval Operator's proposed operating plan for the next Operating
Year (the "Annual Operating Plan") in a form reasonably acceptable to Owner.
Such plan shall describe in detail acceptable to Owner the annual operation and
maintenance plan for the Facility including, without limitation, a summary of
the items in the Annual Operating Budget, hours of operation, holidays to be
observed, schedule of Services, consumption of fuels, purchased electricity,
data regarding expected environmental performance, projected electricity
generated for sale, and any other matters as Owner may require. All such items
shall be set forth on a monthly basis. The proposed Annual Operating Plan shall
be accompanied by all underlying assumptions necessary for its evaluation. All
actions proposed under the Annual Operating Plan shall comply with the Standards
of Performance. Owner shall indicate in writing any proposed revisions,
corrections, deletions or additions to Operator's proposed Annual Operating Plan
within thirty (30) Days after each such submission. The final form of the Annual
Operating Plan shall be approved in writing by both Parties, such approval not
to be unreasonably withheld. In the event of any disagreement, the Parties shall
promptly meet and resolve in good faith any areas of disagreement. If Owner and
Operator are unable to agree upon an Annual Operating Plan, Owner and Operator
shall present the dispute for dispute resolution in accordance with Article VIII
hereof.
(c) Three Year Projection. In addition, with the Annual Operating
Plan, Operator shall submit to Owner for approval a written proposal describing
in detail reasonably acceptable to Owner a proposed operation and maintenance
plan, including scheduled outages, and budget for the next three (3) Operating
Years, including anticipated Major Maintenance (the "Three Year Projection").
Owner shall indicate in writing any proposed revisions, corrections, deletions
or additions to Operator's proposed Three Year Projection within thirty (30)
Days after each such submission.
Section 3.8 - Procurement of Materials and Services.
Operator shall arrange for the procurement of Materials and Services (excluding
natural gas) necessary for the operation and maintenance of the Facility
pursuant to the following provisions.
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(a) All Materials and Services shall be purchased directly by Owner
from Subcontractors, except as otherwise provided in the Site Procedures for
small local purchases and purchases necessary to handle Emergencies. At any
other time that Operator desires to subcontract directly to obtain materials or
services, Operator shall obtain the prior written approval of Owner. In no event
shall Operator be relieved of any of its obligations under this Agreement or of
any of its responsibilities due to faulty performance of any Work performed by
subcontractors.
(b) Operator shall identify Materials and Services needed, establish
technical and commercial requirements, develop qualified bid lists, request
bids/proposals from prospective Subcontractors, evaluate bids/proposals received
and provide a recommendation for award and purchase order to Owner for approval
and execution. In no event shall Operator take title to any Materials. All
purchase orders and bills of lading with respect to Materials shall specify that
Owner shall take title to the Materials directly from Subcontractors.
(c) In evaluating and selecting prospective Subcontractors, Operator
shall make reasonable attempts to optimize Facility costs in consideration of
Facility availability and reliability and to otherwise minimize procurement
costs.
(d) Operator shall receive, inspect, inventory and resolve defects
or deficiencies found in Materials delivered by Subcontractors, and shall sign
all invoices for the Materials indicating Operator's acceptance of the material
as meeting the purchase order. If Operator is unable, using reasonable efforts,
to resolve defects or deficiencies discovered, Operator shall promptly notify
Owner. Operator shall administer on behalf of Owner any claim or dispute arising
under a purchase order. Owner shall provide for direct payment due each
Subcontractor in accordance with the applicable purchase order.
(e) Operator shall be responsible for supervising, coordinating, and
administering all Subcontractors providing Services, including maintenance or
construction services.
Section 3.9 - Inventory.
(a) Operator shall comply with the provisions for maintaining an
inventory of Materials set forth in the Site Procedures.
(b) Operator shall maintain an inventory of Materials adequate to
support the continuous, successful, and reliable operation of the Facility. The
procurement of such inventory, including replacement Materials, shall be made in
accordance with the provisions of Section 3.8.
(c) Operator shall provide security for such inventory.
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Section 3.10 - Personnel.
(a) Operator shall employ at the Facility the appropriate number of
properly qualified and trained Personnel to staff the Facility 24 hours a day, 7
days a week and in a manner consistent with Prudent Operating Practice and to
perform the Operator's obligations under this Agreement as approved under the
Pre-Commencement Phase Budget and Annual Operating Budget.
(b) All Personnel shall be qualified (including, holding all
appropriate valid licenses required by Law) and fully trained for their
respective positions. At least one member of the Personnel shall hold a first
class engineer's license as required under Law. All individuals utilized by
Operator to perform Work shall be employees of the Operator or, subject to
Owner's approval, workers or independent contractors under Operator's direction.
Working hours, rates of compensation, and all other matters relating to such
Personnel shall be determined by Operator (subject to Owner's approval with
respect to budget items).
(c) Owner shall approve the selection of the Plant Manager and
Operator shall consult with Owner regarding the selection of all other
Personnel. Owner shall inform Operator of any objection to any Plant Manager
selection as soon as possible, but in no event later than ten (10) Days after
receipt of notice of Operator's proposed Personnel selection. Operator shall
retain sole responsibility and control of labor matters pertaining to the
Personnel. Operator shall provide Owner with such information regarding the
selection of the Personnel, as Owner may reasonably request. With respect to
hiring of Personnel and its employment policy, Operator shall comply with all
applicable federal and state labor and employment Laws and shall exercise
control over labor relations in a reasonable manner consistent with the intent
and purpose of this Agreement. If in Owner's opinion, the Plant Manager is not
adequately performing the requirements of the job function to the Owner's
satisfaction, including fostering a positive working relationship with the
Owner's staff, the Power Purchasers, and other project participants, then upon
the request of Owner, Operator shall replace the Plant Manager, if, within sixty
(60) days following such request, Operator has not modified the Plant Manager's
performance to the satisfaction of Owner. Owner may also request Operator to
replace any other Personnel, provided, that Owner presents Operator with
reasonable justification therefor, which request shall not be unreasonably
rejected. Operator shall either accept Owner's request or provide Owner with the
reasons for rejection within five (5) Days after receipt of such request. Costs
required to be incurred by Operator as a result of the replacement of such
Personnel pursuant to Owner's exercise of its rights under this Section 3.10(c)
shall be eligible for treatment as Reimbursable Costs, in accordance with the
other requirements of this Agreement.
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(d) Either Owner or Operator may request changes to the job titles,
duties and positions of the Personnel described in this Agreement, subject to
the approval of the other Party, which approval shall not be unreasonably
withheld provided that such change does not have a material adverse impact on
the other Party.
Section 3.11 - Training Programs.
Operator shall require its Personnel to participate in and satisfactorily
complete the following training programs:
(a) Initial Training. Prior to Operator assuming responsibility for
the operation and maintenance of the Facility and in accordance with the
provisions of Section 3.2(a)(2), Operator shall make Personnel available for
"hands on" training to be provided by Contractor pursuant to the Construction
Contract. Operator shall verify that the initial training instructs the
Personnel in the areas of the design, construction, operation and maintenance of
the Facility and shall include normal equipment operation, safety precautions,
routine maintenance, and emergency procedures with respect to all equipment
installed in the Facility. Operator shall promptly notify Owner in the event
Operator determines that any training provided by Contractor fails to meet the
requirements of the Construction Contract. Operator shall insure that the
Personnel are trained in a satisfactory manner so as to enable each of the
Personnel to perform their assigned functions and as required to enable Operator
to comply with its obligations under this Agreement. The initial training will
be videotaped by the Operator at Owner's cost and expense.
(b) Ongoing Training. Within ninety (90) Days following the
Commencement Date, Operator shall establish and maintain a regular ongoing
training program for the Personnel. This training program shall be designed to
train new Personnel, keep existing Personnel familiar with all existing Site
Procedures and informed of all new revisions thereto. Owner may at any time,
upon reasonable notice, review Operator's regular training program in order to
assess its adequacy and compliance with this Section 3.11.
(c) Operator Training Upon Termination. If this Agreement is
scheduled to terminate for any reason, the Operator will cooperate with Owner
and the replacement operator, at Owner's expense, in training replacement
personnel for the Facility, including permitting such replacement personnel to
participate in the foregoing training program. In addition, Operator will
surrender to Owner all training material created, acquired or provided pursuant
to this Section 3.11, provided that, subject to the requirements of Article XI,
Operator may retain a copy thereof.
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Section 3.12 - Reports.
Operator shall cooperate with Owner in complying with the reporting requirements
set forth in the Project Agreements and shall, from and after the Commencement
Date furnish or cause to be furnished to Owner the following reports concerning
the Facility operations:
(a) Monthly Reports. Commencing within ten (10) Days after the end
of each calendar month after the Commencement Date, Operator shall submit: (i) a
progress report, in detail acceptable to Owner, covering all operations
conducted during such calendar month with respect to operations and maintenance
(including without limitation information regarding power generation, heat rates
and fuel consumption), procurement, capital improvements, labor relations,
significant interactions with the Power Purchasers, the Interconnecting
Utilities and Governmental Authorities, and other significant matters, which
report shall include (with respect to quantitative items) a comparison of such
items to corresponding values for the then preceding month and year and listing
of any significant operating problems along with remedial actions planned and a
brief summary of major activities planned for the next two reporting periods;
and (ii) a statement setting forth all Reimbursable Costs paid or incurred,
which statement shall itemize in detail acceptable to Owner the computation of
such Reimbursable Costs and shall state whether or not the Facility operations
have conformed to the applicable Annual Operating Plan and Annual Operating
Budget during such reporting period and if not, the extent and reasons for such
deviation and any remedial action, if remediable.
(b) Annual Reports. As soon as available, and in any event within
thirty (30) Days after the end of each Operating Year, Operator shall submit to
Owner an annual report certified by the Plant Manager describing in detail
substantially similar to that contained in the monthly reports referred to in
Section 3.12(a) above, all of the Facility operations for such Operating Year
and presenting a comparison of such Facility operations with the Annual
Operating Plan and Annual Operating Budget for such Operating Year and with
those obtained for the preceding Operating Year, if any (the "Annual Report").
Within thirty (30) Days after the submission of each Annual Report, the Plant
Manager shall meet with Owner to review and discuss the report and to report
upon any other aspects of the operations at the Facility that Owner may request.
(c) Fuel Reports. Notwithstanding Owner's obligation to furnish fuel
as set forth in Section 4.1 hereof, within ten (10) Days after the end of each
calendar month, Operator shall prepare and submit to Owner a fuel report
summarizing on a daily basis the amount of fuel delivered in accordance with the
Fuel Agreements and accepted at the Facility and the amount of such fuel
consumed at each Unit of the Facility during the preceding month.
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(d) Additional Reports. Operator shall periodically provide reports
to Owner advising Owner of any information Operator becomes aware of concerning
changes in Laws and/or Prudent Operating Practices that it believes may be
material to the operation and maintenance of the Facility.
Section 3.13 - Emergency and Outage Procedures.
In the case of an Unscheduled Outage or Emergency, Operator shall, in accordance
with the requirements of the applicable Site Procedures, notify Owner of the
nature of such Unscheduled Outage or Emergency, the proposed remedial measures
and its probable duration. Operator shall take corrective action pursuant to
Owner's direction only; provided that in the case of an Emergency, Operator
shall act immediately as required to prevent or overcome the threat of injury to
persons or damage to property or to minimize the adverse consequences thereof
pending receipt of instructions by Owner.
Section 3.14 - Improvements.
If at any time, Operator believes that certain alterations, additions,
modifications or other changes to the Facility ("Improvements") would improve
the overall operation, output and/or efficiency of the Facility, then Operator
shall advise Owner in writing of such proposed Improvements and, upon the
written approval of Owner, the Operator shall arrange for the procurement and
integration of all such equipment, materials and other resources necessary to
implement such Improvements at the Facility. Except as set forth in the Annual
Operating Plan or Annual Operating Budget, the Operator shall make no
Improvements other than Improvements made in accordance with this Section 3.14.
Section 3.15 - Annual Review.
No later than one hundred twenty (120) Days prior to each Operating Year
commencing with the second Operating Year, the Operator shall participate in an
annual review. The purpose of the annual review shall be to analyze the past
year's operations and propose changes for the improved quality of the Facility's
operation and maintenance and to review the proposed Annual Operating Plan for
the next Operating Year. To this end, the Operator and Owner shall establish a
standing committee comprised of the Plant Manager and one (1) representative
from each of the Operator and the Owner to monitor and review existing and
proposed activities with respect to the operation and maintenance of the
Facility. Such committee shall meet at least once every year and at such other
times as may be reasonably requested by Owner.
Section 3.16 - Not Used.
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Section 3.17 - Administration.
Operator shall administer and be responsible for the cost accounting,
requisitioning, personnel, and payroll functions related to Operator's Personnel
pursuant to this Agreement. Without limiting the foregoing, Operator shall (i)
pay all bills to be paid by Operator in a timely manner, and (ii) forward in a
timely manner to Owner all bills received by Operator that are Owner's
responsibility to pay hereunder, together with Operator's advice as to which are
due, if there are any offsets or credits, and such other matters as reasonably
related thereto.
Section 3.18 - Taxes.
Operator shall pay, subject to Owner's reimbursement in accordance with Section
6.2, all federal, state and local unemployment taxes, Federal Insurance
Contribution Act (FICA) taxes and other taxes which it is obligated to pay with
respect to wages and salaries paid by it to its employees performing the Work
and maintain all appropriate records with respect thereto.
Section 3.19 - Facility Performance.
If any significant deficiency in performance of the Facility occurs, including,
but not limited to, a failure to meet any warranty under the Project Agreements,
or if such a deficiency is projected, then Operator shall notify Owner of such
deficiency or projected deficiency and shall state Operator's opinion as to the
cause of such deficiency or projected deficiency and prepare a report in detail,
as required, together with a plan to remedy the problem. Upon Owner's request,
Operator shall make available such of its Personnel as reasonably necessary to
review and assess the cause of such deficiency with Owner and Contractor and/or
any of their agents.
Section 3.20 - Loan Agreement.
Operator acknowledges that Owner intends to obtain long-term debt and equity
financing for the Facility, and that compliance by Owner with the terms and
conditions applicable thereto may require the cooperation of Operator in matters
not now ascertainable. Accordingly, Operator will reasonably cooperate with
Owner, so as to permit Owner to comply with the various requirements relating to
the operation and maintenance of the Facility that are imposed by such Project
Lenders, including, but not limited to, providing any required or reasonably
requested information or reports on the operation and maintenance of the
Facility.
Section 3.21 - Fuel Supply.
(a) Operator shall not be responsible for contracting for natural
gas. Operator shall be responsible for day to day communication and coordination
with the Power Purchasers and the fuel supply and transportation subcontractors
of the Power Purchasers and/or the Owner's fuel supply and transportation
Subcontractors, as appropriate.
(b) Operator shall monitor the fuel requirements of the Facility and
Operator shall be responsible for keeping Owner informed that the supply of fuel
available is adequate to
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operate the Facility at its optimal level. In the event Operator becomes aware
that natural gas is not available in sufficient quantities or quality to fuel
the Facility to provide the electrical output requested by the Power Purchasers
in an optimal manner, Operator shall immediately notify Owner.
Section 3.22 - Safety.
Operator shall comply with all Site Procedures regarding safety, security and
fire protection to prevent accidents or injuries to persons or damage to
property on or about the Site. Operator shall continuously update the same to
optimize the safe, reliable and efficient operation of the Facility.
Section 3.23 - Books and Records.
(a) Operator shall maintain operating logs, records and reports (in
form and substance as required by the Site Procedures) documenting the operation
of the Facility, including those logs, records and reports required by any
Project Agreement; maintain current revisions of Facility drawings, equipment
manuals, instruction books, and the Operation and Maintenance Manuals; maintain
accurate cost ledgers and accounting records regarding the Work in accordance
with generally accepted accounting principles for review by Owner. Operator
shall also prepare all reports required for Governmental Authorities, or by the
Project Permits, and provide same to Owner for its review and submittal. Upon
termination of this Agreement, the Operator shall turn over a copy of all such
books, logs, ledgers, manuals, reports and records to Owner.
(b) Operator shall establish and maintain an information system
reasonably satisfactory to Owner to provide storage and ready retrieval of
Facility operating data, including such information necessary to verify and
support calculations for preparation of invoices made pursuant to the Power
Purchase Agreements; provided, however, that all hardware necessary in
connection with the information system shall be provided by Owner.
(c) Operator shall prepare and maintain, on a current basis, proper,
accurate, and complete books and records and accounts of all transactions
related to the Facility, including such information necessary to verify
calculations made pursuant to this Agreement.
(d) At all reasonable times Owner shall have access to the records
maintained pursuant to this Section and may audit the record keeping practices
and systems used to generate the data required by this Section 3.23 and shall
have the right to determine whether such practices and systems are in accordance
with generally accepted accounting principles and cause Operator to make such
changes as necessary to conform with such principles.
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(e) Owner's right of access to the records described in this Section
3.23 and Operator's obligation to maintain and preserve the same shall survive
for a five (5) year period following the termination of this Agreement.
Section 3.24 - Scheduling Maintenance.
Operator shall arrange and schedule all maintenance for the Facility in
accordance with the Standards of Performance and Project Agreements. Scheduled
outages shall be approved by Owner, such approval not to be unreasonably
withheld. Operator shall coordinate with Owner in scheduling such maintenance
and notify the Power Purchasers, as necessary, of Facility conditions as
required by the Project Agreements. Generally, scheduled maintenance will be
performed, to the extent practical, during off-peak hours.
Section 3.25 - Cooperation With Others.
Operator shall cooperate fully with (i) any Subcontractor, (ii) any entity
supplying or transporting fuel to the Facility, (iii) the Interconnecting
Utilities, and (iv) the Power Purchasers.
Section 3.26 - Access.
Operator shall allow Owner and such other parties as Owner designates from time
to time, to have full, unrestricted access to the Facility and Site and all
reports, data, information and documents related to the Project in Operator's
possession at the Site at all times, provided, however, such parties must adhere
to all applicable Site Procedures.
Section 3.27 - Operator Licenses; Permits.
Operator shall cause each of the Personnel to procure and maintain their
respective licenses as required to perform the Work and shall assist Owner in
the maintenance of the Project Permits and procurement of any revisions,
waivers, or additional permits necessary or desirable for the operation of the
Facility as contemplated hereunder. Operator shall prepare all operating and
other reports for Owner's review and submittal to maintain the Project Permits.
Section 3.28 - Enforcement of Warranties.
Operator shall notify Owner of any claims which Owner may have under warranties
or guaranties of which Owner is beneficiary regarding the Facility, Materials or
any component thereof of which Operator becomes aware during the performance of
Work. Operator shall manage and operate the Facility consistent with the
conditions applicable to all such warranties and guarantees so as to preserve
the effectiveness thereof and shall take no action which may adversely affect
any claim under any such warranty or guaranty without the express written
consent of the Owner except as provided in Section 3.13.
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Section 3.29 - Compliance with Laws.
Operator shall at all times operate and maintain the Facility such that it
complies in every material respect with all applicable Laws and Project Permits.
Operator shall notify Owner of any deficiencies or compliance requirements of
such Laws and Project Permits and changes in Laws or requirements of any
Governmental Authority relevant to the Project of which Operator is aware.
Section 3.30 - No Liens or Encumbrances.
Operator shall keep and maintain the Facility free and clear of all liens and
encumbrances resulting from acts or omissions of Operator or its subcontractors
or work done at the request of Operator or its subcontractors to the extent
Owner has paid Operator for the Work.
Section 3.31 - No Action.
Operator shall not intentionally take any action or intentionally fail to take
any action that would (i) relieve Contractor from any obligation or liability
under the Construction Contract, (ii) give rise to any claim by Contractor
against Owner or Operator or (iii) otherwise cause a default (or a condition
which with passage of time, notice or both, would be a default) under any
Project Agreement or a violation of any applicable Law or Project Permit.
Section 3.32 - Litigation; Permit Lapses.
Upon obtaining notice or knowledge thereof, Operator shall submit prompt written
notice to Owner of: (i) any litigation, or material claim, dispute or action,
threatened in writing or filed, concerning the Facility, the Site, the Project
Agreements, or the Work; (ii) any written refusal or threatened refusal to
grant, renew or extend or any pending or written threatened action that might
affect the granting, renewal or extension of, any license, permit, approval,
authorization or consent concerning the Facility or the Work; and (iii) any
dispute with any Governmental Authority concerning the Facility or the Work, any
Project Permit, or any dispute with respect to any Project Agreement.
ARTICLE IV - Owner Responsibilities
Section 4.1 - Fuel Supply.
Owner shall cause natural gas to be provided for use at the Facility, in such
quantities as contemplated pursuant to the Project Agreements and as reasonably
requested by Operator pursuant to Section 3.21. In the event that natural gas is
purchased by Owner, Owner shall be responsible for (a) contracting for natural
gas and (b) making direct payment on invoices for natural gas to the applicable
suppliers.
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Section 4.2 - Reasonable Access.
Owner shall provide and grant to Operator right of access to the Facility and
the Site throughout the term of this Agreement. As reasonably requested by
Operator, Owner shall provide Operator with reasonable access to any information
in its possession relating to the physical characteristics of the Facility or to
any of the Facility Equipment.
Section 4.3 - Accommodations.
Owner shall provide for and make available to Operator such office space,
storage facilities, unloading areas, rest rooms and office equipment facilities
as Operator may reasonably require and are reasonably practicable at the
Facility, as constructed pursuant to the Construction Contract.
Section 4.4 - Utilities.
Owner shall provide for and make available to Operator sufficient quantities of
electricity and other utilities as Operator may reasonably request for (a) the
operation and maintenance of the Facility and (b) the health and safety of its
employees.
Section 4.5 - Manuals and Drawings.
Owner shall provide Operator with all operation and maintenance manuals and all
drawings, specifications, diagrams, and other information which Owner has or may
obtain with respect to the Facility including any of the same that Contractor is
obligated to provide to Owner pursuant to the Construction Contract. Should any
such information be classified as confidential or proprietary, then Owner shall
use reasonable efforts to obtain all necessary authorizations, releases,
acknowledgments, or other approvals to provide Operator access to and use of
such information. Operator, in turn, shall comply with all resulting
requirements for protecting the confidential or proprietary nature of such
information, including without limitation, any such requirements contained in
any Project Agreement following receipt of such requirements.
Section 4.6 - Taxes.
Owner shall pay (or reimburse Operator) for any present or future duty or tax
(other than income taxes of Operator) which may be assessed against it and/or
Operator, upon reasonable notice from Operator, relative to the operation and
maintenance of the Facility. Operator shall promptly furnish any such bills it
receives to Owner. If Owner is exempt from the payment of any applicable sales
and/or use taxes or has a direct payment permit with respect to such taxes, then
Owner shall provide Operator with a copy of the certificate or permit, duly
executed and issued by the appropriate governmental authority, or an opinion of
counsel regarding such exemption in lieu of such certificate or permit.
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Section 4.7 - Maintenance of Permits.
Owner shall pay for and maintain, with the cooperation of the Operator, any and
all certificates, permits, governmental fees, licenses, and inspections
necessary for the continuous operation of the Facility (except any of the same
required to be obtained and maintained by Operator or the Personnel pursuant to
Section 3.27 of this Agreement), including any required renewals of the Project
Permits.
Section 4.8 - Payment
Owner shall make applicable payments to Operator pursuant to Article VI.
ARTICLE V - Limitations on Authority
Section 5.1 - General Limitations.
Notwithstanding any provision in this Agreement to the contrary, unless
previously expressly approved in (i) the Annual Operating Plan or Annual
Operating Budget regarding Operational Phase Services; or (ii) the
Pre-Commencement Phase Budget with regard to Pre-Commencement Phase Services,
or, (iii) otherwise approved in writing by Owner, Operator or any agent,
representative or contractor of Operator shall not:
(a) Disposition of Assets. Sell, lease, pledge, mortgage, convey, or
make any license, exchange or other transfer or disposition of any property or
any interest therein comprising any part of the Project;
(b) Contract. Make, enter into, execute, amend, terminate, suspend,
modify or supplement or give or accept waivers under any contract or agreement
on behalf of or in the name of Owner;
(c) Expenditures. Make or commit to any expenditure, incur any
obligation or liability or acquire on a Reimbursable Cost basis any Materials,
assets or other items, or consent or agree to do any of the foregoing; provided
that in the event of an Emergency affecting the safety or protection of Persons
or endangering the Facility or property located at the Facility, Operator,
without approval from Owner, shall be authorized to take all reasonable actions
to prevent such threatened damage, injury or loss in accordance with Sections
3.8 and 3.13;
(d) Other Actions. Take or agree to take any other action that
materially varies with the applicable Annual Operating Plan or Annual Operating
Budget or with any Project Agreement or fail to take any action required by the
Annual Operating Plan, Annual Operating Budget or any Project Agreement;
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(e) Lawsuits and Settlements. Settle, compromise, assign, pledge,
transfer, release or consent to the compromise, assignment, pledge, transfer or
release of, any claim, suit, debt, demand or judgment against or due by, Owner
or Operator, the cost of which, in the case of Operator, would be Reimbursable
Costs hereunder, or submit any such claim, dispute or controversy to arbitration
or judicial process, or stipulate in respect thereof to a judgment, or consent
to do the same or commence any litigation, action, arbitration, or other
proceeding on behalf of Owner; provided, however, that Owner shall not
unreasonably withhold its approval of any settlement, compromise, arbitration or
litigation of any claim, suit, demand, debt or judgment involving a liability or
potential liability only against Operator; or
(f) Project Agreements. Initiate or respond to any complaint or
dispute resolution under or negotiate with any party to any Project Agreement,
except as expressly authorized in writing by Owner.
ARTICLE VI - Payment Amount and Terms
Section 6.1 - Payment.
As the sole and exclusive compensation and reimbursement to Operator for the
performance of the Work hereunder, Owner shall pay Operator, in the manner and
at the times specified in this Article VI, all Reimbursable Costs, the
Pre-Commencement Phase Services Fee and the Management Fee. Operator
acknowledges that the obligation of Owner to pay the Pre-Commencement Phase
Services Fee and the Management Fee is subordinate to the obligation of Owner to
pay Debt Service (as defined in the Loan Agreement to the Project Lenders).
Section 6.2 - Reimbursable Costs.
(a) Covered Expenditures. Subject to the limitations on expenditures
set forth elsewhere in this Agreement, Owner shall reimburse Operator for the
following costs incurred by Operator in performing the Work, each as properly
incurred by Operator pursuant to this Agreement and documented by written
invoice or receipt provided to Owner (the "Reimbursable Costs"): (i) the actual
payroll cost for the Personnel involved in the performance of the Work,
including overtime, plus the actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation, vacation,
holidays, fringe benefits and other statutory compensation; (ii) (A) prior to
the Commencement Date, relocation and recruitment costs of salaried and
non-salaried employees as approved in advance by Owner (provided, that such
relocation and recruitment costs shall not exceed $80,000 in the aggregate) and
(B) on and after the Commencement Date, relocation and recruitment costs of
salaried employees and recruitment costs of non-salaried employees as approved
in advance by Owner; (iii) the actual costs of Operator's subcontractors
approved as provided herein; (iv) the actual cost of insurance paid by Operator
to provide the coverages set forth in Section 7.1 (except for payments for
deductibles to
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be paid by Operator pursuant to Section 7.4); (v) upon Owner's request and
subject to Owner's prior approval, other services provided (other than the Work)
at a mutually agreed upon price, terms and conditions and (vi) any other cost
designated as a Reimbursable Cost pursuant to the terms of this Agreement. Owner
shall pay Reimbursable Costs as follows:
(b) Payments. Owner shall establish the Operating Account and, on or
before the first day of each month, shall deposit into such account the portion
of the Reimbursable Costs budgeted for such month in the applicable Annual
Operating Budget or Pre-Commencement Phase Budget. Any interest accruing on such
account shall be for the benefit of Owner. Operator may withdraw funds from such
account as and when necessary to pay such Reimbursable Costs incurred by
Operator. Operator shall submit a statement to Owner at the end of each month
itemizing the total Reimbursable Costs incurred during such month. Upon the
approval of such statement and subject to Section 6.6, Owner shall make any
additional payment to Operator due for such month within thirty (30) Days from
the date of such invoice statement. Any excess payment by Owner shall be
credited against any amount due Operator for the period following such
statement. No Reimbursable Costs shall be invoiced by Operator unless they were
incurred in accordance with the applicable Annual Operating Budget or
Pre-Commencement Phase Budget, each as amended, supplemented, or otherwise
modified from time to time. If at any time during the performance of the Work
after the Commencement Date, Operator becomes aware that for any monthly period
Reimbursable Costs exceed or could be reasonably anticipated to exceed the
amount provided therefor in the Annual Operating Budget, Operator shall promptly
notify Owner of such budget overrun and shall not, without the written approval
of Owner amending such Annual Operating Budget or authorizing such expenditure,
perform any further Work that will result in or increase such budget overrun,
except in the case of an Emergency as provided in Section 3.13.
(c) Direct Payments.
(i) For each item of Material and rendition of Services, Operator
shall promptly notify Owner in writing that a payment is due to a Subcontractor
pursuant to a purchase order issued by Owner. The written notification shall be
certified by the Operator as pertaining to work that has been duly performed in
accordance with the applicable purchase orders, and shall be accompanied by an
invoice, bill of sale or other appropriate documentation evidencing the payment
due. Upon receipt of such written notification, Owner shall cause such payment
to be made in a timely manner directly to said Subcontractor in accordance with
the purchase order.
(ii) All payments due from Owner to Subcontractors (the "Direct
Payments") in a given month shall be separately itemized in the invoice
statements required pursuant to Section 6.2(a), provided, however, that Direct
Payments shall not be included in the amount of the Reimbursable Costs.
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(iii) In no event shall any separate or additional compensation be
payable by Owner to Operator in connection with Operator's performance under
this Section.
Section 6.3 - Fees.
(a) Pre-Commencement Phase Services Fee. Owner shall pay to Operator
a fixed fee of $390,000 for the Pre-Commencement Phase Services (the
"Pre-Commencement Phase Services Fee"). The Pre-Commencement Phase Services Fee
shall be payable in ten (10) equal monthly installments beginning ten (10)
months before the Scheduled Commencement Date and ending on the Commencement
Date (provided that if the Commencement Date occurs prior to the end of such ten
(10) month period, the balance of the Pre-Commencement Phase Services Fee shall
be payable in the month immediately following the month in which the
Commencement Date occurs). The Pre-Commencement Services Fee shall be payable on
the first Day of the month for which such payment is due. The Pre-Commencement
Phase Services Fee shall constitute full payment for the services listed in
Exhibit D, all Operator overhead and profit for the Work and general and
administrative costs incurred by the Operator.
(b) Management Fee. Owner shall pay to Operator an annual Management
Fee of $500,000 for each Operating Year, adjusted as set forth in Section 6.11,
commencing on the Commencement Date and continuing for each Operating Year
thereafter. Each annual Management Fee shall be earned in monthly increments of
one-twelfth (1/12) of such Fee, each of which shall be payable monthly on the
first day of the month in which Work is to be performed (partial month fees will
be pro-rated accordingly). The Management Fee shall constitute full payment for
the services listed in Exhibit D, all Operator overhead and profit for the Work
and general and administrative costs incurred by the Operator.
Section 6.4 - Not Used.
Section 6.5 - Not Used.
Section 6.6 - Disputes.
Should Owner in good faith contest the validity, reasonableness or accuracy of
any statement submitted to it for payment, it shall notify Operator in writing
within fifteen (15) Days of its receipt of such statement, explaining in detail
the reasons for its refusal to honor Operator's request for payment. If Owner
disputes only part of a statement submitted to it for payment, then it shall pay
to Operator the undisputed portion of such statement in accordance with Section
6.2 and notify Operator in writing of the amount disputed in accordance with
this Section 6.6. All such disputes shall be resolved pursuant to Article VIII
of this Agreement.
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Section 6.7 - Exclusion.
Except as may otherwise expressly be provided for in this Agreement, Owner shall
not be liable for any additional costs incurred by Operator, or fees related
thereto, to the extent such costs are incurred by Operator either (i) for Work
performed not consistent with the Standards of Performance; (ii) for Work
performed to remedy a fault or deficiency which was created or aggravated by
Operator's failure to follow the Standards of Performance, or Operator's
negligent acts or omissions or willful misconduct, or (iii) in violation of
Section 5.1.
Section 6.8 - Audit Rights.
Notwithstanding the payment of any amount pursuant to the foregoing provisions,
Owner shall remain entitled to conduct an audit and review of all payments made
to Operator hereunder on a time and material or cost reimbursable basis,
together with any supporting documentation in accordance with the provisions of
Section 6.2 for a period of five (5) years from and after the close of the
calendar year (in the case of payments for Pre-Commencement Phase Services) or
Operating Year (in the case of payments for Work performed after the
Commencement Date). Such audit and review may be conducted by Owner or by an
independent certified public accountant and the party conducting such audit and
review shall be entitled to inspect, copy and audit any of Operator's financial
books, records, accounts, and ledgers relating to the Facility or the Work.
Operator shall cooperate with the auditors and promptly respond to any questions
relating to such audits. Operator shall retain all such information described
above for a period of five (5) years. If, pursuant to such audit and review, it
is determined that any amount previously paid by Operator did not constitute a
due and payable item hereunder, including without limitation, a properly payable
Reimbursable Cost, Owner, at its option, may recover such amount immediately
upon demand, with interest determined in accordance with Section 6.10, from
Operator or deduct or cause to be deducted such amount from any payment that
thereafter may become due to Operator hereunder.
Section 6.9 - Payment of Fines and Penalties.
Payment at any time of any fine or penalties (or settlements in lieu of fines or
penalties) payable to any Governmental Authority, to the extent caused by the
negligent acts or omissions or willful misconduct of Operator, or Operator's
failure to comply with any provision of this Agreement, shall be the
responsibility of Operator and such fines or penalties shall not be considered
Reimbursable Costs or otherwise result in any increase of the costs to be borne
by Owner. Owner shall be responsible for the payment of any other fines or
penalties (or settlements in lieu of fines or penalties) payable to any
Governmental Authority as a result of the failure of the Facility to comply with
applicable Laws or Facility Permits.
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If either Party receives notice or has knowledge of any violation of any laws or
regulations by the other Party with respect to the matters covered by this
Agreement which could result in such fines or penalties from a Governmental
Authority, then such knowledgeable Party shall give prompt notice thereof to the
other Party.
Section 6.10 - Interest.
Any amount owed to either Party hereunder by the other Party shall accrue
interest each Day from the date that such amount is due until the date paid at
the Reference Rate per annum, computed and compounded daily.
Section 6.11 - Payment Adjustment.
The Management Fee shall be adjusted annually, effective as of January 1st of
any given Operating Year. On such date each Management Fee shall be adjusted in
accordance with the following equation:
Adjusted Management Fee = original Management Fee multiplied by the
ratio of
GDP-IP August Previous Year
---------------------------
GDP-IP August 1998
Where:
"GDP-IP August Previous Year" equals the published index value in
August of the Operating Year immediately preceding the Operating Year for which
the adjustment is due.
"GDP-IP August 1998" equals the published index value for August
1998.
"GDP-IP" means the final published Implicit Price Deflator for Gross
Domestic Product as determined quarterly and reported monthly by the Bureau of
Economic Analysis of the U.S. Department of Commerce in the publication "Survey
of Current Business." In the event this index is discontinued or its basis is
substantially modified, the Parties shall agree on a substitute index.
ARTICLE VII - Insurance
Section 7.1 - General Requirements
7.1.1 All insurance carried and maintained pursuant to this Agreement shall be
with insurance companies which are authorized to transact insurance business and
cover risks in the State of Mississippi and which are rated "Excellent" or
better by Best's Insurance Guide and Key Ratings or other insurance companies of
recognized responsibility and satisfactory to the Owner, Lender
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and (with respect only to the insurance companies proposed to provide the
insurance required by Section 7.3.1, paragraphs i and ii) Operator, except that
Operator may self-insure the coverages it is required to provide hereunder.
7.1.2 On or before the Notice to Proceed Date and annually thereafter, the
Parties shall arrange to furnish each other with an approved certification of
all required insurance and copies of policies, if requested. 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, the policy term and shall
specifically list the special provisions enumerated for such insurance required
by this Article VII.
Section 7.2 - Operator Provided Insurance
7.2.1 Coverages - 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 coverage as follows:
i. Workers' Compensation and Employer's Liability Coverage - Operator
shall maintain or cause to be maintained Workers' Compensation
insurance written in accordance with statutory limits and Employer's
Liability in the amount not less than $10,000,000 per occurrence and
in the annual aggregate. The Employer's Liability coverage shall not
contain an occupational disease exclusion. Such policy or policies
shall contain an all states endorsement or stop gap endorsement and
alternate employer coverage.
ii. Comprehensive Automobile Liability Coverage - Operator shall
maintain or cause to be maintained Comprehensive Automobile
Liability insurance covering all owned, non-owned and hired vehicles
used by Operator or its permissive users in connection with Work.
Such coverage shall be written in an amount not less than $1,000,000
per occurrence.
iii. Excess (or Umbrella) Liability Coverage - Operator shall maintain
excess (or Umbrella) Liability insurance written on an occurrence
basis providing coverage for a limit of $9,000,000 per occurrence
and annual aggregate in excess of the insurance required in Section
7.2.1, paragraph ii.
iv Subcontractor Insurance - Operator shall require all of Operator's
subcontractors to obtain, maintain and keep in force during the time
in which they are engaged in performing services hereunder
reasonably adequate coverage in accordance with Operator's normal
practice (but not less than Worker's Compensation insurance written
in accordance with statutory limits and Employer's Liability,
Comprehensive Automobile Liability and Comprehensive
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<PAGE>
General Liability each with limits of $1,000,000 per occurrence and
in the aggregate) and furnish Owner with acceptable evidence of such
insurance upon its request.
7.2.2 Deductibles - All deductibles or self-insured retentions for the coverages
specified in Section 7.2.1 shall be the sole responsibility of Operator.
7.2.3 Endorsements - Any insurance provided in accordance with Section 7.2.1
shall be endorsed to provide that 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 interest of Owner, Independent Engineer,
Lender, Power Purchasers or Interconnecting Utilities, such cancellation or
change shall not be effective as to Owner until forty-five (45) days after
receipt by Owner of written notice sent by registered mail from such insurer of
such cancellation or change; provided, however, that such forty-five (45) day
period shall be reduced to 10 days in the case where cancellation results from
the nonpayment of premiums. In addition, any insurance provided in accordance
with Section 7.2.1 paragraphs ii, iii and iv shall be endorsed to provide that:
i. Owner, Independent Engineer, Power Purchasers, Interconnecting
Utilities and Lender shall be an additional insured, in each case
with the understanding that any obligation imposed upon Operator
(including the liability to pay premiums) shall be the sole
obligation of Operator and not that of Owner, Independent Engineer,
Utilities, Transmission Providers or Lender.
ii. The insurer thereunder waives all rights of subrogation against
Owner, Independent Engineer, Power Purchasers, Interconnecting
Utilities and Lender and any other right to deduction due to
outstanding premiums, whether by attachment or otherwise.
iii. Such insurance shall be primary without right of contribution of any
other insurance carried by or on behalf of Owner, Independent
Engineer, Power Purchasers, Interconnecting Utilities or Lender with
respect to its interest as such in the Facility.
iv. 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.
Any insurance provided in accordance with Section 7.2.1 paragraph i shall be
endorsed to provide that the insurer thereunder waives all rights of subrogation
against Owner, Independent
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Engineer, Power Purchasers, Interconnecting Utilities and Lender and any other
right to deduction due to outstanding premiums, whether by attachment or
otherwise.
Section 7.3 - Owner Provided Insurance
7.3.1 Coverages - Owner shall commencing on or before (x) the Notice to Proceed
Date in the case of insurance provided in accordance with paragraphs i and ii
below and (y) the Commencement Date in the case of insurance provided in
accordance with paragraph iii below, and continuing throughout the term of this
Agreement and any renewal thereof carry and maintain or cause to be maintained,
at its own expense, insurance with coverage as follows:
i. Commercial or Comprehensive General Liability Coverage. - Owner
shall maintain or cause to be maintained Commercial or Comprehensive
General Liability insurance with a combined single limit of not less
than $1,000,000 per occurrence and in the annual aggregate. Such
coverage shall also include premises/operations, explosion, collapse
and underground hazard, broad form contractual, products/completed
operations, independent contractors, broad form property damage and
personal injury.
ii. Excess (or Umbrella) Liability Coverage - Owner shall maintain
excess (or Umbrella) Liability insurance providing coverage for a
limit of $9,000,000 per occurrence and in the annual aggregate in
excess of the insurance required in paragraph i above.
iii. Property and Boiler and Machinery Coverage - Owner shall maintain at
all times Property and Boiler and Machinery insurance on an "all
risk" replacement cost basis with extended coverages, providing
coverage for the Facility, which insurance shall include coverage
for removal of debris and shall insure the buildings, structures,
boiler and machinery, equipment, facilities, fixtures and other
properties constituting a part of the Facility in an amount
satisfactory to Owner with a deductible of not greater than
$1,000,000.
iv. Subcontractor Insurance - Owner shall require all of its
Subcontractors to obtain, maintain and keep in force during the time
in which they are engaged in performing services hereunder
reasonably adequate coverage in accordance with Owner's normal
practice and furnish Owner with acceptable evidence of such
insurance upon its request.
7.3.2 Deductibles - All deductibles for the coverages specified in this Section
7.3.1, paragraphs i, ii and iii shall be the sole responsibility of Owner,
except that Operator shall be responsible for such deductible to the extent the
claim arises out the negligence or willful misconduct of Operator in the
performance of the Work, not to exceed $100,000 per occurrence pursuant to
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Section 7.3.1 paragraphs i and ii or $200,000 per occurrence pursuant to Section
7.3.1, paragraph iii. Any such deductible or self-insured retention paid by
Operator shall not be deemed to be a Reimbursable Cost hereunder.
7.3.3 Endorsements - Any insurance provided in accordance with Section 7.3.1
shall be endorsed to provide that:
i. Operator shall be an insured for losses occurring at the Site in the
case of insurance provided in accordance with Section 7.3.1
paragraphs i and ii and an additional insured in the case of
insurance provided in accordance with Section 7.3.1 paragraphs iii
and iv, in each case with the understanding that, except as
expressly provided in Section 7.3.2, any obligation imposed upon
Owner (including the liability to pay premiums) shall be the sole
obligation of Owner and not that of Operator.
ii. The insurer thereunder waives all rights of subrogation against
Operator and Owner and any other right to deduction due to
outstanding premiums, whether by attachment or otherwise.
iii. Such insurance shall be primary without right of contribution of any
other insurance carried by or on behalf of Operator with respect to
its interest as such in the Facility.
iv. 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 interest of Operator and Lender, such
cancellation or change shall not be effective as to Operator until
forty-five (45) days after receipt by Operator of written notice
sent by registered mail from such insurer of such cancellation or
change; provided, however, that such forty-five (45) day period
shall be reduced to ten (10) days in the case where cancellation
results from the nonpayment of premiums.
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.
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iv. If Owner purchases insurance on a claims made basis, such policies
must contain a discovery period that expires five (5) years after
the expiration of the policy or, with Operator's prior written
consent which shall not be unreasonably withheld, Owner will provide
an equivalent arrangement to address claims which occurred during
the claims made policy period but are not reported for a period of
five (5) years.
Section 7.4 - Optional Insurance Responsibilities
If requested by Owner in writing, Operator shall assist Owner in obtaining for
its own account the insurance Owner is required to maintain pursuant to Section
7.3.1 paragraphs i and ii above, subject to Owner reimbursing Operator for its
reasonable costs incurred in providing such assistance.
ARTICLE VIII - Dispute Resolution
Section 8.1 - Procedure.
In the event a dispute arises between or among Owner and Operator regarding the
application or interpretation of any provision of this Agreement other than
matters which may not be settled without the consent of an insurance company or
a third party to a Project Agreement, the aggrieved Party shall notify the other
Party to this Agreement of the dispute. If the Parties shall have failed to
resolve the dispute within ten (10) Days after delivery of such notice, each
Party shall, within two (2) Days thereafter, nominate a senior member of its
management to meet at the Facility, or at any other mutually agreed location, to
resolve the dispute. Should the Parties be unable to resolve the dispute to
their mutual satisfaction within twenty (20) Days of such nomination, each Party
shall have the right to submit the dispute to arbitration in accordance with
Sections 8.2 through 8.5.
Section 8.2 - Arbitration Procedure.
(a) The Parties agree to settle all controversies and disputes
between them arising out of or relating to this Agreement (including, without
limitation, the breach, termination or validity thereof) by arbitration in
accordance with the Arbitration Rules of the American Arbitration Association
("AAA"), or successor organization, in effect at the time of the arbitration
("Rules"), except as such Rules may be modified by this Agreement.
(b) A Party desiring to submit a dispute to arbitration hereunder
shall file a Demand for Arbitration with the AAA at its office in New York, New
York. A copy of such Demand shall be sent to the other Party at the same time.
The arbitration proceeding shall be conducted by an arbitrator or a panel of
three arbitrators, as provided below. Within ten (10) Days after a Demand for
Arbitration has been made by either Party, the Parties shall either agree on the
appointment of a single arbitrator or each Party shall appoint one arbitrator.
Within
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<PAGE>
twenty (20) Days after the Demand for Arbitration has been made, the two
arbitrators shall choose a third arbitrator who shall act as chairperson of the
arbitral proceedings. If the two arbitrators chosen by the Parties do not agree
upon a third arbitrator within twenty (20) Days after the filing of the Demand
for Arbitration, then upon the application of either Party, the third arbitrator
shall be appointed by the AAA. Should either Party refuse or neglect to
participate in the appointment of the arbitrators within the time provided, the
arbitrator selected by the other Party shall be the sole arbitrator of the
dispute.
(c) Following the appointment of the arbitrators, each Party shall
have the right to mail to the other Party (with a copy to the arbitrators) a
written request for the production of certain identified documents or of all
documents in possession of the other Party relevant to any claims or
counterclaims in said arbitration. Within ten (10) Days of receipt of any such
request, the receiving Party may make written objection to the requesting Party
(with a copy to the arbitrators) to all or part of said request, on the ground
that it is unduly burdensome, that the documents requested are irrelevant or
privileged, or that such documents are equally available to the requesting
Party. The arbitrators shall rule on the validity of any such objection and the
Parties shall produce documents in accordance with such order. The documents
requested shall be delivered within thirty (30) Days of receipt of such request,
unless the arbitrators otherwise direct.
(d) THE SITE OF THE ARBITRATION SHALL NEW YORK, NEW YORK, UNLESS
OTHERWISE AGREED TO BY THE PARTIES. The Parties shall diligently and
expeditiously proceed with arbitration. The arbitrators shall be instructed to
render a written decision within forty-five (45) Days after the conclusion of
the hearing or the filing of such briefs as may be authorized by the
arbitrators, subject to any reasonable delay due to unforeseen circumstances.
(e) Except to the extent the Parties' remedies may be limited by the
terms of this Agreement, the arbitrators shall be empowered to award any remedy
available under the laws of the State of New York including, but not limited to,
monetary damages and specific performance. The arbitrators shall not have the
power to amend or add to this Agreement. The award of the arbitrators shall be
in writing with reasons for such award and signed by the arbitrators. The
Parties agree that any award rendered shall be final and binding; provided,
however, the Parties do not hereby waive their rights to modify or vacate an
award pursuant to Sections 10 and 11 of the United States Arbitration Act, 9
U.S.C. ss.ss. 10, 11. Judgment rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
Section 8.3 - Qualifications of Arbitrators; Expenses.
(a) The arbitrators in the arbitration proceeding provided for
in Section 8.2 shall be individuals experienced in the power plant operation and
maintenance industry and competent to pass on the matter presented for
arbitration, but said arbitrators shall have no interest in or
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<PAGE>
prior connection with Owner, Operator, or any of their respective Affiliates,
and shall be impartial toward each Party at the time of their selection.
(b) Owner and Operator shall share equally the compensation and
expenses of the arbitrators as well as all fees imposed by the AAA including,
but not limited to, transcripts, hearing room rentals, filing fees, and
administrative costs. Owner and Operator shall each be responsible for its own
costs and legal fees, if any. Notwithstanding the foregoing, the arbitrators
shall be empowered to award a Party its costs, expenses and legal fees if the
arbitration proceeding is initiated by the other Party in bad faith.
Section 8.4 - Independent Arbitration Agreement.
This Article VIII constitutes an independent contract to arbitrate all disputes
between the Parties, including, without limitation, disputes regarding contract
formation and whether either Party is entitled to quasi-contractual or quantum
meruit recovery from the other Party.
Section 8.5 - Continuation of Work.
Pending final resolution of any dispute, the Parties shall continue to fulfill
their respective obligations hereunder, including but not limited to payment
obligations. Subject to Sections 2.3 and 3.5(b), the interpretation or decision
of the non-aggrieved Party shall take precedence until such time as the dispute
is resolved pursuant to Section 8.1 or 8.2; provided that, nothing in this
Section shall relieve the non-aggrieved Party from any liability hereunder
resulting from such action to the extent such interpretation or decision is
ultimately determined to be wrong by the Arbitrators.
ARTICLE IX - Commencement and Termination
Section 9.1 - Commencement of Work.
The Pre-Commencement Phase Services shall commence on the Notice to Proceed
Date. The Operational Phase Services shall commence on the Commencement Date.
Section 9.2 - Term.
Except as may otherwise be noted herein, this Agreement shall be effective as of
the Effective Date and shall remain in full force and effect for an initial term
of twenty-seven (27) years from the Commencement Date.
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Section 9.3 - Renewals.
Owner shall have the option to extend the term of this Agreement for succeeding
two (2) year periods, provided that Owner gives written notice to Operator of
such intent no later than one hundred and eighty (180) Days prior to the
expiration of the current term.
Section 9.4 - Early Termination.
(a) This Agreement may not be terminated before its expiration
except (i) by mutual written agreement of the Parties or (iii) by Owner pursuant
to Sections 9.4(b) or 18.2 or (iv) pursuant to the default provisions expressed
in Article XII.
(b) Owner may, at its option, terminate this Agreement by giving the
Operator thirty (30) Days prior notice in the case of clauses (i), (ii) and
(iii) below and immediately in the case of clause (iv) below. Owner may
terminate this Agreement
(i) if Operator shall fail to perform hereunder in accordance
with Prudent Operating Practice and, as a result thereof,
there is a failure to maintain for a fifteen (15) consecutive
month period at least a ninety-two percent (92%) Availability
Adjustment Factor (as defined pursuant to the Power Purchase
Agreements) calculated on a rolling average basis, and, during
such period, cash distributions are prohibited from being made
by Owner to its partners pursuant to the Loan Agreement for
two (2) consecutive quarters; or
(ii) if there is a failure to maintain for a fifteen (15)
consecutive month period at least a ninety percent (90%)
Availability Adjustment Factor (as defined pursuant to the
Power Purchase Agreements) calculated on a rolling average
basis, and, during such period, the Senior Debt Service
Coverage Ratio under and as defined in the Loan Agreement for
two (2) consecutive quarters is less than 1.10/1.00; or
(iii) upon damage to, or destruction of, a substantial portion
of the Facility, which damage or destruction cannot reasonably
be expected to be repaired or rebuilt within one (1) calendar
year; or
(iv) a work stoppage by Operator's on-site personnel and
failure by Operator to provide a complement of workers within
ten (10) Days as necessary to operate the Facility and perform
the Work in all material respects as required by this
Agreement.
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<PAGE>
Section 9.5 - Termination Procedure.
Upon the effective date of termination of this Agreement authorized under
Section 9.4, the Operator shall (a) discontinue the Work, (b) place no further
orders or subcontracts for Materials, Services, or labor, except as authorized
in advance by Owner or required of Operator to avoid giving rise to a default
under this Agreement, (c) make every reasonable effort to obtain cancellation of
affected subcontracts or, at Owner's request, cause the assignment of any such
contracts to Owner or its replacement operator upon terms satisfactory to Owner,
and (d) take such other action as may be reasonably requested by Owner for the
orderly closeout and transition of Operator's operation and maintenance
activities. After deduction of any amounts owed by Operator to Owner, upon
termination pursuant to this Article, Owner shall pay, or cause to be paid, to
Operator (A) the amount, if any, due and payable to Operator pursuant to this
Agreement up to and including the date of termination, and (B) except in the
case of a termination of Operator pursuant to Article XII, all reasonable
documented costs incurred by Operator for its own efforts to implement
termination and the resulting reasonable costs actually incurred for turnover
and demobilization, excluding any loss of anticipated profit. Such payments to
Operator shall not duplicate any other payments hereunder made to Operator.
Operator shall use reasonable efforts to minimize all termination costs. Other
than as set forth in this Section 9.5, Owner shall have no liability to Operator
for costs, expenses or losses of any kind or nature incurred by Operator as a
result of such termination. In no event shall the aggregate payments of Owner
hereunder exceed the amount due for the then-current Operating Year, pro-rated
for any partial Operating Year. Within sixty (60) Days following the termination
date, Operator shall submit to Owner its final invoice statement which Owner
shall review and make payments on in accordance with the provisions expressed in
Article VI. Upon Operator's receipt of final payment in full from Owner, this
Agreement shall terminate and neither Party shall have any further obligation to
the other Party except with respect to those certain provisions of this
Agreement which by their nature survive.
Section 9.6 - Suspension of Performance.
At any time and from time to time Owner may direct Operator to suspend and
subsequently to resume performance of the Work. Any such direction shall be
promptly confirmed in writing. During any such suspension, Operator and Owner
shall proceed in accordance with the provisions of Section 9.5, revised as
applicable to account for the differences between termination and suspension.
Notwithstanding any other provision of this Agreement to the contrary, in the
event of a suspension pursuant to this Section 9.6, Operator shall reduce the
number of Personnel at Owner's request and Owner and Operator shall negotiate in
good faith an equitable reduction in the compensation of Operator for the
applicable period of suspension. Owner shall be responsible for all of the costs
and expenses associated with the remobilization after the suspension.
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<PAGE>
ARTICLE X - Representations
Section 10.1 - Representations and Warranties.
(a) Each Party represents and warrants to the other Party that: (i)
such Party has the full power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby; (ii) the
execution and delivery of this Agreement by such Party and the carrying out by
such Party of the transactions contemplated hereby have been duly authorized by
all requisite corporate (or, if applicable, partnership) action, and this
Agreement has been duly executed and delivered by such Party and constitutes the
legal, valid and binding obligation of such Party, enforceable against it in
accordance with the terms hereof, subject as to enforceability of remedies to
limitations imposed by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the enforcement of creditors rights
generally and general principles of equity; (iii) no authorization, consent,
approval or order, or notice to or registration, qualification, declaration or
filing with any Governmental Authority is required for the execution, delivery
and performance by such Party of this Agreement or the carrying out by such
Party of the transactions contemplated hereby, other than regulatory and similar
approvals needed with respect to the operation and maintenance of the Facility;
and (iv) none of the execution, delivery and performance by such Party of this
Agreement, the compliance with the terms and provisions hereof, and the carrying
out of the transaction contemplated hereby, conflicts or will conflict with or
result in a breach or violation of any of the terms, conditions, or provisions
of any law, governmental rule or regulation or the charter document (or
partnership agreement, if applicable), as amended, supplemented, or otherwise
modified, or bylaws, as amended, supplemented, or otherwise modified, of such
Party or any applicable order, writ, injunction, judgment or decree of any court
or Governmental Authority against such Party or by which it or any of its
properties is bound, or any loan agreement, indenture, mortgage, bond, note,
resolution, contract or other agreement or instrument to which such Party is a
Party or by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder or will result in the imposition of any lien
upon any of its properties.
(b) Operator further represents and warrants to Owner that:
(i) it has experience in the operation and maintenance of combustion turbine,
combined cycle power generation facilities and is fully qualified to operate and
maintain the Facility in accordance with the terms hereof, (ii) it shall not
intentionally take any action that would cause a default under any Project
Agreement, and (iii) there are no legal or arbitral proceedings or any
proceedings by or before any Governmental Authority, now pending or (to the
knowledge of Operator) threatened against Operator or any of its subsidiaries
that if adversely determined, could reasonably be expected to have a material
adverse effect on Operator's ability to perform its obligations under this
Agreement.
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<PAGE>
ARTICLE XI - Confidentiality
Section 11.1 - General.
Each Party agrees to hold in confidence for a period of five (5) years from the
date of disclosure, but in any event for the term of the Loan Agreement, any
confidential information supplied by the other Party or its contractors and
designated in writing as confidential by the supplier thereof, including this
Agreement ("Confidential Information"). Accordingly, it shall not be disclosed
in whole or in part to third parties without the prior written permission of the
other Party, except that Operator agrees that Owner may disclose any
Confidential Information to Lender, potential Lenders, and their representatives
as required for the financing of the Facility and to the Owner's partners and
prospective partners, subject to appropriate confidentiality agreement. Operator
further agrees, to the extent requested by the supplier of such information, to
require its subcontractors, vendors, suppliers and employees to enter into
appropriate nondisclosure agreements relative to such Confidential Information,
prior to the receipt thereof.
Section 11.2 - Exceptions.
The provisions of this Article shall not apply to information within any one of
the following categories or any combination thereof:
(a) Information that was in the public domain prior to the receiving
Party's receipt or that subsequently becomes part of public domain by
publication or otherwise, except by the receiving Party's wrongful act; or
(b) Information that the receiving Party can show was in its
possession prior to receipt thereof from the disclosing Party; or
(c) Information received by a Party from a third party who such
Party reasonably determines is under no limitation or restriction regarding
disclosure.
Section 11.3 - Required Disclosure.
Any Party required by law, rule, regulation or order, or in the course of
administrative or judicial proceedings, to disclose information that is
otherwise required to be maintained in confidence pursuant to this Article XI
(collectively, a "Legally Compelled Disclosure"), may make disclosure
notwithstanding the provisions of this Article XI; provided, however, that the
Party required to make the disclosure shall immediately notify the other Party
of the requirement and the terms thereof and shall cooperate to the maximum
extent practicable to preserve the confidential nature of the information and,
in the case of Legally Compelled Disclosure, minimize the disclosure. The Party
disclosing such information shall use all reasonable efforts to obtain
proprietary or confidential treatment of such information by the third party to
whom the information is disclosed, and in the case of a Legally Compelled
Disclosure, to the extent such
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remedies are available, shall seek protective orders, limiting the dissemination
and use of the information. Moreover, in the case of a Legally Compelled
Disclosure, this Agreement does not alter the rights of either Party to object
to the rule, regulation, order or proceedings requiring the disclosure.
Section 11.4 - Return of Confidential Information
Confidential Information furnished to Operator by Owner hereunder shall be
returned to Owner or its destruction certified before final payment is made to
Operator hereunder; provided that, subject to any restrictions imposed by
Article XI, Operator may retain a copy thereof.
ARTICLE XII - Default
Section 12.1 - Events of Default.
The following occurrences or events, or any of them, by or against either
Operator or Owner, shall constitute a default under this Agreement:
(a) A material breach of any of the terms, conditions, warranties,
covenants or representations expressed in this Agreement (other than a breach
described in Sections 12.1(b) through (f) below); or
(b) the filing of a petition commencing a voluntary case under the
Federal Bankruptcy Code or for liquidation, reorganization or any similar
arrangement under federal or state law relating to bankruptcy, insolvency,
winding up or adjustment of debts; or
(c) the admission in writing of its insolvency or inability to pay
its debts generally as they become due or the acquiescence in or consent to any
involuntary case commenced pursuant to Section 12.1(d) or the declaration of
such Party as bankrupt or insolvent under the Federal Bankruptcy Code or any
other federal or state law relating to bankruptcy, insolvency, winding up or
adjustment of debts; or
(d) the filing of a petition against it commencing an involuntary
case under the Federal Bankruptcy Code or proposing the adjudication of such
Party as a debtor or bankrupt or proposing its liquidation or reorganization
pursuant to any federal or state law relating to bankruptcy, insolvency, winding
up or adjustment of debts; or
(e) the dissolution of any Party or failure to maintain such Party's
good standing or qualification to do business in the State of Mississippi and
state of organization; or
(f) an assignment for the benefit of creditors.
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Section 12.2 - Rights Upon Default.
(a) In the event that (1) either Party is in default of this
Agreement pursuant to Section 12.1(a) in the case of a non-monetary default or
12.1(d) (for filing of an involuntary petition in bankruptcy) and such default
is not cured, or the defaulting Party is not diligently pursuing a cure, within
thirty (30) Days following receipt of notice that a default under this Agreement
has occurred, or, in the case of a non-monetary default if diligently pursuing a
cure, has not cured such default within ninety (90) Days of such notice;
provided that to the extent that the Operator is in default pursuant to Section
12.1(a) on more than two occasions related to the same default during any twelve
(12) month period, it shall not be entitled to either the 30 or 90 day cure
period provided for herein, or (2) either Party is in default pursuant to
Sections 12.1(b) (for filing a voluntary petition in bankruptcy), 12.1(c),
12.1(e) or 12.1(f), then the non-defaulting Party may take any one or more of
the following actions: (i) terminate this Agreement immediately without
obligation to or recourse by the defaulting Party and in accordance with the
procedures described in Section 9.5, (ii) exercise any other right it may have
under this Agreement, and/or (iii) pursue any other right or remedy available to
it under Law or equity in accordance with the procedures of Article VIII subject
to the limits set forth in this Agreement.
(b) In the event that Owner so elects to terminate this Agreement as
a result of Operator's default hereunder, and without limiting any other right
or remedy of Owner arising therefrom, Owner may employ any other person, firm or
corporation to perform the Work by whatever method Owner may deem expedient.
Furthermore, Operator shall, at Owner's expense, perform the following services
relative to the Work so affected by its default, regardless of whether or not
Owner elects to terminate this Agreement as a result of such default:
(i) assist Owner in preparing an inventory of all Materials in
use or in storage at the Facility; and
(ii) assign to Owner such subcontracts and other contractual
agreements relating to Operator's performance of the Work as
may be designated by Owner. Furthermore, Operator shall
execute all documents reasonably requested by Owner and take
such other steps as are reasonably requested by Owner that may
be required to assign and vest in Owner or its designee all
rights, benefits, interests and title in connection with such
contracts or obligations; and
(iii) assist Owner in training Operator's successor.
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ARTICLE XIII - Indemnity
Section 13.1 - Operator's Indemnity.
13.1.1 Indemnity. Operator shall indemnify, hold harmless and defend Owner, the
Project Lender, the Independent Engineer, and their Affiliates and their
respective officers, directors, partners, and employees (collectively, the
"Owner's Indemnitees") from and against any and all claims, demands, suits,
legal proceedings, liabilities, judgments, awards, losses, damages, costs or
expenses (including, without limitation, reasonable legal fees and expenses),
for bodily injury to or death of persons or damage to or destruction of third
party tangible property, to the extent caused by or arising out of any negligent
act or omission (whether active or passive), willful misconduct or strict
liability of Operator or of anyone acting under its direction or control or on
its behalf in connection with or incident to the performance of the Work (other
than Owner's Indemnitees).
13.1.2 Nonpayment. Operator agrees to fully indemnify, save harmless and defend
the Owner's Indemnitees from claims, liabilities, expenses (including reasonable
legal fees), penalties, interest, demands and causes of action for nonpayment of
amounts due Operator's subcontractors, or others as a result of furnishing Work
which amounts are payable by Operator, provided that Operator has been paid in
accordance with the provisions of the Agreement, including any right of Owner to
withhold payment under the Agreement.
13.1.3 No Limitation of Indemnity. With respect to any and all claims arising,
directly or indirectly, from the performance of the Operator pursuant to this
Agreement brought against any Owner's Indemnitee, whether brought by any
employee of Operator, any subcontractor of Operator, anyone directly or
indirectly employed by any of them or by anyone for whose acts any of them may
be liable or otherwise, or in the event of any other claim against an Owner's
Indemnitee subject to Section 13.1.1, the indemnification obligation under such
Section shall not be limited in any way by the amount or type of damages,
compensation or benefits payable by or for Operator or any subcontractor of
Operator or any other Person under worker's compensation acts, disability
benefit acts, nor by the provision of any insurance, whether required to be
provided under the Agreement, or of other employee benefit acts.
Section 13.2 - Owner's Indemnity.
13.2.1 Indemnity. Owner shall indemnify, defend and hold Operator and its
officers, directors, and their Affiliates and their respective officers,
directors, partners, and employees (collectively "Operator's Indemnitees")
harmless from and against any and all claims, demands, suits, legal proceedings,
liabilities, judgments, awards, losses, damages, costs or expenses (including,
without limitation, reasonable legal fees and expenses) for bodily injury to or
death of persons or damage to or destruction of third party tangible property,
to the extent caused by or arising out of any negligent act or omission (whether
active or passive) willful misconduct or strict liability of Owner or its
Subcontractors or anyone acting on Owner's behalf, including, without
limitation,
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Affiliates of the foregoing (other than Operator's Indemnitees) in connection
with or incident to activities or services on or about the Site.
13.2.2 No Limitation of Indemnity. With respect to any and all claims in
connection with this Project brought against any Operator's Indemnitee, whether
brought by any employee of Owner, any Subcontractor of Owner, anyone directly or
indirectly employed by any of them or by anyone for whose acts any of them may
be liable or otherwise, or in the event of any other claim against an Operator's
Indemnitee subject to Section 13.2.1, the indemnification obligation under such
Section shall not be limited in any way by the amount or type of damages,
compensation or benefits payable by or for Owner or any Subcontractor or any
other Person under worker's compensation acts, disability benefit acts, nor by
the provision of any insurance, whether required to be provided under the
Agreement, or of other employee benefit acts.
Section 13.3 - Survival of Indemnity.
This Article XIII and any other indemnity provided under this Agreement shall
survive the termination or suspension of this Agreement and shall remain in full
force and effect until the later of (i) the time during which a claim or cause
of action may be brought is barred by the applicable statute of limitations and
(ii) the satisfaction or payment of such claim or liability and of all expenses
and charges incurred by Operator or Owner, as the case may be, relating to the
enforcement of this Article XIII, but with respect to Section 13.1 in no event
later than the date of expiration of the insurance required to be provided by
Owner pursuant to Article 7.
Section 13.4 - Litigation.
If any party indemnified pursuant to this Article 13 (each an "Indemnified
Party" collectively "Indemnified Parties") receives notice or has knowledge of
any claim that may reasonably result in a claim for indemnification by such
Indemnified Party against a Party (the "Indemnifying Party") pursuant to this
Article XIII or Article XVII, such Indemnified Party shall, as promptly as
possible, give the Indemnifying Party notice of such claim, including a
reasonably detailed description of the facts and circumstances relating to such
claim, and a complete copy of all notices, pleading and other papers related
thereto, and the basis for its potential claim for indemnification with respect
thereto in reasonable detail and cooperate with the Indemnifying Party in
response thereto.
Subject to the limitations on the Indemnifying Party's indemnity obligations
hereunder, the Indemnifying Party shall assume on behalf of the Indemnified
Party, and conduct with due diligence and good faith the defense of, any suit
against one or more of the Indemnified Parties, whether or not the Indemnifying
Party is joined therein; provided, however, that, without relieving the
Indemnifying Party of its obligations hereunder and subject to the Indemnifying
Party's control over the defense and settlement of such suit, the Indemnified
Party may elect to participate in the defense of any such suit, at its own
expense. The Indemnifying Party's
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indemnity hereunder is for the exclusive benefit of the Indemnified Parties and
their assignees and in no event shall inure to the benefit of a third party.
ARTICLE XIV - Liability of the Parties
Section 14.1 - Limitation of Liability.
14.1.1 In no event whether as a result of breach of contract, warranty,
indemnity, tort (including negligence), strict liability or otherwise, shall
either Party, including with respect to the Operator its suppliers or
subcontractors of any tier, be liable hereunder for any consequential or
indirect loss or damages, including without limitation, loss of energy, revenue,
costs of capital, loss of other anticipated revenues and profits, loss of good
will, damage to or loss of property or equipment in excess of the obligation
assumed by Operator in Sections 7.2 and 13.1, loss of use of equipment or power
system; increased operating costs or any special or incidental damages.
14.1.2 Excluding any liability of Operator for the payment of amounts pursuant
to Sections 13.1.1, 13.1.2, and 7.3.2 as it relates to the payment of
deductibles by Operator for the coverage provided in Section 7.3.1 (i) and (ii),
and excluding any third party liabilities regarding Operator's indemnity as set
forth in Section 7.4, the total aggregate liability of Operator and its
suppliers and subcontractors of any tier with respect to any and all claims
arising out of the performance or non-performance of its obligations under this
Agreement, whether based on contract, warranty, tort (including negligence and
strict liability), or otherwise shall not exceed, exclusive of proceeds of
insurance received by Owner (i) with respect to claims arising or accruing in
the Pre-Commencement Phase, the Pre-Commencement Phase Services Fee (the
"Pre-Commencement Phase Liability Limit") and (ii) with respect to claims
arising or accruing in any Operating Year, the annual Management Fee for such
Operating Year, provided that if such Operating Year consists of less than three
hundred sixty-five days, such amount will be prorated accordingly (the
"Operating Year Liability Limit").
14.1.3 Excluding any liability of Owner for the payment of amounts pursuant to
Section 6.2(a), Sections 13.2.1 and 13.2.2 and amounts to which Operator is
entitled to receive under this Agreement or by law (but subject to Section
14.1.1) in the event of a wrongful termination of this Agreement, the total
aggregate liability of Owner with respect to any and all claims arising out of
the performance or non-performance of its obligations under this Agreement,
whether based on contract, warranty, tort (including negligence and strict
liability), or otherwise shall not exceed, (i) with respect to claims arising or
accruing in the Pre-Commencement Phase, the Pre-Commencement Phase Liability
Limit and (ii) with respect to claims arising or accruing in any Operating Year,
the Operating Year Liability Limit.
Section 14.2 - Survival
The Parties further agree that the waivers and disclaimers of liability,
indemnities, releases from
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liability, and limitations on liability expressed in this Agreement shall
survive termination or expiration of this Agreement, and shall apply at all
times (unless otherwise expressly indicated), whether in contract, equity, tort
or otherwise, regardless of the fault, negligence, strict liability, or breach
of warranty of the Operator's Indemnitees or Owner's Indemnitees, as applicable.
Section 14.3 - No Warranties or Guarantees.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTIES OR GUARANTEES TO THE OTHER, EITHER EXPRESS OR IMPLIED, WITH RESPECT
TO THE SUBJECT MATTER OF THIS AGREEMENT, AND BOTH PARTIES DISCLAIM AND WAIVE ANY
IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MECHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 14.4 - No Personal Liability.
Each Party acknowledges and agrees that in no event shall any partner,
shareholder, member, owner, manager, officer, director, or employee of either
Party be personally liable to the other Party for any payments, obligations, or
performance due under this Agreement, or any breach or failure of either Party
and the sole recourse for payment or performance of the obligations hereunder
shall be against Owner or Operator and each of their respective assets and not
against any other person, except for such liability as expressly assumed by an
assignee pursuant to an assignment of this Agreement in accordance with the
terms hereof.
ARTICLE XV - Force Majeure
Section 15.1 - Force Majeure; Events Limitation.
Neither Operator nor Owner shall be liable to the other for any failure to
perform pursuant to the terms and conditions of this Agreement to the extent
such performance was prevented by an event of Force Majeure. Force Majeure as
used in this Agreement means any event beyond the reasonable control of the
Party affected and which, with the exercise of due care, such Party could not
reasonably have been expected to avoid, including but not limited to acts of
God, explosions or fires, floods, hurricanes, tornadoes, lightning, earthquakes,
drought, epidemics, blight, famine, quarantine, blockade, acts or inactions of
Governmental Authorities, war, insurrection or civil strife, rebellion,
sabotage, strike or labor difficulty (except any such strikes or labor
difficulties involving Operator's Personnel or other employees or any
subcontractor of Operator or their employees), unavailability of equipment which
could not have been reasonably avoided by Operator's compliance with Prudent
Operating Practices; provided that commercial impracticability shall not
constitute an event of Force Majeure; provided further that a Party shall not be
excused from its performance pursuant to this Article 15.1 (i) unless such Party
gives notice and full particulars of the same to the other Party as soon as
practicable after the
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occurrence relied on, (ii) to the extent such failure was caused by its
negligence, (iii) to the extent the event relied upon could have been prevented
by reasonable diligence or was within the reasonable control of such Party, (iv)
to the extent of its failure to use due diligence to remedy the situation and
remove the cause of the event of Force Majeure in an adequate manner and with
all reasonable dispatch, (v) for its obligations to make payments due under this
Agreement. The Party affected by the event of Force Majeure shall, to the extent
practicable, take such action as such Party may lawfully and reasonably initiate
to diligently cure the event of Force Majeure and to mitigate the direct and
indirect effects of the event of Force Majeure. The Parties expressly understand
and agree that (a) in the event that any Operator subcontractor is entitled
under the terms of any contract or agreement to force majeure relief for events
or circumstances of a nature or type similar to those specifically enumerated
above on terms broader than those provided above, such broader force majeure
relief shall not constitute force majeure for the Operator hereunder unless such
events or circumstances would themselves constitute a Force Majeure event
hereunder if Operator were directly affected thereby; and (b) the compliance of
Operator's subcontractors with the terms of its applicable subcontract or
purchase order shall be within Operator's control. The burden of proof shall be
on the Party seeking to show excuse from performance due to a Force Majeure
event.
ARTICLE XVI - Title, Documents and Data
Section 16.1 - Materials and Equipment.
Title to all Materials (including equipment) and other items purchased or
obtained by Operator on a Reimbursable Cost basis hereunder shall pass
immediately to and vest in Owner upon the passage of title from the vendor or
supplier thereof; provided, however, that such transfer of title shall in no way
affect Operator's obligations as set forth in the other provisions of this
Agreement.
Section 16.2 - Review by Owner.
All materials and documents required to be submitted for the approval of Owner
shall be prepared and processed in accordance with the requirements and
specifications set forth in the Site Procedures and Annual Operating Plan, as
applicable; provided, however, that Owner's review or approval of materials and
documents submitted by Operator shall not relieve Operator of its responsibility
for the corrections thereof or of its obligations to meet all of the
requirements of this Agreement.
ARTICLE XVII - Hazardous Materials
Section 17.1 - Owner's Indemnity.
Operator makes no representation or warranty concerning the existence or
nonexistence of Hazardous Materials at the Site when the Work commences and
disclaims all responsibility and
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liability for the excavation, transportation, storage, handling, removal,
treatment or disposal of pre-existing Hazardous Materials discovered or
encountered at the Site. Owner shall indemnify, defend and hold Operator and its
Subcontractors harmless from and against any claim, suit, loss, cost, liability,
fine, or damage (including reasonable attorneys' fees), including, but not
limited to, liability or cost incurred or assessed against Operator pursuant to
42 USC 9601 et seq., "Comprehensive Environmental Response, Compensation and
Liability Act of 1980" and amendments thereto, 15 USC 2602, et seq., "The Toxic
Substances Control Act" and amendments thereto, 42 USC 6901 et seq., "The
Resource Conservation and Recovery Act of 1976" and amendments thereto, or other
applicable Law made or asserted by any Person, including governmental entities,
based on or related to complaints or allegations, whether or not supported by
fact, that soils, leachate, effluent, or other residue located on, emanating
from, or arising from the soils, subsurface or physical conditions at the Site
contain preexisting toxic substances or preexisting Hazardous Materials.
Operator shall provide prompt notice to Owner of any suspected Hazardous
Materials which it finds during performance of Work. Owner shall be responsible
for the prompt determination of the nature of such Hazardous Materials and shall
proceed with due diligence.
Section 17.2 - Collection and Removal.
Operator shall arrange for the proper collection, removal and disposal of any
Hazardous Materials furnished, used, applied, generated or stored at the Site or
emanating from the Site as a result of Work including, but not limited to, used
oils, greases, and solvents from flushing and cleaning processes performed under
this Agreement. All activities in connection with the foregoing shall be
performed in accordance with the Site Procedures. All costs associated with the
transporting and disposing of Hazardous Materials to or from the Site by
Operator in connection with its performance of the Work pursuant to the terms of
this Agreement shall be paid by Owner pursuant to the provisions of Section 6.2.
Section 17.3 - Material Safety Data Sheets.
As required under all applicable Laws, Operator shall provide Material Safety
Data Sheets covering all Hazardous Materials furnished under or otherwise
associated with the Work. Operator shall provide Owner with copies of the
applicable Material Safety Data Sheets or copies of a document certifying that
no Material Safety Data Sheets are required under any applicable Laws and shall
determine whether any substance or material furnished, used, applied, or stored
in connection with the Work is within the provisions of any Laws concerning
Hazardous Materials.
Section 17.4 - Operator's Indemnity.
Operator covenants and agrees that Operator will not introduce Hazardous
Materials on the Site or in the Work in violation of any Laws or handle
Hazardous Materials negligently or in violation of Law. Operator shall
indemnify, defend and hold Owner and its partners, officers, directors,
employees, assigns, successors in interest, agents, the Power Purchasers and the
Interconnecting Utilities from and against any claim, suit, loss, cost,
liability, fine, or damage (including reasonable attorneys' fees), including,
but not limited to, liability or cost incurred or
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assessed against Owner pursuant to 42 USC 9601 et seq., "Comprehensive
Environmental Response, Compensation and Liability Act of 1980" and amendments
thereto, 15 USC 2601, et seq., "The Toxic Substances Control Act" and amendments
thereto, 42 USC 6901 et seq., "The Resource Conservation and Recovery Act of
1976" and amendments thereto, or other Laws, arising out of Operator's breach of
the preceding covenant and agreement. Owner shall provide prompt notice to
Operator of any such indemnification sought from Operator.
ARTICLE XVIII - Miscellaneous Provisions
Section 18.1 - Entire Agreement.
This Agreement (including all exhibits and schedules thereto) contains the
entire understanding of the Parties with respect to the subject matter hereof
and supersedes any and all prior negotiations, agreements, commitments, and
writings with respect thereto. There are no oral understandings, terms or
conditions and neither Party has relied upon any representation, express or
implied, not contained in this Agreement.
Section 18.2 - Changes to Project Agreements.
Notwithstanding anything to the contrary contained in this Agreement, in the
event (i) any Project Agreement is amended, modified, or supplemented or entered
into subsequent to the Effective Date of this Agreement, and (ii) such Project
Agreement as amended, modified, or supplemented or such new Project Agreement
contains terms that impose upon Operator obligations materially more burdensome
than the obligations imposed upon the Operator absent such amendment,
modification or supplement or new Project Agreement and (iii) the Operator's
obligations under such amendment, modification, supplement or new Project
Agreement cannot be fully compensated as a Reimbursable Cost hereunder, then
Owner and Operator shall negotiate in good faith to provide for the equitable
compensation of Operator on terms reasonably satisfactory to each of Owner and
Operator. If despite good faith negotiations the Parties are unable to reach
agreement with respect to such matter, then Owner shall have the right to
terminate this Agreement.
Section 18.3 - Amendments.
No change, amendment or modification of this Agreement shall be valid or binding
upon the Parties hereto unless such change, amendment or modification shall be
in writing and duly executed by both Parties.
Section 18.4 - Joint Effort.
Preparation of this Agreement has been a joint effort of the Parties and the
resulting document shall not be construed more severely against one of the
Parties than against the other.
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Section 18.5 - Captions.
The captions contained in this Agreement are for convenience and reference only
and in no way define, describe, extend, or limit the scope or intent of this
Agreement or the intents of any provision contained herein.
Section 18.6 - Notice.
Any notice, demand, offer, or other written instrument required or permitted to
be given pursuant to this Agreement shall be in writing signed by the Party
giving such notice and shall be deemed given when delivered to the Party to whom
notice is to be given by personal delivery, first class registered or certified
mail, nationally recognized courier, or telex at the most recent address
specified by such Party pursuant to this Section 18.6:
(a) To Owner: LSP Energy Limited Partnership
655 Craig Road, Suite 336
St. Louis, MO 63141
Attention: Batesville Project Manager
Tel: (314) 993.2700
Fax: (314) 993.2790
With a copy to: LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, NJ 08816
Attention: General Counsel
(b) To Operator: Cogentrix Batesville Operations, LLC
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Either Party shall have the right to change the place to which such
notice shall be sent or delivered by similar notice sent in like manner to the
other Party.
Section 18.7 - Effective Date of Notice.
The effective date of any notice issued pursuant to this Agreement shall be the
date of the addressee's receipt of such notice or date of refusal to accept
delivery.
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Section 18.8 - Partial Invalidity.
The invalidity of one or more of the phrases, sentences, clauses, Sections or
Articles contained in this Agreement shall not affect the validity of the
remaining portion of this Agreement so long as the material purposes of this
Agreement can be determined and effectuated.
Section 18.9 - Assignment.
(a) Neither this Agreement nor any right granted hereunder may be
assigned or otherwise disposed of by Operator and neither shall inure to the
benefit of any trustee in bankruptcy, liquidator, receiver, successor, or
Affiliate of Operator, whether by operation of law or otherwise, without the
express written consent of Owner and, furthermore, any assignment or transfer
without such express written consent shall be null and void and shall constitute
a material breach of this Agreement; provided, however, that Operator may assign
this Agreement without the consent of Owner (i) to the successor entity in
connection with a merger, consolidation or other corporate reorganization of
Operator, (ii) to the purchaser, in connection with the sale of all or
substantially all of the business or assets of the Operator, provided that such
purchaser is at least as experienced in the operation and maintenance of natural
gas fired, combustion turbine, combined cycle power generation facilities as
Operator is as of the date hereof, or (iii) to an Affiliate of Operator,
provided such transfer shall not in any manner release the Operator from its
obligations hereunder; and provided further that Operator shall provide a
guarantee of the performance of such affiliate satisfactory in form and
substance to Owner.
(b) This Agreement shall not be assigned by Owner without the prior
written consent of Operator, which consent shall not be unreasonably withheld,
except that this Agreement may be assigned by Owner without such consent (i) to
the Project Lender as security for Lender's financing of the Facility provided
that such transfer shall not in any manner release Owner from its obligations
hereunder; (ii) to the successor of Owner, or to a Person acquiring all or a
controlling interest in the business assets of Owner or to an Affiliate of
Owner; and (iii) in connection with a sale or transfer of Facility. Operator
hereby agrees to execute and deliver a reasonably acceptable form of a consent
to assignment if required in connection with an assignment by Owner.
Section 18.10 - No Waiver.
Any failure of either Party to enforce any of the provisions of this Agreement
or to require at any time performance by the other Party of any of the
provisions hereof during the pendency of this Agreement shall in no way affect
the validity of this Agreement, or any part hereof, and shall not be deemed a
waiver of the right of either Party thereafter to enforce any and each such
provision.
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Section 18.11 - Counterparts.
This Agreement may be executed by the Parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 18.12 - Publicity.
Each Party shall obtain the other Party's prior written approval regarding the
text of any announcement, publication, photograph or other type of communication
concerning the Work prior to the dissemination or release of same by either
Party, which approval shall not be unreasonably withheld.
Section 18.13 - Applicable Law.
This Agreement shall be governed by, construed and enforced in accordance with
the laws of the State of New York, without regard for its principles governing
conflicts of law.
Section 18.14 - Successors and Assigns.
This Agreement shall be binding upon the Parties hereto, their successors and
assigns from the Effective Date until such time as all obligations described
herein have been completed in full.
Section 18.15 - Exhibits and Schedules.
All Exhibits and Schedules referenced in this Agreement shall be incorporated
into this Agreement by such reference and shall be deemed to be an integral part
of this Agreement.
Section 18.16 - Third Party Beneficiaries.
This Agreement and each and every provision hereof is for the exclusive benefit
of the Parties hereto and is not for the benefit of any third party.
Section 18.17 - Operator Liens and Encumbrances.
Operator represents and warrants that it shall not encumber the Facility,
Facility Site, or any part thereof as security for any payments owed to it by
Owner hereunder unless Operator has provided Owner and Lender with the lesser of
(i) thirty (30) Days, or (ii) a period equal to one half (1/2) the statutory
period under Mississippi law for the filing of mechanic's or materialmen's liens
prior written notice of its intent to do so and neither Owner nor Lender shall
have made payment or provided a bond or other reasonably acceptable provision to
secure such payment within said period.
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Batesville O&M Agreement Page 55
<PAGE>
Section 18.18 - Effect of Approval Rights.
Operator acknowledges and agrees that any right of Owner to review or approve
any matter under this Agreement, including, without limitation, any such right
provided in Article III is for the exclusive benefit of the Party entitled to
exercise such right and no exercise of or failure to exercise any such right
shall in any way relieve or limit any of Operator's obligations or liabilities
under this Agreement.
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Batesville O&M Agreement Page 56
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have set their hands on the day and
year first above written.
LSP Energy Limited Partnership
By LSP Energy, Inc.
its general partner
By:/s/ Frank Hardenbergh
----------------------
Its: Senior Vice President and Secretary
------------------------------------
Cogentrix Batesville Operations, LLC
By:/s/ Thomas Schwartz
-------------------
Its: Senior Vice President - Finance and Treasurer
----------------------------------------------
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Batesville O&M Agreement Page 57
<PAGE>
Exhibit A
Description of Facility and Site
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Batesville O&M Agreement Page A-1
<PAGE>
Attachment A-1
The Site
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Batesville O&M Agreement Page A-1
<PAGE>
Exhibit B
Typical List of Site Procedures
1.0 Organization/Management Procedures (including organization chart, staffing
plan, role descriptions, Personnel anticipated education and experience).
1.1 Standard Facility Organization
1.2 Standards of Conduct
1.3 Training/Qualifications Program
1.4 Hiring/Promotion/Compensation
1.5 Personnel Procedures (including health and drug screening)
1.6 Annual Budgeting/Planning
1.7 Project Commitments Database
1.8 Management Reports
1.9 Government Interface Practices
1.10 Legal/Insurance Program
1.11 Document Control/Records Management and Procedures
2.0 Procurement/Accounting
2.1 Requisitions/Purchasing Procedures
2.2 Accounts Administration
2.3 Financial Practices/Cash Management
3.0 Operations
3.1 Operator Training/Qualifications/Licensing
3.2 Operating Reports (Logs and Records)
3.3 Performance Testing
3.4 Environmental Compliance (Permits)
3.5 Chemistry Program (Process, Description, Testing, Corrective Action)
3.6 Integrated Startup and Shutdown Procedures (provided by Contractor)
3.7 Interface procedures with Facility Contract Parties
3.8 Performance Tests
4.0 Maintenance
4.1 Computerized Preventive Maintenance Management Program
4.2 Planning and Execution of Outages
4.3 Stores/Spare Parts Inventory Control
4.4 Maintenance Training/Qualifications
4.5 Tool Control and Issue
4.6 Predictive Maintenance Program
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Batesville O&M Agreement Page B - 1
<PAGE>
4.7 Preventative Maintenance Procedures
4.8 Configuration Management and Control Procedures
4.9 Spare Parts Forecasting
5.0 Safety and Security Program and Systems; Compliance Plan
5.1 Switching and Tagging
5.2 Crane Qualifications
5.3 Personnel Protective Equipment Requirements
5.4 Evacuation Plan
5.5 Fire Protection and Prevention Systems/Inspections
5.6 Cutting and Welding Permits
5.7 Emergency Response: Safety and Health Action Plan
5.8 Occupational Injury/Illness Reporting
5.9 Testing and Inspection of Tools and Protective Devices
5.10 Hazardous Material and Waste Handling
5.11 Police/Fire/Emergency Coordinator Interface Procedures
5.12 Site Physical Security Procedures
5.13 Employee Safety Program
5.14 Safety Coordination and Action Plan
5.15 Facility Site Access Procedure
5.16 Subcontractor Safety and Quality Assurance Program
6.0 Quality
6.1 Inspection and Acceptance of Contractor Services
6.2 Equipment Failure Investigation
6.3 Accident Investigation and Reporting
6.4 High Energy Equipment Inspection and Testing
a. Hydrostatic Test Procedures
b. Motor/Cable Megger Testing Procedures
c. Calibration Procedures
6.5 Guidelines for the Optimization of Facility Output and
Efficiency/Results Engineering
7.0 Notification Procedures
7.1 Accidents/Reporting and Recordkeeping
7.2 Public Relations
7.3 Pickets/Union Incidents
7.4 Hazardous Materials
- --------------------------------------------------------------------------------
Batesville O&M Agreement Page B - 2
<PAGE>
Exhibit C
Typical Pre-Commencement and Annual Operating Phase Budgets
EXPENSES ($) EACH MONTH
- -------- --------------
Salaries and Wages
Employee Benefits
Office and Administration
Balance of Plant Maintenance
Equipment and Materials
Water Treatment Chemicals
SCR Chemicals
Supply/Waste Water
Major Maintenance
Back-up Power
Transmission System Maintenance
Pipeline Maintenance
PRODUCTION
- ----------
Capacity Factor, %
Starts (No.)
Scheduled Maintenance, KWH
Heat Rate, BTU/KWH
Standard Capacity, KW
Supplemental Capacity, KW
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Batesville O&M Agreement Page C-1
<PAGE>
Exhibit D
Services Included with Pre-Commencement and Management Fees
A. Pre-Commencement Phase Fee Includes:
o Local salary survey
o Local advertisement for Personnel
o Human Resource support, Personnel interviews and personnel selection
o Payroll and benefits administration
o Cost accounting set-up
o Develop Materials recommendations
o Procure Materials using Owner's procurement procedures
o Review plant designs for operability
o Predictive maintenance program - setup and training (travel included)
o Communication costs from the Charlotte, North Carolina office of Cogentrix
to Site
o Operation and maintenance management support and oversight (travel
included)
o Comprehensive Automobile Liability Insurance
o Preparation of Site Procedures
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Batesville O&M Agreement Page D-1
<PAGE>
B. Management Fee Includes:
o Cost accounting support
o Human Resource support and oversight
o Procurement support and parts coordination
o Environmental oversight
o Payroll and Benefits administration
o Maintenance Control Program support
o Predictive maintenance analysis, review and reporting
o Communication costs from the Charlotte, North Carolina office of Cogentrix
to Site
o Brief engineering answers to plant technical inquiries (less than 1 hr)
o Operation and maintenance support organization for technical operational
support on an as required basis
o Outage planning support
o Operability recommendations
o Health and safety oversight
o Operation and maintenance management support and oversight (travel
included)
o Comprehensive Automobile Liability Insurance
o Labor bonuses
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Batesville O&M Agreement Page D-2
<PAGE>
Exhibit E
Project Agreements and Project Permits Delivered to Operator
1. Power Purchase Agreement dated as of May 18, 1998, as amended by the First
Amendment to Power Purchase Agreement dated as of July 22, 1998 and the Second
Amendment to Power Purchase Agreement dated as of August ___, 1998, between
Virginia Electric Power Company and Owner.
2. VEPCO Acknowledgment of Dedicated Unit
3. Power Purchase Agreement dated May 21, 1998, as amended July 16, 1998 between
Aquila Power Corporation and Utilicorp United, Inc. and Owner.
4. Aquila Acknowledgment if Dedicated Unit
5. Interconnection and Operating Agreement dated May 18, 1998, as amended by the
Letter of Amendment dated August 18, 1998 between Owner and the Entergy
Mississippi, Inc.
6. Interconnection Agreement dated July 22, 1998 between Owner and the Tennessee
Valley Authority.
7. Water Supply Storage Agreement dated as of June 8, 1998 between Owner and the
United States of America.
8. Infrastructure Use Agreement to be entered into among the State of
Mississippi, Panola Country, Mississippi, City of Batesville, Mississippi,
Industrial Development Authority of the Second Judicial District of Panola
County, Mississippi and Owner.
9. Facilities Agreement, dated June 23, 1998, between Owner and Tennessee Gas
Pipeline Company.
10. Interconnection Agreement, dated July 29, 1998, between Owner and ANR
Pipeline Company.
11. Inducement Agreement to be entered into among the Mississippi Department of
Economic and Community Development, the Mississippi Business Finance
Corporation, the Mississippi Major Impact Authority, Panola County, Mississippi,
the City of Batesville, Mississippi, the Panola Partnership, Inc., and the
Industrial Development Authority of the Second Judicial District of Panola
County, Mississippi.
12. Turnkey Engineering, Procurement and Construction Agreement dated as of July
22, 1998 between Owner and BVZ Power Partners - Batesville.
13. Common Agreement, dated August ___, 1998, among Owner, LSP Batesville
Funding Corporation, LSP Batesville Holding, LLC, Credit Suisse First Boston, as
Tranche A Facility Agent, IBJ Shroder Bank & Trust Company as the Tranche B
Facility Trustee, IBJ Shroder Bank & Trust Company, as the Tranche C Facility
Trustee, Credit Suisse First Boston as the L/C Facility Agent and IBJ Shroder
Bank & Trust Company as Administrative Agent, Collateral Agent, Intercreditor
Agent and Securities Intermediary
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Batesville O&M Agreemrent Page E-1
<PAGE>
Permit/Approval
1. CERTIFICATION OF EXEMPT WHOLESALE GENERATOR STATUS issued by the Federal
Energy Regulatory Commission to LSP Energy Limited Partnership
on April 28, 1998.
2. SELF-CERTIFICATION OF COAL OR ALTERNATE FUEL CAPABILITY filed before the
Department of LSP Energy Limited Partnership on March 19, 1998.
3. ACKNOWLEDGMENT OF NOTICE OF PROPOSED CONSTRUCTION AND ALTERATION issued by
the Federal Aviation Administration to LSP Energy Limited Partnership on
June 23, 1998 indicating that proposed construction would not be an
airspace obstruction or hazard.
4. NATIONWIDE PERMIT 7, 12, 14, 25, 26 and Authorization 144 under General
Permit 22 issued by the Army Corps of Engineers to LSP Energy Limited
Partnership on December 4, 1997.
5. APPROVAL TO CHARGE MARKET BASED RATES issued by Federal Energy Regulatory
Commission to LSP Energy Limited Partnership on May 14, 1998.
6. CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY issued by the Mississippi
Department of Environmental Quality to LSP Energy Limited
Partnership on November 25, 1997.
7. PERMIT TO WITHDRAW WATER FOR BENEFICIAL USE - FROM LAKE ENID issued by
Mississippi Department of Environmental Quality to LSP Energy Limited
Partnership on November 25, 1997.
8. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM WASTEWATER DISPOSAL AND
STORM WATER PERMIT AND SECTION 316(B) issued by Mississippi Department of
Environmental Quality to LSP Energy Limited Partnership on December 10,
1997, with requirements of Section 316(b) of the Clean Water Act met as of
February 16, 1998.
9. CONFIRMATION OF APPROPRIATE ZONING issued by City of Batesville to LSP
Energy Limited Partnership on April 24, 1997.
10. HIGHWAY CROSSING PERMIT for water pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited
Partnership on July 28, 1998.
11. HIGHWAY CROSSING PERMIT for wastewater pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited
Partnership on July 31, 1998.
12. ROAD CROSSING PERMITS FOR WATER PIPELINE CONSTRUCTION issued by Panola
County to LSP Energy Limited Partnership on July 14, 1998.
13. FLOODPLAIN DEVELOPMENT PERMIT for the water pipeline issued by Pete
Sullivan, Panola County Engineer, to LSP Energy Limited Partnership on
September 8, 1997.
14. FLOODPLAIN DEVELOPMENT PERMIT for the wastewater pipeline issued by Pete
Sullivan, Panola County Engineer, to LSP Energy Limited
Partnership on September 8, 1997.
15. NATIONWIDE PERMIT 12 for the construction of the gas pipeline issued by
the Army Corps of Engineers to ANR Pipeline Company on August 15, 1997 and
transferred to LSP Energy Limited
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Batesville O&M Agreemrent Page E-1
<PAGE>
Partnership on July 23, 1998.
16. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM GENERAL STORM WATER PERMIT
for the construction of the gas pipeline issued by Mississippi Department
of Environmental Quality to ANR Pipeline Company on August 20, 1997 and
transferred to LSP Energy Limited Partnership on July 30, 1998.
17. FLOODPLAIN DEVELOPMENT PERMIT for the gas pipeline issued by Pete
Sullivan, Panola County Engineer, to ANR Pipeline Company on July 21, 1997
and transferred to LSP Energy Limited Partnership on July 27, 1998.
18. HIGHWAY CROSSING PERMIT for gas pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited Partnership
on July 27, 1998 and August 13, 1998.
19. ROAD CROSSING PERMIT FOR GAS PIPELINE CONSTRUCTION issued by Panola County
to LSP Energy Limited Partnership on August 5, 1998.
20. AIR POLLUTION CONTROL/PREVENTION OF SIGNIFICANT DETERIORATION CONSTRUCTION
PERMIT issued by Mississippi Department of Environmental Quality to LSP
Energy Limited Partnership on November 25, 1997. The permit was modified
on July 14, 1998 and is subject to a 30-day appeal period commencing July
28, 1998.
21. AIR POLLUTION CONTROL OPERATION PERMIT issued by Mississippi Department of
Environmental Quality to LSP Energy Limited Partnership on November 25,
1997. The permit was modified on July 14, 1998 and is subject to a 30-day
appeal period commencing July 28, 1998.
22. OPERATING PERMIT pursuant to Title V of the Clean Air Act Amendments of
1990 to be obtained from Mississippi Department of Environmental Quality
by LSP Energy Limited Partnership.
23. ACID RAIN PERMIT to be obtained from Mississippi Department of
Environmental Quality by LSP Energy Limited Partnership. The application
was submitted on June 2, 1998.
24. SPILL PREVENTION CONTROL AND COUNTERMEASURE PLAN to be submitted to the
Environmental Protection Agency by LSP Energy Limited Partnership.
25. HAZARDOUS WASTE PREVENTION NUMBER to be obtained from the Environmental
Protection Agency by LSP Energy Limited Partnership if required.
26. SOLID WASTE NOTIFICATION FOR OPERATION to be obtained from Mississippi
Department of Environmental Quality by LSP Energy Limited Partnership.
27. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM GENERAL STORM WATER PERMIT
for the construction of the Project on the site and construction of
off-site infrastructure components to be obtained from Mississippi
Department of Environmental Quality by BVZ Power Partners-Batesville.
28. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST WATER
DISCHARGE PERMIT for the gas pipeline to be obtained from Mississippi
Department of Environmental Quality by LSP Energy Limited Partnership.
29. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST
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Batesville O&M Agreemrent Page E-1
<PAGE>
WATER DISCHARGE PERMIT for the water pipeline to be obtained from
Mississippi Department of Environmental Quality by LSP Energy Limited
Partnership.
30. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST WATER
DISCHARGE PERMIT for the wastewater pipeline to be obtained from
Mississippi Department of Environmental Quality by LSP Energy Limited
Partnership.
31. CERTIFICATE OF OCCUPANCY to be obtained from the City of Batesville by LSP
Energy Limited Partnership.
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Batesville O&M Agreemrent Page E-1
<PAGE>
Exhibit 10.13
Agreement Number: ELLSP-1-1
WATER SUPPLY STORAGE AGREEMENT
BETWEEN THE UNITED STATES OF AMERICA
AND
LSP ENERGY LIMITED PARTNERSHIP FOR
WATER STORAGE SPACE IN ENID LAKE
THIS Agreement, entered into this 8th day of June 1998, by and between
THE UNITED STATES OF AMERICA (hereinafter called the "Government") represented
by the District Engineer of the Vicksburg District of the United States Army
Corps of Engineers, or his/her successor or designee (hereinafter called the
"District Engineer") executing this agreement, and LSP Energy Limited
Partnership (hereinafter called the "User"):
WITNESSETH THAT:
WHEREAS, the Flood Control Act of 25 March 1928, as amended, authorized
the construction, operation, and maintenance of the Yazoo Basin, Enid Lake,
Yocona River, Mississippi (hereinafter called the "Project"); and
WHEREAS, the User desires to enter into an agreement with the Government
for the use of storage included in the Project for municipal and industrial
water supply, and for payment of the cost thereof in accordance with the
provisions of the water Supply Act of 1958, as amended (43 U.S.C. 390b-f); and
WHEREAS, the User is empowered to enter into an agreement with the
Government and is vested with all necessary powers of accomplishment of the
purposes of this agreement.
NOW, THEREFORE, the Government and the User agree as follows:
ARTICLE 1 - WATER STORAGE SPACE
a. Project Construction. The Government, subject to the directions of
Federal law and any limitations imposed thereby, shall modify the Project so as
to include therein space for the storage of water by the user.
b. Rights of User.
(1) The User shall have the right to utilize an undivided 7.8
percent (estimated to contain 4,500 acre-feet after adjustment for sediment
deposits) of the conservation storage space between elevations 205.0 and 230.0
feet, National
<PAGE>
Agreement Number: ELLSP-1-1
Geodetic Vertical Datum (NGVD), which usable storage space is estimated to
contain 57,600 acre-feet after adjustment for sediment deposits. This storage
space of 4,500 acre-feet is to be used to impound water for present demand or
need for municipal and industrial water supply.
(2) The User shall have the right to withdraw water from the lake
subject to the provisions of Article 1c and to the extent the aforesaid storage
space will provide; and shall have the right to construct all such works,
plants, pipelines, and appurtenances as may be necessary and convenient for the
purpose of diversion or withdrawals, subject to the approval of the District
Engineer as to design and location, said approval not be unreasonably withheld.
The grant of an easement for right-of-way, across, in and upon land of the
Government at the Project shall be by a separate instrument in a form
satisfactory to the Secretary of the Army, without additional cost to the User,
under the authority of and in accordance with the provisions of 10 U.S.C. 2669
and such other authorities as may be necessary. Subject to the conditions of
such easement, the User shall have the right to use so much of the Project land
as may reasonably be required in the exercise of the rights and privileges
granted under this agreement.
c. Rights Reserved. The Government reserves the right to control and use
all storage in the Project in accordance with authorized Project purposes. The
Government further reserves the right to take such measures as may be necessary
in the operation of the Project to preserve life and/or property, including the
right not to make downstream releases during such periods of time as are deemed
necessary, in its sole discretion, to inspect, maintain, or repair the Project.
d. Quality or Availability of Water. The User recognizes that this
agreement provides storage space for raw water only. The Government makes no
representations with respect to the quality or availability of water and assumes
no responsibility therefor, or for the treatment of the water.
e. Sedimentation Surveys.
(1) Sedimentation surveys will be made by the District Engineer
during the term of this agreement at intervals not to exceed fifteen (15) years
unless the District Engineer determines that such surveys are unnecessary. When,
in the opinion of the District Engineer, the findings of such survey
2
<PAGE>
Agreement Number: ELLSP-1-1
indicate any Project purpose will be affected by unanticipated sedimentation
distribution, there shall be an equitable redistribution of the sediment reserve
storage space among the purposes served by the Project including municipal and
industrial water supply. The total available remaining storage space in the
Project will then be divided among the various Project features in the same
ratio as was initially utilized. Adjusted pool elevations will be rounded to the
nearest one-half foot. Such findings and the storage space allocated to
municipal and industrial water supply shall be defined and described as an
exhibit which will be made a part of this agreement and the water control manual
will be modified accordingly.
(2) The Government assumes no responsibility for deviations from
estimated rates of sedimentation, or the distribution thereof. Such deviations
may cause unequal distribution of sediment reserve storage greater than
estimated, and/or encroachment on the total storage at the Project.
ARTICLE 2 - REGULATION OF AND RIGHT TO USE OF WATER
The regulation of the use of water withdrawn or released from the
aforesaid storage space shall be the sole responsibility of the User. The User
has the full responsibility to acquire in accordance with State laws and
regulations, and, if necessary, to establish or defend, any and all water rights
needed for utilization of the storage provided under this agreement. The
Government shall not be responsible for diversions by others, nor will it become
a party to any controversies involving the use of the storage space by the User
except as such controversies may affect the operations of the Project by the
Government.
ARTICLE 3 - OPERATION AND MAINTENANCE
The Government shall operate and maintain the Project and the User shall
pay to the Government a share of the costs of such operation and maintenance as
provided in Article 5. The User shall be responsible for operation and
maintenance of all installations and facilities which it my construct for the
diversion or withdrawal of water, and shall bear all costs of construction
operation and maintenance of such installations and facilities.
3
<PAGE>
Agreement Number: ELLSP-1-1
ARTICLE 4 - MEASUREMENT OF WITHDRAWALS AND RELEASES
The User agrees to furnish and install, without cost to the Government, suitable
meters or measuring devices satisfactory to the District Engineer for
measurement of water which is withdrawn from the Project. The User shall furnish
to the Government monthly statements of all such withdrawals. Prior to the
construction of any facilities for withdrawal of water from the Project, the
User will obtain the District Engineer's approval of the design, location and
installation of the facilities including the meters or measuring devices, said
approval not to be unreasonably withheld. Such devices shall be available for
inspection by Government representatives at all reasonable
ARTICLE 5 - PAYMENTS
In consideration of the right to utilize the aforesaid storage space in the
Project for municipal and industrial water supply purposes, the User shall pay
the following sums to the Government:
a. Project Investment Costs.
(1) The User shall repay to the Government, at the times and with
interest on the unpaid balance as hereinafter specified, the amounts stated
below which, as shown in Exhibit "B" attached to and made a part of this
agreement, constitute the entire actual amount of the costs allocated to the
water storage right acquired by the User under this agreement. The amount of
costs is based on updated cost of storage. The interest rate to be used for
purposes of computing interest on the unpaid balance will be the yield rate
adjusted at 5-year intervals as determined by the Secretary of the Treasury on
the basis set forth in Section 932 of the 1986 Water Resources Development Act.
For this agreement, the starting interest rate shall be that rate in effect at
the time the agreement is approved. The interest will be revised as specified in
Article 5a(4) and at 5-year intervals after first payment of storage cost.
(2) The cost allocated to the storage space indicated in Article
1b(1) is currently estimated at $1,111,898 on the basis of the costs presented
in Exhibit "B". These costs shall be repaid within the life of the Project and
not to exceed 30 years from the due date of the first annual payment. The
4
<PAGE>
Agreement Number: ELLSP-1-1
payments shall be in equal consecutive annual installments, the first of which
shall be due and payable within 24 months after the User is notified by the
District Engineer that the agreement has been approved or within 30 days after
the first use of storage, whichever occurs first. Annual installments thereafter
will be due and payable on the anniversary date of the date the first payment is
due. Except for the first annual payment which will be applied solely to the
retirement of principal, all installments shall include accrued interest on the
unpaid balance at the rate provided above. The last annual installment shall be
adjusted upward or downward when due to assure repayment of all of the
investment costs allocated to the storage within 30 years from the above date.
(3) An estimated schedule of annual payments for the reallocation
water supply costs is attached as Exhibit "C" of this agreement.
(4) Subsequent to approval of the Secretary of the Army or his duly
authorized representative, and prior to the first payment on the storage space
by the User, Exhibit "B" will be adjusted to reflect application of the
appropriate construction cost index, and fiscal year interest rate.
b. Repair, Rehabilitation, and Replacement Costs. The User will be
required to pay 0.682 percent of the cost of joint-use repair, rehabilitation,
or replacement of Project features. Payment of these costs shall be made either
incrementally during construction or in lump sum (including interest during
construction) upon completion of construction.
c. Annual Operation and Maintenance (O&M Expense). The User will be
required to pay 0.682 percent of the annual experienced joint-use O&M expense of
the Project. Payments for O&M expense are due and payable in advance on the date
for payment of Project investment costs as set forth in Article 5a(2) and shall
be based on O&M expense for the Project in the Government fiscal year most
recently ended. The amount of each annual payment will be the actual experienced
O&M expense (allocated joint-use) for the preceding fiscal year or an estimate
thereof when actual expense information is not available.
d. Prepayment. The User shall have the right at any time to prepay the
indebtedness under this Article in whole or in
5
<PAGE>
Agreement Number: ELLSP-1-1
part, with accrued interest thereon to the date of such prepayment.
e. Delinquent Payments. If the User shall fail to make any of the aforesaid
payments when due, then the overdue payments shall bear interest compounded
annually until paid. The interest rate to be used for overdue payments due under
the provisions of Articles 5a, 5b, and 5c above shall be that determined by the
Department of the Treasury's Treasury Fiscal Requirements Manual (1 TFRM 6-8000,
"Cash Management"). The amount charged on payments overdue for a period of less
than one year shall be figured on a monthly basis. For example, if the payment
is made within the first month after being overdue after a 15-day grace period
from the anniversary date of the date of notification, one month's interest
shall be charged. Thereafter a month's interest will be charged for any portion
of each succeeding month that the payment is delinquent. This provision shall
not be construed as giving the User a choice of either making payments when due
or paying interest, nor shall it be construed as waiving any other rights of the
Government, at law or in equity, which might result from any default by the
User.
ARTICLE 6 - PROTECTIVE COVENANT AND TERMINATION
a. Prior to use of the water storage space the User must complete design
and construction of its water intake Structure. Pending completion of design and
construction, the Government shall reserve for the User 4,500 acre-feet of
storage for municipal and industrial water supply purposes for a period of up to
24 months. For this privilege, the User shall pay the Government $1.00 per
acre-foot per year or $4,500 per year. The payment shall be due and payable
within 30 days after the User is notified by the District Engineer that the
agreement has been approved. This payment will preclude the requirement for any
other payments prior to first use or the end of the 24-month period. All
operation, maintenance, and replacement costs incurred subsequent to first use
or the expiration of the 24-month period must be shared by the User. Should the
User be unable to complete design and construction of its water intake structure
it may notify the District Engineer of said failure and the agreement shall be
considered terminated at that time. Should the User not terminate the agreement
within the 24-month period, payments for project costs shall be as set forth in
Article 5.
6
<PAGE>
Agreement Number: ELLSP-1-1
b. In the event of any termination pursuant to this Article, the User
shall, upon request of the District Engineer, promptly remove at User's own
expense, any facilities constructed on project land for water withdrawal and
restore premises around the removed facilities to a condition satisfactory to
the District Engineer.
ARTICLE 7 - DURATION OF AGREEMENT
This agreement shall become effective when approved by the Secretary of
the Amy or his duly authorized representative and shall continue in full force
and effect for the life of the Project.
ARTICLE 8 - PERMANENT RIGHTS TO STORAGE
Upon completion of payments by the User, as provided in Article 5a herein,
the User shall have a permanent right, under the provisions of the Act of 16
October 1963 (Public Law 88-140, 43 U.S.C. 390e), to the use of the water
supply storage space in the Project as provided in Article 1, subject to the
following:
a. The User shall continue payment of annual operation. and maintenance
costs allocated to water supply in accordance with Article 5c.
b. The User shall bear the costs allocated to water supply of any
necessary repair, rehabilitation, or replacement of Project features which may
be required to continue satisfactory operation of the Project in accordance with
authorized Project purposes. Such costs will be established by the District
Engineer and repayment arrangements shall be in writing in accordance with the
terms and conditions set forth in Article 5b for repair, rehabilitation, or
replacement costs and be made a part of this agreement.
c. Upon completion of payments by the User as provided in Article 5a, the
District Engineer shall redetermine the storage space for municipal and
industrial water supply in accordance with the provisions of Article 1e. Such
redetermination of reservoir storage capacity my be further adjusted from, time
to time as the result of sedimentation resurveys to reflect actual rates of
sedimentation and the exhibit revised to show the revised storage space
allocated to municipal and industrial water supply.
7
<PAGE>
Agreement Number: ELLSP-1-1
d. The permanent rights of the User under this agreement shall be
continued so long as the Government continues to operate the Project. In the
event the Government no longer operates the Project, such rights may be
continued subject to the execution of a separate agreement, or additional
supplemental agreement providing for:
(1) Continued operation by the User of such part of the facility as
is necessary for utilization of the water supply storage space allocated to it;
(2) Terms which will protect the public interest; and.
(3) Effective absolvement of the Government by the User from all
liability in connection with such continued operation.
ARTICLE 9 - RELEASE OF CLAIMS
The User shall hold and save the Government, including its officers, agents, and
employees harmless from liability of any nature or kind for or on account of any
claim for damages which may be filed or asserted as a result of the storage in
the Project, or withdrawal or release of water from the Project, made or ordered
by the User or as a result of the construction, operation, or maintenance of the
water supply facilities and appurtenances thereto owned and operated by the User
except for damages due to the fault or negligence of the Government or its
contractors.
ARTICLE 10 - ASSIGNMENT
The User shall not transfer or assign this agreement nor any rights acquired
thereunder, nor suballot said water supply storage space or any part thereof,
nor grant any interest, privilege, or license whatsoever in connection with this
agreement, without the approval of the Secretary of the Army or his duly
authorized representative, provided that, unless contrary the public interest,
this restriction shall not be construed to apply to any water that may be
obtained from the water supply storage space by the User and furnished to any
third party or parties, nor any method of allocation thereof.
8
<PAGE>
Agreement Number: ELLSP-1-1
ARTICLE 11 - OFFICIALS NOT TO BENEFIT
No member of or delegate to Congress, or Resident Commissioner, shall be
admitted to any share or part of this agreement or to any benefit that may arise
therefrom; but this provision shall not be construed to extend to this agreement
if made with a corporation for its general benefit.
ARTICLE 12 - COVENANT AGAINST CONTINGENT FEES
The User warrants that no person or selling agency has been employed or
retained to solicit or secure this agreement upon an agreement or understanding
for a commission, percentage, brokerage, or contingent fee, excepting bona fide
employees or bona fide established commercial or selling agencies maintained by
the User for the purpose of securing business. For breach or violation of this
warranty the Government shall have the right to annul this agreement without
liability or in its discretion to add to the price or consideration, or
otherwise recover the full amount of such commission, percentage, brokerage, or
contingent fee.
ARTICLE 13 - ENVIRONMENTAL QUALITY
During any construction, operation, and maintenance by User of any facilities,
specific actions will be taken to control environmental pollution which could
result from such activity and to comply with applicable Federal, State, and
local laws and regulations concerning environmental pollution.
Particular attention should be given to:
a. Reduction of air pollution by control of burning, minimization of dust,
containment of chemical vapors, and control of engine exhaust gases, and of
smoke from temporary heaters;
b. Reduction of water pollution by control of sanitary facilities, storage
of fuels and other contaminants, and control of turbidity and siltation from
erosion;
c. Minimization of noise levels;
d. Onsite and off-site disposal of waste and spoil; and
e. Prevention of landscape defacement and damage.
9
<PAGE>
Agreement Number: ELLSP-1-1
ARTICLE 14 - FEDERAL AND STATE LAWS
a. In acting under its rights and obligations hereunder the User agrees to
comply with all applicable Federal and State laws and regulations, including but
not limited to the provisions of the Davis-Bacon Act (40 U.S.C. 276a et seq.);
the Agreement Work Hours and Safety Standards Act (40 U.S.C. 327-333); Title 29,
Code of Federal Regulations, Part 3; and Sections 210 and 305 of the Uniform
Relocation Assistance and Real Property Acquisition Policies Act of 1970 (PL
91-646).
b. The User furnishes, as part of this agreement, and assurance (Exhibit
"D") that it will comply with Title VI of the Civil Rights Act of 1964 (78 Stat.
241, 42 U.S.C. 2000d, et seq.) and Department of Defense Directive 5500.11
issued pursuant thereto and published in Part 300 of Title 32, Code of Federal
Regulations.
c. Any discharges of water into a navigable stream or tributary thereof
resulting from. the User's facilities and operations undertaken under this
agreement shall be performed only in accordance with applicable Federal, State,
and local laws and regulations.
d. The User furnishes, as part of this agreement, a certification (Exhibit
"E" and a Disclosure of Lobbying Activities) that it will comply with Table 31,
U.S.C., Section 1352 of the Limitation on use of appropriated funds to influence
certain Federal contracting and financial transactions (Public Law 101-121
October 23, 1989) and Federal Acquisition Regulation 52.203-12 issued pursuant
thereto.
ARTICLE 15
DEFINITIONS
a. Annual operation and maintenance (O&M) expenses. Annual expenses funded
under the O&M, General account. These expenses include the daily project O&M
costs as well as those O&M costs which are not capitalized.
b. District Engineer. The District Engineer of the Vicksburg
District of the United States Army Corps of Engineers, or his/her successor
or designee.
10
<PAGE>
Agreement Number: ELLSP-1-1
c. Fiscal Year. Refers to the Government's fiscal year. This year begins
on 1 October and ends on 30 September. The September calendar year corresponds
to the fiscal year.
d. Joint-use cost. The cost of features used for any two or more Project
purposes.
e. Life of the project. This is the physical life of the Project.
f. Project investment costs. The initial cost of the Project, including
land acquisition; construction; interest during construction on the value of
land, labor, and materials used for planning and construction of the Project.
g. Repair, rehabilitation, and replacement. Costs funded in part under the
operation and Maintenance, General, or Construction, General accounts but not
associated with initial Project investment costs. Such expenditures are for
costly, infrequent work and are intended to ensure continued satisfactory
operation of the Project.
ARTICLE 16 - APPROVAL OF AGREEMENT
This agreement shall be subject to the written approval of the Secretary
of the Army or his duly authorized representative and shall not be binding until
so approved.
11
<PAGE>
Agreement Number: ELLSP-1-1
IN WITNESS WHEREOF, the parties have executive this agreement as of the
day and year first above written.
APPROVED: THE UNITED STATES OF AMERICA
/s/ Dr. John H. Zirschky By /s/ Robert Crear
- ----------------------------- -----------------------------------
Dr. John H. Zirschky Robert Crear
Acting Assistant Secretary Colonel, Corps of Engineers
of the Army for Civil Works District Engineer
Date: June 8, 1998 LSP Energy Limited Partnship
------------ By LSP Energy, Inc.,
General Partner
--------------------------------
--------------------------------
By /s/ Clarence J. Heller
--------------------------------
Executive Vice President
12
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT A
CERTIFICATION
I, Frank E. Hardenbergh, Attorney for LSP Energy Limited Partnership,
have reviewed the foregoing agreement executed by the Executive Vice President
and as principal legal officer of/for LSP Energy Limited Partnership, certify
that the company is legally capable of entering into the contractual
obligations contained in the foregoing agreement and that, upon acceptance, it
will be legally enforceable.
Given under my hand, this 14th day of May 1998.
/s/ Frank E. Hardenbergh
-------------------------------------------
Attorney for LSP Energy Limited Partnership
A-1
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT B
- --------------------------------------------------------------------------------
I-LAKE STORAGE
- --------------------------------------------------------------------------------
Percent of
----------------------------------
Usable Water
Elevation Storage Usable Conservation Supply
Feature (ft, NGVD) (ac-ft) Storage Storage Storage
- --------------------------------------------------------------------------------
Flood Control 230.0 - 268.0 602,400 91.273
- --------------------------------------------------------------------------------
Conservation Storage 205.0 - 230.0 57,600 100.00
- --------------------------------------------------------------------------------
Water Supply (4,500) 0.682 7.8 100.00
- --------------------------------------------------------------------------------
conservation (53,100) 8.045 92.2
- --------------------------------------------------------------------------------
Total 660,000 100.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II - INVESTMENT COSTS TO BE REPAID BY USER
FOR WATER SUPPLY STORAGE
IN ENID LAKE
- --------------------------------------------------------------------------------
Cost of 4,500 acre-feet of water supply storage:
4,500/660,000 = 0,00682 x 163,034,904 = $1,111,898
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
III - ANNUAL COSTS TO USER FOR USE OF
STORAGE SPACE IN ENID LAKE
- --------------------------------------------------------------------------------
Interest & Amortization
$1,111,898 x 0.07360 factor based on 30
payments, 29 with interest @ 6.75% $81,800
- --------------------------------------------------------------------------------
Operation and Maintenance a/
Joint-Use (0.00682 x S3,020,947) $20,600
- --------------------------------------------------------------------------------
Major Replacement b/
- --------------------------------------------------------------------------------
Total Estimated Annual Costs $102,400
- --------------------------------------------------------------------------------
a/ The first payment shall be due and payable on the date specified in
Article 5a(2).
b/ Major replacement costs are payable only when incurred as specified in
Article 5b(2).
B-1
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT C REPAYMENT SCHEDULE
(ANNUAL)
- --------------------------------------------------------------------------------
TOTAL COST $1,111,898
INTEREST RATE PERCENT 6.75
NUMBER OF PAYMENTS 30
ANNUAL PAYMENT [cannot read]
- --------------------------------------------------------------------------------
PAYMENT TO PAYMENT TO
YEAR INTEREST PRINCIPAL TOTAL PAYMENT BALANCE DUE
- --------------------------------------------------------------------------------
($) ($) ($) ($)
1,111,898
1 0 81,800 81,800 1,030,088
2 69,532 12,268 81,800 1,017,830
3 68,703 13,097 81,800 1,004,733
4 67,819 13,981 81,800 990,753
5 66,876 14,924 81,800 975,828
6 65,868 15,932 81,800 959,897
7 64,793 17,007 81,800 942,882
8 63,645 18,155 81,800 924,735
9 62,420 19,380 81,800 905,355
10 61,111 20,689 81,800 884,666
11 59,715 22,085 81,800 862,581
12 58,224 23,576 81,800 839,005
13 56,633 25,167 81,800 813,836
14 54,934 26,866 81,800 786,972
15 53,121 28,679 81,800 758,293
16 51,185 30,615 81,800 727,677
17 49,118 32,682 81,800 694,996
18 46,912 34,888 81,800 660,108
19 44,557 37,243 81,800 622,865
20 42,043 39,757 81,800 583,208
21 39,360 42,440 81,800 540,668
22 36,495 45,305 81,800 495,363
23 33,437 48,363 81,800 447,000
24 30,173 51,627 81,800 395,373
25 26,688 55,112 81,800 340,261
26 22,968 58,832 81,800 281,428
27 18,996 62,804 81,800 218,625
28 14,757 67,043 81,800 151,582
29 10,232 71,568 81,800 80,014
30 5,401 80,014 85,415 0
- --------------------------------------------------------------------------------
C-1
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT D
ASSURANCE OF COMPLIANCE WITH THE DEPARTMENT OF DEFENSE DIRECTIVE UNDER TITLE
VI OF THE CIVIL RIGHTS ACT OF 1964
LSP ENERGY LIMITED PARTNERSHIP
HEREBY AGREES THAT it will comply with Title VI of the Civil Rights Act of 1964
(Public Law 88-352) and all requirements imposed by or pursuant to the Directive
of the Department of Defense (32 Code of Federal Regulations Part 300, issued as
Department of Defense Directive 5500. 11, 28 December 1964) issued pursuant to
that title, to the end that in accordance with Title VI of that Act and the
Directive, no person in the United States shall, on the ground of race, color,
or national origin be excluded from participation in, be denied the benefits of,
or be otherwise subjected to discrimination under any program or activity for
which the Applicant-Recipient receives Federal financial assistance from
Department of the Army and HEREBY GIVES ASSURANCE THAT it will immediately take
any measures necessary to effectuate this agreement
If any real property or structure thereon is provided or improved with the aid
of Federal financial assistance extended to the Applicant-Recipient by the
Department of the Army, assurance shall obligate the Applicant-Recipient, or in
the case of any transfer of such property, any transferee, for the period during
which the real property or structure is used for a purpose for which the
Federal financial assistance is extended or for another purpose involving the
provision of similar services or benefits. If any personal property is so
provided this assurance shall obligate the Applicant-Recipient for the period
during which it retains ownership or possession of the property. In all other
cases this assurance shall obligate the Applicant-Recipient for the period
during which the Federal financial assistance is extended to it by Department of
the Army.
THIS ASSURANCE is given in consideration of and for the purpose of obtaining any
and all Federal grants, loans, contracts, property, discounts or other Federal
financial assistance extended after the date hereof to the Applicant-Recipient
by the Department, including installment payments after such date on account of
arrangements for Federal financial assistance which were approved before such
date. The Applicant-Recipient recognizes and agrees that such Federal financial
assistance will be extended in reliance on the representations and agreements
made in this assurance, and that the United States shall have the right to, seek
judicial enforcement of this assurance.
D-1
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT D (Cont)
This assurance is binding on the Applicant-Recipient, its successors,
transferees, and assignees, and the person or persons whose signatures appear
below are authorized to sign this assurance on behalf of the
Applicant-Recipient.
Sections IV and VII of Department of Defense Directive 5500.11 setting forth
prohibited discriminatory actions and compliance information is on the reverse
hereof.
Dated 14 May 1998 LSP Energy Limited Partnership
----------------- ---------------------------------------------------
(Applicant-Recipient)
By /s/ Clarence J. Heller, Executive Vice President
- ---------------------- ---------------------------------------------------
LSP Energy, Inc., General Partner
D-2
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT D (Cont)
SECTIONS IV AND VII DEPARTMENT OF DEFENSE DIRECTIVE 5500.11
IV. Policy.
A. General. No person in the United States shall on the ground of race,
color, or national origin be excluded from participation in be denied the
benefits of, or be otherwise subjected to discrimination under any program to
which this Directive applies.
B. Specific Discriminatory Actions Prohibited.
1. A recipient under any program to which this Directive applies may not,
directly or through contractual or other arrangements, on the ground of race,
color, or national origin.
a. Deny an individual any service, financial aid, or other benefit
provided under the program;
b. Provide any service, financial aid, or other benefit to an individual
which is different or is provided in a different manner, from that provided to
others under the program;
c. Subject an individual to segregation or separate treatment in any
matter related to his receipt of any service, financial aid, or other benefit
under the program;
d. Restrict an individual in any way in the enjoyment of any advantage or
privilege enjoyed by other receiving any service, financial aid, or other
benefit under the program;
e. Treat an individual differently from others in determining whether he
satisfies any admission, enrollment, quota, eligibility, membership or other
requirement or condition which individuals must meet in order to be provided any
service, financial aid, or other benefit provided under the program;
f. Deny an individual an opportunity to participate in the program through
the provision of services or otherwise or afford him an opportunity to do so
which is different from that afforded others under the program.
2. A recipient, in determining the types of services, financial aid, or
other benefits, or facilities which will be provided under any such program or
the class of individuals to whom, or the situations in which, such services,
financial aid, other benefits, or facilities will be provided under any such
program, or the class of individuals to be afforded the opportunity to
participate in any such program, may not, directly or through contractual or
other arrangements, utilize criteria or methods of administration which have the
effect of subjecting individuals to discrimination because of their race, color,
or nation origin, or have the effect of defeating or substantially impairing
accomplishment of the objectives of the program as respect individuals of a
particular race, color, or national origin.
3. As used in this Section the services, financial aid, or other benefits
provided under a program receiving Federal
D-3
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT D (Cont)
financial assistance shall be deemed to include any service, financial aid, or
other benefit provided in or through a facility provided with the aid of Federal
financial assistance.
4. The enumeration of specific forms of prohibited discrimination in this
Subsection does not limit the generality of the prohibition in Subsection I.A.
of this Section.
VII. Compliance Information.
A. Cooperation and Assistance. Each responsibility Department official
shall to the fullest extent practicable see, the cooperation of recipients in
obtaining compliance with this Directive and shall provide assistance and
guidance to recipients to help them comply voluntarily with this Directive.
B. Compliance Reports. Each recipient shall keep such records and submit
to the responsible Department official timely complete and accurate compliance
reports at such times, and in such form and containing such information, as the
responsible Department official may determine to be necessary to enable him to
ascertain whether the recipient has complied or is complying with this
Directive. In the case of any program under which a primary recipient extends
Federal assistance to any other recipient such other recipient shall also submit
compliance reports to the primary recipient as may be necessary to enable The
primary recipient to carry out its obligations imposed pursuant to this
Directive.
C. Access to Sources of Information. Each recipient shall permit access by
the responsible Department official during normal business hours to such of its
books, records, accounts, and other sources of information, and its facilities
as may be pertinent to ascertain compliance with this Directive. Where any
information required of a recipient is in the exclusive possession of any other
institution or person and this institution or person shall fail or refuse to
furnish this information, the recipient shall so certify in its report and shall
set forth what effects it has made to obtain the information.
D. Information to Beneficiaries and Participants. Each recipient shall
make available to participants, beneficiaries, and other interested persons such
information regarding the provisions of this Directive and its applicability to
the program under which the recipient receives Federal financial assistance, and
make such information available to them in such manner, as the responsible
Department official finds necessary to apprise such persons of the protections
against discrimination assured them by the Act and this Directive.
D-4
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT E
CERTIFICATION REGARDING LOBBYING
ENID LAKE WATER SUPPLY STORAGE
1. The undersigned certifies, to the best of their knowledge and belief, that:
a. No Federal appropriated funds have been paid or will be paid, by or on
behalf of the undersigned, to any person for influencing or attempting to
influence an officer or employee of any agency, a member of Congress, an officer
or employee of Congress, or any employee of a member of Congress in connection
with the awarding of any Federal agreement, the making of any Federal grant, the
making of any Federal loan, the entering into of any cooperative agreement, and
the extension, continuation, renewal, amendment or modification of any Federal
agreement, grant, loan, or cooperative agreement.
b. If any funds other than Federal appropriated funds have been paid or
will be paid to any person for influencing or attempting to influence an officer
or employee of any agency, Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with the water
storage agreement for LSP Energy Limited Partnership, the undersigned shall
complete and submit Standard Form-LLL, "Disclosure of Lobbying Activities", in
accordance with its instructions.
c. The undersigned shall require that the language of this certification
be included in the award documents for all subawards at all tiers (including
subagreements, subgrants, and agreements under grants, loans and cooperative
agreements) and that all subrecipients shall certify and disclose accordingly.
E-1
<PAGE>
Agreement Number: ELLSP-1-1
EXHIBIT E (Cont)
2. This certification is a material representation of fact upon which reliance
was placed when this transaction was made or entered into. Submission of this
certification is a prerequisite for making or entering into this transaction
imposed by Section 1352, Title 31 U.S. Code. Any person who fails to file the
required certification shall be subject to a civil penalty of not less than
$10,000 and not more than $100,000 for each such failure.
LSP Energy Limited Partnership
By LSP Energy, Inc., General Partner
/s/ Clarence J. Heller
--------------------------------------------
Clarence J. Heller, Executive Vice President
--------------------------------------------
E-2
<PAGE>
AMENDMENT NO. I
AMENDMENT TO THE WATER SUPPLY STORAGE AGREEMENT
BETWEEN THE UNITED STATES OF AMERICA AND
LSP ENERGY LIMITED PARTNERSHIP
FOR WATER STORAGE SPACE IN ENID LAKE
WITNESSETH THAT:
WHEREAS, LSP Energy Limited Partnership (hereinafter called the
"User") entered into Agreement No. ELLSP- 1 - 1 with the United States of
America (hereinafter called the "Government") on June 8, 1998, for water supply
space in Enid Lake (hereinafter called "the Agreement"); and,
WHEREAS, the United States of America is acting through the District
Engineer of the Vicksburg District of the United States Army Corps of Engineers;
and,
WHEREAS, water withdrawn from Enid Lake by the User pursuant to the
Agreement will be used in the User's electric generating facility located in
Batesville, Mississippi (hereinafter called the "Facility"); and,
WHEREAS, the User, certain lenders (hereinafter called the
"Lenders") and Credit Suisse First Boston, as agent acting on behalf of the
Lenders (the "Agent") have entered into certain financing and security
agreements and documents related thereto pursuant to which the Lenders have
provided to the User construction and permanent financing of the Facility; and
WHEREAS, as a condition to the Lenders' advance of funds under the
financing documents, the Lenders request a modification to the Agreement.
NOW, THEREFORE, in consideration for the foregoing, the Government
and the User do hereby agree to amend Article 10 of the Agreement as follows:
1. The existing Article 10 is hereby amended by adding the character "(a)" in
front of the first sentence of Article 10.
2. Article 10 is hereby amended by adding the following clauses:
(b) Water withdrawn from Enid Lake by the User pursuant to the
Agreement will be used in the User's electric generating facility
located in Batesville, Mississippi (hereinafter called the
"Facility"). The User, certain lenders (hereinafter called the
"Lenders") and Credit Suisse First Boston, as agent acting on
behalf of the Lenders (the "Agent") have entered into certain
financing and security agreements and documents related thereto
pursuant to which the Lenders have provided to the User
construction and permanent financing of the Facility. The
Government will not, without prior written notice to the Agent
cancel or terminate this Agreement, on account of any default or
breach of the User thereunder. The Agent will be provided (i)
thirty (30) days from the date notice of default or breach is
delivered to the Agent to cure such default if such default is
the failure to pay amounts to
<PAGE>
the Government which are due and payable by the User under this
Agreement or (ii) a reasonable opportunity, but not fewer than
thirty (30) days, to cure such breach or default if the breach or
default cannot be cured by the payment of money to the Government so
long as the Agent or its designee shall have commenced to cure the
breach or default within such period and thereafter diligently
pursues such cure to completion and continues to perform any
monetary obligations under this Agreement and all other obligations
under this Agreement are performed by the User or the Agent;
provided, that such period shall not exceed ninety (90) days.
(c) Should the Lenders foreclose on any agreements between the
Lenders and the User, or otherwise succeed to the rights, title
and interest of the User in and to the Facility, then within a
reasonable time period after such foreclosure or other succession
to the rights, title and interest of the User in and to the
Facility, the Agent or its successors or assigns shall so
request, the Government will negotiate with the Agent a new
Agreement, which Agreement shall be on substantially the same
terms and conditions as this Agreement.
(d) Except as expressly provided in this Article, nothing contained
herein shall be construed as modifying the obligations of the User
to the Government under this Agreement or a waiver of any rights of
the Government against the User pursuant to this Agreement.
(e) The Government and the User hereby agree that the Lenders and the
Agent are intended third party beneficiaries of this Agreement and
this Article.
3. This amendment may be executed by one or more parties to this amendment on
any number of separate counterparts (including by facsimile transmission),
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument.
4. Except as provided in this amendment, all of the terms and provisions of
the Agreement are and shall remain in full force and effect.
5. Any references to the "Agreement" shall include the Agreement as amended
by this amendment.
6. Nothing contained herein affects or diminishes the Government's statutory
and/or sovereign powers with respect to the operation and/or maintenance
of Enid Lake.
2
<PAGE>
AMENDMENT NO. I
This Amendment shall become effective upon the execution of said
agreement by the Secretary of the Army or his duly authorized representative.
DATED: 1/29/99 LSP ENERGY LIMITED PARTNERSHIP
-------
By: LSP Energy, Inc., its managing
general partner
By: /s/ Mikhail Segal
------------------------------
Name: Mikhail Segal
Title:President
SECRETARY OF THE ARMY OR HIS DULY
DATED: 15th March 1999 AUTHORIZED REPRESENTATIVE
-------------------
By: /s/ Joseph W. Westphal
------------------------------
Name: Joseph W. Westphal
Title: Assistant Secretary of the
Army
ACCEPTED AND ACKNOWLEDGED BY:
CREDIT SUISSE FIRST BOSTON, as agent
for the Lenders
By: /s/ James Bartlett
------------------------------
Name: James Bartlett
Title: Director
By: /s/ Louis D. Iaconetti
------------------------------
Name: Louis D. Iaconetti
Title: Vice President
<PAGE>
AMENDMENT NO. I
This Amendment shall become effective upon the execution of said
agreement by the Secretary of the Army or his duly authorized representative.
DATED: __________________ LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc., its managing
general partner
By:
------------------------------
Name: Mikhail Segal
Title:President
SECRETARY OF THE ARMY OR HIS DULY
DATED: __________________ AUTHORIZED REPRESENTATIVE
By:
------------------------------
Name:
Title:
ACCEPTED AND ACKNOWLEDGED BY:
CREDIT SUISSE FIRST BOSTON, as agent
for the Lenders
By: /s/ James Bartlett
------------------------------
Name: James Bartlett
Title: Director
By: /s/ Louis D. Iaconetti
------------------------------
Name: Louis D. Iaconetti
Title: Vice President
<PAGE>
Exhibit 10.14
LSP Energy Limited Partnership
Attn: Mikhail Segal
July 20, 1998
Re: Batesville Project
Dear Mr. Segal:
The purpose of this Letter of Agreement/Blanket Purchase Order is to establish
the commitments between LSP Energy Limited Partnership, a Delaware limited
partnership ("Purchaser"), and Westinghouse Power Generation, a Division of CBS
Corporation, a Pennsylvania Corporation ("Westinghouse") for the blanket order
to purchase by Purchaser and sale by Westinghouse of combustion turbine parts
for the Batesville project as specified below (Blanket Purchase Order).
SCOPE OF SUPPLY AND DELIVERY SCHEDULE
Initial Combustion Turbine Parts
Purchaser shall purchase from Westinghouse, via a derivative purchase order
under this Letter Agreement/Blanket Purchase Order ("Derivative Purchase
Order"), the initial combustion turbine parts listed in Table 1 below ("Initial
Combustion Turbine Parts"). Such Derivative Purchase Order for the Initial
Combustion Turbine Parts shall be issued by Purchaser to Westinghouse in a time
frame which is consistent with Westinghouse's standard lead times as shown in
Table 2 (not to exceed 12 months) so as to allow Westinghouse time to deliver
the Initial Combustion Turbine Parts prior to the commercial operation date of
the Batesville project without expediting, but no later than December 31, 1999.
Table 1
-----------------------------
INITIAL COMBUSTION QTY
TURBINE PARTS SETS*
-----------------------------
Baskets 1
-----------------------------
Nozzles 1
-----------------------------
Transitions 1
-----------------------------
Transition Seals 1
-----------------------------
- ----------
* Represents set quantities.
- --------------------------------------------------------------------------------
Westinghouse Proprietary Information
<PAGE>
Follow-On Combustion Turbine Parts
During the first 48,000 equivalent base load operating hours ("EBHs") of each
combustion turbine ("FBHs" is defined in Westinghouse Service Bulletin 36803)
or eight years from commercial operation of each combustion turbine whichever
comes first (the "Term"), Purchaser shall purchase from Westinghouse, via a
Derivative Purchase Order, all combustion turbine spare parts required of the
type listed in Table 2, including those required for each combustion turbine
first four combustor inspections, the first hot path inspection, and first
major overhaul inspection "Follow-On Combustion Turbine Parts" (Each Derivative
Purchase Order shall specify the number and type Follow-On Combustion Turbine
Parts being ordered.). Purchaser may, at its option, extend this agreement until
96,000 EBHs of each combustion turbine or fourteen years from commercial
operation of each combustion turbine whichever comes first, if requested in
writing prior to December 31, 1998. Follow-On Combustion Turbine Parts set or
sets shall be delivered by Westinghouse within Westinghouse's standard lead
times as shown in Table 2 (not to exceed 12 months) after Westinghouse receives
the Derivative Purchase Order. In the event of unplanned maintenance, where
Purchaser requires Westinghouse to deliver Follow-On Combustion Turbine Parts
earlier than Westinghouse's standard lead times, Westinghouse will attempt to
expedite such Follow-On Combustion Turbine Parts. Prior to any expediting.
Purchaser and Westinghouse will attempt to agree to any additional charges to be
paid by Purchaser for such expediting. If Westinghouse is unable to deliver any
such Follow-On Combustion Turbine Parts in a reasonable time or if the parties
are not able to agree to such additional charges for expediting, Purchaser may
purchase such Follow-On Combustion Turbine Parts from other sources if delivery
from other sources is substantially earlier for said Follow-On Combustion
Turbine Parts.
Table 2
----------------------------------------------
FOLLOW-ON COMBUSTION PRICE Standard
TURBINE PARTS PER SET leadtime in
man-weeks
----------------------------------------------
Baskets $488,130 16
----------------------------------------------
Nozzles $811,440 18
----------------------------------------------
Transitions $1,152,000 26
----------------------------------------------
Transition Seals $73,500 18
----------------------------------------------
Row 1 Vane $1,158,305 52
----------------------------------------------
Row 1 Blade $1,152,720 52
----------------------------------------------
Row 2 Vane $1,107,745 52
----------------------------------------------
Row 2 Blade $799,720 52
----------------------------------------------
Row 3 Vane $694,050 32
----------------------------------------------
Row 3 Blade $1,168,610 32
----------------------------------------------
Row 4 Vane $876,560 32
----------------------------------------------
Row 4 Blade $859,200 32
----------------------------------------------
Row 1 Ring Segments $145,000 30
----------------------------------------------
Row 2 Ring Segments $145,000 30
----------------------------------------------
Row 3 Ring Segments $128,000 30
----------------------------------------------
Row 4 Ring Segments $128,000 30
----------------------------------------------
Compressor Diaphragms $2,404,710 52
----------------------------------------------
Compressor Blades $1,670,025 26
----------------------------------------------
Note: All prices listed in table are in 7/1/98 US$.
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Westinghouse Proprietary Information
<PAGE>
PRICING & PAYMENT TERMS
Initial Combustion Turbine Parts
In consideration of the Initial Combustion Turbine Parts provided by
Westinghouse, Purchaser will pay to Westinghouse the price of $2,020,056 (in
July 1, 1998 US$), as adjusted either up or down by the BLS (60% PPI3511-1 for
materials; 40% SIC3511 for labor) at the time of each invoice, provided, however
such price shall not be adjusted downward below $2,020,056.
Westinghouse shall submit an initial invoice in the amount of 35% of the price
for the Initial Combustion Turbine Parts upon receipt of Purchaser's Derivative
Purchase Order for the Initial Combustion Turbine Parts and Purchaser shall pay
such invoice within thirty days of such submission. Upon shipment, Westinghouse
shall submit an invoice in the amount of any unpaid balance of the price for the
supply of the Initial Combustion Turbine Parts and Purchaser shall pay such
invoice within thirty days of such submission or at the time Purchaser has
received, inspected and accepted the Initial Combustion Turbine Parts from the
transportation carrier, whichever comes later.
Follow-On Combustion Turbine Parts
In consideration of the Follow-On Combustion Turbine Parts provided by
Westinghouse, Purchaser will pay to Westinghouse 80% of the list price for the
particular Follow-On Combustion Turbine Parts set or sets desired, as specified
in the above table, as adjusted either up or down by the BLS (60% PPI3511-1 for
materials; 40% SIC3511 for labor) at the time of each invoice, provided, however
such prices shall not be adjusted downward below 80% of the prices specified in
the above table. If market prices of Westinghouse's Follow-On Combustion Turbine
Parts significantly change downward, Purchaser may elect to re-negotiate this
Letter Agreement/Blanket Purchase Order in good faith with Westinghouse to
reflect Westinghouse's new market prices.
Upon receipt by Westinghouse of the Derivative Purchase Order from Purchaser
stating Purchaser's desire to receive delivery of a particular set or sets of
Follow-On Combustion Turbine Parts, Westinghouse shall submit an initial invoice
in the amount of 35% of the price for the particular set or sets of Follow-On
Combustion Turbine Parts and Purchaser shall pay such invoice within thirty days
of such submission. Upon shipment, Westinghouse shall submit an invoice in the
amount of any unpaid balance of the price of such particular set or sets of
Follow-On Combustion Turbine Parts and Purchaser shall pay such invoice within
thirty days of such submission or at the time Purchaser has received, inspected
and accepted the Initial Combustion Turbine Parts from the transportation
carrier, whichever comes later.
INITIAL COMBUSTION TURBINE PARTS AND FOLLOW-ON COMBUSTION TURBINE PARTS WARRANTY
AND EXCLUSIVE REMEDY
Westinghouse warrants that the New Initial Combustion Turbine Parts and
Follow-On Combustion Turbine Parts furnished to Purchaser under this Blanket
Purchase Order or under any Derivative Purchase Order, including any part
repaired or replaced by Westinghouse during the New Initial Combustion Turbine
Parts and Follow-On Combustion Turbine Parts Warranty Period, will be free of
defects in workmanship and materials until (i) 42 months from delivery of the
original New Initial Combustion Turbine Part or New Follow-On Combustion Turbine
Part, (ii) 12 months after such original New Initial Combustion Turbine Part or
New Follow-On Combustion Turbine Part is installed in the combustion turbine,
(iii) 8,000 EBHs after such original New initial Combustion Turbine Part or New
Follow-On Combustion Turbine Part is installed in the combustion turbine ("EBHs"
is defined in Westinghouse Service Bulletin 36803), or (iv) 400 Equivalent
Starts after such original New Initial Combustion Turbine
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Westinghouse Proprietary Information
<PAGE>
Part or New Follow-On Combustion Turbine Part is installed in the combustion
turbine ("Equivalent Starts" is defined in Westinghouse Service Bulletin 36803),
whichever occurs first, except that the warranties on all the New Initial
Combustion Turbine Parts and Follow-On Combustion Turbine Parts shall expire no
later than one year after the conclusion of the Term of the Contract (the New
Initial Combustion Turbine Parts and Follow-On Combustion Turbine Parts Warranty
Period.
If during the New Initial Combustion Turbine Parts and Follow-On Combustion
Turbine Parts Warranty Period Westinghouse is promptly notified in writing that
the New Initial Combustion Turbine Paris and Follow-On Combustion Turbine Parts
fails to conform to the New Initial Combustion Turbine Parts and Follow-On
Combustion Turbine Parts Warranty, Westinghouse will at its option and expense
correct such nonconformity by repair or replacement.
TERM AND CONDITIONS
The exclusive terms and conditions governing this Letter Agreement/Blanket
Purchase Order and any Derivative Purchase Order are those set forth in
Westinghouse Selling Policy 1270, dated April 1, 1997 with the exception that:
(i) Article 2 of such Selling Policy is replaced with the Scope of Supply and
Delivery Scheduled specified above; (ii) the second and third paragraphs of
Articles 3 of such Selling Policy and Items A & B of Article 4 of such Selling
Policy are replaced with the Pricing & Payment Terms specified above; and (iii)
Article 7, Section A. of such Selling Policy is replaced with the Initial
Combustion Turbine Parts and Follow-On Combustion Turbine Parts Warranty and
Exclusive Remedy specified above. If there are any other terms and conditions in
Selling Policy 1270, dated April 1, 1997, which directly conflict with the terms
and conditions of this Letter Agreement/Blanket Purchase Order, the terms and
conditions in this Letter Agreement/Blanket Purchase Order shall supersede. Any
and all terms and conditions specified/referenced in a Derivative Purchase
Order, other than those specified herein, whether preprinted or otherwise, are
null and void and shall in no event have any force and effect.
NOW, THEREFORE, the parties hereto have entered into this Letter
Agreement/Blanket Purchase Order as of the date first appearing above.
WESTINGHOUSE PURCHASER
WESTINGHOUSE POWER GENERATION LSP ENERGY LIMITED PARTNERSHIP.
By: /s/ T. A. Christopher By: /s/ R. L. Brooks
------------------------------- -----------------------------
Name: T. A. Christopher Name: R. L. BROOKS
------------------------------- -----------------------------
Title: V.P. and General Manager Title: S.V.P., MARKETING
------------------------------- -----------------------------
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Westinghouse Proprietary Information
<PAGE>
[LOGO] Westinghouse Electric Corporation Selling Policy
Power Generation Business Unit 1270
The Quadrangle Page 1
4400 Alafaya Trail
Orlando, Florida. U.S.A. 32526-2399
(For sales in the USA)
June 1, 1989
Supersedes Selling Policy 1270, Pages 1-6
dated November 1, 1982
Mailed to: E, C/1270
These Terms and Conditions govern the Sale of Equipment, Shop Repair and
Modernization, and Technical Services for Power Generation Equipment.
The terms and conditions set forth in the Westinghouse quotation and in this
Selling Policy 1270 are the terms and conditions governing the Westinghouse
offer. Each offer is valid for 60 days from the date of the offer unless
extended, modified or withdrawn in writing by Westinghouse. The return of a
purchase order or any other reasonable manner of acceptance communicated to
Westinghouse during such validity period will be sufficient to form an Agreement
on the terms and conditions of the Westinghouse offer including the terms and
conditions of this Selling Policy 1270.
1. Definitions
Whenever used in this document with initial capitalization, the following
definitions shall be applicable:
A. "Agreement" or "Contract" shall mean the Westinghouse quotation, this
Selling Policy 1270 and Purchaser's purchase order (excluding any
preprinted terms and conditions on said purchase order and in any
attachment or attachments to said purchase order) or other document
evidencing acceptance of the Westinghouse offer as set forth in the
quotation; or an integrated agreement signed by Westinghouse and
Purchaser; for Equipment, Shop Repair and Modernization, and Technical
Services, or one or more of them.
B. "Equipment" shall mean equipment, components, parts and materials provided
by Westinghouse pursuant to the Agreement.
C. "Purchaser" shall mean the entity purchasing Equipment, Shop Repair and
Modernization, and Technical Services, or one or more of them, as well as
any other owners of the power generation facility where the Equipment or
Purchaser's Material will be situated.
D. "Purchaser's Material" shall mean equipment, materials, components and
items of any kind owned by Purchaser for which Westinghouse is to provide
Technical Services under the Agreement or on which Westinghouse is to
perform Shop Repair and Modernization under the Agreement, or both of
them.
E. "Shop Repair and Modernization" shall mean work performed by Westinghouse
on Purchaser's Material at a Westinghouse manufacturing plant, a
Westinghouse service facility or a suitable facility selected by
Westinghouse.
F. "Site" shall mean the Purchaser's facility where the Equipment or
Purchaser's Material will be situated.
G. "Supplier" shall mean any subcontractor or supplier of any tier who
supplies goods and services to Westinghouse in connection with the
obligations of Westinghouse under the Agreement.
H. "Technical Services" shall mean (i) inspections, technical evaluation of
inspections, technical analysis of materials and technical recommendations
related to Shop Repair and Modernization, (ii) technical information
provided by Westinghouse including data interpretation and report, (iii)
advice and consultation given to Purchaser's personnel at Purchaser's
facility or at a Westinghouse facility by a Westinghouse engineer or
technician or (iv) advice and guidance given to Purchaser by the
Westinghouse field engineer(s) regarding methods and procedures for
installation of Equipment or Purchaser's Material and for periodic
maintenance and calibration of Equipment or Purchaser's Material when the
scope of work under the Agreement specifically provides for much services.
I. "Westinghouse" shall mean Westinghouse Electric Corporation or an
affiliated company and their subsidiaries, successors and assigns.
2. Scope
Westinghouse will furnish to Purchaser Equipment, Shop Repair and Modernization,
and Technical Services, or some or all of them, as specified in and pursuant to
the Agreement.
3. Price Policy
Unless otherwise stated in the offer, the price does not include disassembly and
reassembly of equipment at the Site.
Prices are firm for (i) Equipment with a scheduled shipment date of 60 weeks or
less from the date of the Agreement and (ii) Shop Repair and Modernization, and
Technical Services which are scheduled to be performed within 60 weeks from the
date of the Agreement.
For (i) Equipment with a scheduled shipment date in excess of 60 weeks and (ii)
Shop Repair and Modernization, and Technical Services scheduled to be completed
beyond 60 weeks from the date of the Agreement, the prices are subject to
adjustment upward or downward for changes in labor and material indexes. This
adjustment shall be determined in accordance with Price Adjustment Policy
1270-1.
4. Terms of Payment
A. For Agreements covering Equipment or Shop Repair and Modernization, or
both of them, with a total price of $500,000 or less terms of payment are
net thirty (30) days from date of invoice. The invoice will be issued on
the date of shipment. Where partial shipments are made pro rata invoices
will be issued on the date of each partial shipment.
B. For Agreements covering Equipment or Shop Repair and Modernization, or
both of them, with a total price in excess of $500,000 the terms of
payment are as set forth below:
(a) 5% of the total price (as adjusted in accordance with the provisions
of Price Adjustment Policy 1270-1 when adjustment is applicable)
will be invoiced sixty (60) days after the date of the Agreement,
and
(b) progressive payments in the amount of 85% of the total price (as
adjusted in accordance with the provisions of Price Adjustment
Policy 1270-1 when adjustment is applicable) will
<PAGE>
Page 2
be invoiced in equal monthly installments commencing thirty (30)
days after issuance of the 5% invoice and extending to the first day
of the month which includes the day of scheduled shipment, and
(c) 10% of the price of each item (as adjusted in accordance with the
provisions of Price Adjustment Policy 1270-1 when adjustment is
applicable) will be invoiced upon shipment of that item.
(d) Payment of each invoice is to be made within thirty (30) days of its
date.
(e) Should the price of any portion of the work covered by the Agreement
be revised in accordance with the provisions set forth herein
invoicing will be made according to the terms set forth above by
determining the accumulated percentage of the price due times the
revised price and subtracting the sum of the payments previously
made.
(f) If shipment (from the manufacturing plant or repair facility where
the work is performed) of an item Is delayed for causes which are
within the reasonable control of Westinghouse, issuance of the
invoice covering the final 10% payment detailed in (c) above will be
deferred for twice the number of months by which shipment of that
item is delayed. Furthermore, where applicable, Purchaser will be
excused from the duty to pay any net price increase on the final 10%
payment of the delayed item resulting from the operation of the
provisions of Price Adjustment Policy 1270-1 during the period of,
and arising solely from, such delay in shipment of said item by
Westinghouse.
THE REMEDIES OF PURCHASER SET FORTH ABOVE FOR DELAY IN SHIPMENT
CAUSED BY WESTINGHOUSE ARE EXCLUSIVE AND NO OTHER REMEDIES OF ANY
KIND WHATSOEVER SHALL APPLY, Deferral in issuance of the final 10%
invoice and (where applicable) forgiveness of certain net price
increases as provided above shall constitute complete fulfillment of
all liabilities of Westinghouse to Purchaser for delay in shipment
whether based in contract, tort (including negligence and strict
liability), or otherwise.
C. For Agreements covering Technical Services terms of payment are net within
thirty (30) days from date of invoice. Invoices will be issued on the
fifteenth day of each month covering the Technical Services performed in
the previous month.
D. In any instance where Purchaser is unable to return components to
Westinghouse for fitting or for coordination with other assemblies by the
specific date agreed to in the Agreement, Westinghouse reserves the right
to Invoice Purchaser for work performed to date and either ship the
components to Purchaser in their existing state or hold the components in
storage at Purchaser's risk and expense. That portion of the work which is
to be performed by Westinghouse at a later date will be performed as a
Purchaser requested change under Article 17 - Changes.
E. For Agreements covering the supply of banding that require field pitch
measurements, Westinghouse will ship the blading and the unpunched shroud
at approximately the same time. Purchaser will make payment in full in
accordance with Section A or B above. Westinghouse will punch the shroud
at a later date at no charge.
F. If shipments are delayed by Purchaser, affected payments shall become due
based on the date Westinghouse is prepared to make shipment.
G. Any past due amounts shall, without prejudice to the right of Westinghouse
to payment when due, bear interest at a floating rate equivalent to
one-twelfth (1/12) of the per annum prime rate charged by Chase Manhattan
Bank. New York, New York, U.S.A., as such prime rate is published on the
first banking day following the date payment is due, plus an additional
one-half of one percent (0.5%) payable each month or portion thereof that
payment is delayed. If payments are not made when due Westinghouse, upon
fifteen (15) days written notice, may, at its option, suspend all further
work hereunder. Resumption of work thereafter is contingent upon
correction of the payments deficiency. The schedule for the resumed work
will be established by Westinghouse based on its then current work load
and the availability of other resources. All Westinghouse expenses
associated with any such suspension shall be for the account of Purchaser.
H. If there exists a good faith dispute over the amounts to be paid.
Purchaser shall pay the undisputed amount. The disputed portion may be
held in abeyance until resolution of the matter with that portion,
together with the interest charge specified in G above, due thirty (30)
days after said resolution.
5. Delivery, Title and Risk of Loss or Damage
Delivery of each component of Equipment shall be made when said component is
placed Free On Board carrier at the manufacturing plant. Legal and equitable
title and risk of loss or damage to each such component of the Equipment shall
pass from Westinghouse to Purchaser upon Delivery.
Purchasers Material sent to Westinghouse for Shop Repair and Modernization or
Purchaser's Material or Equipment being returned pursuant to the provisions of
the Warranty or Patents Articles of the Agreement will be delivered by Purchaser
at its expense to the repair or manufacturing plant designated by Westinghouse
where the work is to be performed. Title to such Equipment or Purchaser's
Material will remain at all times with Purchaser. Risk of loss or damage to such
Equipment or Purchaser's Material will transfer to Westinghouse upon its arrival
on board the carrier at the repair or manufacturing plant and will transfer back
to Purchaser upon its delivery to the carrier at the repair or manufacturing
plant after the work is performed. Delivery of Purchaser's Material shall be
made when the item is placed Free On Board carrier at the repair or
manufacturing plant after the work is performed. When repair work is performed
by Westinghouse at the Site, title and risk of loss or damage to the Equipment,
to Purchaser's Material and to other property shall remain at all times with
Purchaser.
6. Transportation
A. Transportation and Storage
When items of Equipment are ready for shipment or Shop Repair and
Modernization is completed on Purchaser's Material, Westinghouse will (i)
in the absence of shipping instructions inform Purchaser of pending
shipment and Purchaser will thereafter promptly give shipping instructions
to Westinghouse (ii) determine the method of transportation and the
routing of the shipment and (iii) ship the Equipment or Purchaser's
Material freight prepaid and included in the price by Normal Carriage:
(a) to Purchaser's designated destination when shipped by highway
transport, or
(b) to the rail siding nearest Purchaser's designated destination when
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[LOGO] Selling Policy
1270
Page 3
shipped by rail transport.
In the event that Purchaser fails to provide Westinghouse with timely
shipping instructions, Westinghouse will ship the equipment or Purchaser's
Material by Normal Carriage to Purchaser or to a suitable storage
location selected by Westinghouse.
If the Equipment or Purchaser's Material is to be placed into storage in
accordance with the above, delivery of the Equipment or Purchasers
Material shall be deemed to have occurred for all purposes hereunder at
the time the Equipment or Purchaser's Material is placed on the carrier
for shipment to the storage location. If it is to be stored in the
facility where manufactured, or where Shop Repair and Modernization is
performed, delivery shall be deemed to have occurred when the Equipment
or Purchaser's Material (i) is placed Free On Board the common carrier for
shipment to the storage location or (ii) is placed into the storage
location when stored in a Westinghouse manufacturing facility.
In the event of storage pursuant to the preceding paragraph, all expenses
thereby incurred by Westinghouse, such as preparation for and placement
into storage, handling, freight, storage, inspection, preservation, taxes
and insurance, shall be payable by Purchaser upon submission of an
invoice(s) prepared by Westinghouse. When conditions permit and upon
payment to Westinghouse of any additional amounts due hereunder, Purchaser
shall arrange, at its expense, for removing the Equipment or Purchaser's
Material from storage.
B. Normal Carriage
Most Equipment and Purchaser's Material can be shipped by highway
transport. Westinghouse shall make every reasonable effort to ship by
highway transport unless rail transport is requested by Purchaser. Normal
Carriage means carriage by either, highway transport (provided this does
not necessitate use of specialized riggers trailers) or by rail transport,
on normal routing from the repair facility or factory to (i) Purchaser's
designated destination when shipped by highway transport, (ii) the rail
aiding nearest Purchasers designated destination when shipped by rail
transport or (iii) the port of export selected by Westinghouse in the 48
continental United States if Purchaser's designated destination is outside
the United States or is in Alaska or Hawaii.
C. Special Transportation and Services
Purchaser agrees to pay or to reimburse any transportation charges in
excess of regular charges for Normal Carriage, including, but not limited
to, excess charges for special routing, special trains, specialized
riggers trailers, lighterage, barging and air transport.
Purchaser also agrees to pay or to reimburse any cost incurred or charge
resulting from special services performed in connection with the transportation
of the Equipment or Purchaser's Material, including, but not limited to, the
construction and repair of transportation and handling facilities, bridges and
roadways, of whatever kind and wherever located.
7. Warranty
A. Equipment Warranty and Exclusive Remedy
Westinghouse warrants that the Equipment furnished to Purchaser, including
any part repaired or replaced by Westinghouse during the Equipment
Warranty Period, will be free of defects in workmanship and materials
until one (1) year from the date of shipment of the original Equipment to
Purchaser (the Equipment Warranty Period).
If during the Equipment Warranty Period Westinghouse is promptly notified
in writing that the Equipment fails to conform to the Equipment Warranty,
Westinghouse will at its option and expense correct such nonconformity by
repair or replacement.
B. Shop Repair and Modernization Warranty and Exclusive Remedy
Westinghouse warrants that the work performed by Westinghouse on
Purchaser's Material, including any materials supplied by Westinghouse in
connection therewith (hereinafter referred to as the "Work"), will be free
of defects in workmanship and materials until one year from the date of
shipment of Purchaser's Material to Purchaser (the Shop Repair and
Modernization Warranty Period).
If during the Shop Repair and Modernization Warranty Period Westinghouse
is promptly notified in writing that the Work fails to conform to the Shop
Repair and Modernization Warranty, Westinghouse will at its option and
expense correct such nonconformity by repair or replacement of the
defective portion of the Work. If repair or replacement is impractible,
Westinghouse will refund the amount of the compensation paid to
Westinghouse for such nonconforming portion of the Work.
C. Technical Services Warranty and Exclusive Remedy
Westinghouse warrants for each item of Technical Services that (i) the
engineering services of its personnel will be competent and consistent
with Westinghouse's engineering practices and (ii) the technical
information, reports, analyses and recommendations transmitted by
Westinghouse in connection therewith will be competent and consistent with
Westinghouse's engineering practices, until one year from the date of
completion of that Item of Technical Services (the Technical Services
Warranty Period).
If during the Technical Services Warranty Period Westinghouse is promptly
notified in writing that any portion of the Technical Services fails to
conform to the Technical Services Warranty, Westinghouse, if Purchaser
provides (when necessary) access to the areas in Purchaser's facility
where Technical Services were performed, will promptly reperform such
nonconforming portion of the Technical Services or if reperformance is
impracticable Westinghouse will refund the amount of the compensation paid
to Westinghouse for such nonconforming portion of the Technical Services.
D. Title
Westinghouse warrants that the Equipment, when delivered, shall not be
subject to any encumbrances, liens, security interests, or other defects
in title. In the event of any failure to conform to this warranty,
Westinghouse, upon prompt written notice of such failure, shall defend the
title to the Equipment.
E. Warranty Conditions
The warranties and remedies set forth in this Article are conditioned
upon:
(1) Purchaser's receipt, handling, storage and maintenance during any
storage, installation, testing, operation and maintenance, including
tasks incident thereto, of the Equipment, Purchaser's Material or
Purchaser's equipment for which Westinghouse has provided Technical
Services, in accordance with the recommendations of Westinghouse to
the extent applicable or, in the absence of such recommendations or
to the extent not applicable, in accordance with the generally
accepted practices of the United States electric power industry. In
addition, such Equipment, Purchaser's Material or Purchaser's
equipment shall not have been operated in excess of limitations
specified in writing by Westing-
<PAGE>
Page 4
house and not have been subjected to accident, alteration, abuse or
misuse; and
(2) the Purchaser, without cost to Westinghouse;
(a) providing working access to the non-conformity, including
disassembly, removal, replacement and reassembly of the
Equipment, Purchaser's Material and any other equipment,
materials or structures necessary to permit Westinghouse to
perform the warranty work.
(b) making its Site facilities and personnel (to the extent
consistent with personnel job classifications) available to
assist Westinghouse in the performance of its warranty
obligations.
F. Additional Condition Applicable to the Sale of Monitoring Devices.
Monitoring devices supplied by Westinghouse pursuant to the Agreement,
such as but not limited to, monitors for generator condition and for steam
chemistry, are intended to enhance the availability and reliability of
steam turbine generators. These monitors normally represent
state-of-the-art technology which enables users to better diagnose and
control conditions within the turbine generator. While such monitors
follow conditions and trends within the equipment and thereby permit
earlier detection of harmful conditions, Westinghouse does not warrant or
represent that use of such monitors will prevent failure or detect all
harmful conditions in the turbine generator and Purchaser acknowledges the
same.
G. Additional Conditions Applicable to Diagnostic and Non-Destructive
Examination and Testing.
Diagnostic and non-destructive examination and testing techniques employed
by Westinghouse represent the current Westinghouse techniques for
detecting defects in (including indications of cracking) and evaluation of
the condition of Purchaser's Material. However even these current
techniques, when performed according to the standards detailed above in
this warranty provision, may not detect all of the defects In Purchaser's
Material (including indications of cracking) and shall not constitute a
breech by Westinghouse of its warranty obligations. Purchaser acknowledges
that Westinghouse will not be responsible for the consequences of
undetected defects including undetected cracks.
H. Exclusivity of Warranties and Remedies.
THE WARRANTIES SET FORTH IN THIS ARTICLE ARE EXCLUSIVE AND ARE IN LIEU OF
ALL OTHER WARRANTIES WHETHER STATUTORY, EXPRESS, OR IMPLIED (INCLUDING ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND
ALL WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE).
Correction of non-conformities in the manner and for the period of time
provided above shall constitute Westinghouse's sole liability and
Purchaser's exclusive remedy for failure of Westinghouse to meet its
warranty obligations whether claims of the Purchaser are based in
contract, in tort (including negligence and strict liability), or
otherwise.
8. Taxes
The price paid or to be paid to Westinghouse under the Agreement does not
include any federal (other than federal income taxes imposed on Westinghouse),
state, or local property, license, privilege, sales, use, excise, value added,
gross receipts, or similar taxes now or hereafter applicable to, measured by, or
imposed upon or with respect to the transaction, the property, its sale, its
value or its use, or any services performed in connection therewith. Purchaser
agrees to pay or reimburse Westinghouse for any such taxes which Westinghouse or
its Suppliers are required to pay.
9. Additional Conditions Applicable to Nuclear Installations
In the event the Technical Services, the Shop Repair and Modernization or the
Equipment provided hereunder is to be performed or utilized at or in any manner
in connection with a nuclear installation, the following conditions shall apply:
A. Purchaser Insurance
(1) If Purchaser procures property damage insurance applicable to
occurrence at the Site and third party non-nuclear liability
insurance, or either of such types of insurance, such insurance will
name Westinghouse and its Suppliers as additional insureds.
(2) In the event the Equipment or Purchaser's Material shall be utilized
at or in connection with a nuclear installation, Purchaser shall at
its own cost, prior to the arrival of nuclear fuel at the Site,
secure and thereafter maintain in force protection against liability
arising out of or resulting from a nuclear incident (as defined in
the Atomic Energy Act of 1954, as amended) as required by the
Nuclear Regulatory Commission; provided, however, that if the
nuclear liability protection system in effect on the date of the
Agreement expires or is repealed, changed, or modified, Purchaser
will, without cost to Westinghouse, maintain liability protection
through government indemnity, limitation of liability, and/or
liability insurance which will not result in a material impairment
of the protection afforded Westinghouse and its Suppliers by such
nuclear liability protection system which is in effect as of the
date of the Agreement, taking into account the availability of
insurance, customary practice in the United States electric utility
industry for plants of similar size and character, and other
relevant factors in light of then existing conditions. In any event,
the protection provided pursuant to this provision shall remain in
effect until the decommissioning of the nuclear plant.
B. Waivers by Purchaser
Neither Westinghouse nor its Suppliers shall be liable for any loss of,
damage to, or loss of use of property or equipment wherever located,
arising out of or resulting from a "nuclear incident". Purchaser waives
and, to the extent permitted by its insurer, will require its insurers to
waive all rights of recovery against Westinghouse and its Suppliers on
account of any such loss, damage, or loss of use. All such waivers shall
be in a form acceptable to Westinghouse.
In the event Purchaser recovers damages from a third party based on losses
at the plant site resulting from the hazardous properties of source,
special nuclear or byproduct material (as defined in the Atomic Energy Act
of 1954, as amended). Purchaser shall indemnity Westinghouse and its
Suppliers against claims by such third party which are based on
Purchaser's recovery of such damages. In addition, Purchaser waives and
will require its insurers to waive all rights of recovery against
Westinghouse and its Suppliers, for any and all costs or expenses arising
out of or in connection with the investigation and settlement of claims or
the defense of suits for damage resulting from the nuclear energy hazard.
C. Third Party Property Protection
Purchaser will indemnify Westinghouse and its Suppliers for any liability
arising
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[LOGO] Selling Policy
1270
Page 5
out of loss of or damage to property at the Site which arises out of a
"nuclear incident". In addition, Purchaser shall obtain for the benefit of
Westinghouse and its Suppliers, protection against liability for, arising
out of, or resulting from damage to any property or equipment located at
the Site which is used or intended for use by Purchaser in connection with
the operation of the nuclear power plant (including but not limited to
fuel) and which is owned by parties other than Purchaser.
D. Decontamination
Purchaser shall, without cost to Westinghouse, perform any required
decontamination and health physics to the extent necessary for
Westinghouse to perform its contractual obligations. This includes
decontamination of any Westinghouse equipment or tools used in the
performance thereof. Purchaser shall provide documentation demonstrating
that components or parts being returned to Westinghouse meet the
requirements designated for unrestricted release as set forth in 10CFR20.
10. Force Majeure
A. Westinghouse will not be liable for failure to perform any obligation or
delay in performance resulting from or contributed to by any cause beyond
the reasonable control of Westinghouse or its Suppliers or from any act of
God; act of civil or military authority; act of war whether declared or
undeclared; act (including delay, failure to act, or priority) of any
governmental authority or Purchaser; civil disturbance; insurrection or
riot; sabotage; fire; inclement weather conditions; earthquake; flood;
strike; work stoppage or other labor difficulty; embargo; car shortage;
fuel or energy shortage; major equipment breakdown; delay or accident in
shipping or transportation; or failure or delay beyond its reasonable
control in obtaining necessary manufacturing facilities, labor, or
materials from usual sources.
B. In the event of a delay in performance excusable under this Article, the
date of Delivery or time for performance of the work will be extended by a
period of time reasonably necessary to overcome the effect of such delay,
and Purchaser will reimburse Westinghouse for its additional costs and
expenses resulting from the delay.
11. Termination
Purchaser may terminate the Agreement upon thirty (30) days prior written notice
to Westinghouse and payment of reasonable and proper termination charges. Should
the work be delayed for a period in excess of six (6) months, at the option of
Westinghouse, the Agreement may be deemed to have been terminated by Purchaser.
Termination charges in either event will include a portion of the purchase price
reflecting the amount of work performed, man hours expended and materials
acquired at the time of termination. These charges will also include the
expenses associated with the termination, including, but not limited to, any
additional expense incurred by reason of termination or cancellation of
agreements between Westinghouse and its Suppliers, and any applicable costs
allocated in contemplation of performance. Westinghouse will make every
reasonable effort to minimize such termination charges. All termination charges
shall be due and payable thirty (30) days from the date at the Westinghouse
invoice.
12. Patents
A. Westinghouse will, at its own expense, defend or at its option settle any
suit or proceeding brought against Purchaser so far as based on an
allegation that any Technical Services, work on Purchaser's Material,
Equipment (including parts thereof), or use thereof for its intended
purpose, constitutes an infringement of any United States patent, if
Westinghouse is notified promptly in writing and given authority,
information, and assistance in a timely manner for the defense of said
suit or proceeding. Westinghouse will pay the damages and costs awarded in
any suit or proceeding so defended. Westinghouse will not be responsible
for any settlement of such suit or proceeding made without its prior
written consent. In case the Technical Services, work on Purchaser's
Material, the Equipment, or any part thereof, as a result of any suit or
proceeding so defended is held to constitute infringement or its use by
Purchaser is enjoined, Westinghouse will, at its option and its own
expense, either: (a) procure for Purchaser the right to continue using
said Equipment or Purchaser's Material; (b) replace it with substantially
equivalent non-infringing equipment; or (c) modify it so it becomes
non-infringing.
B. Westinghouse will have no duty or obligation to Purchaser under this
Article to the extent that the Technical Services, work on Purchaser's
Material or Equipment is (a) supplied according to Purchaser's design or
instructions wherein compliance therewith has caused Westinghouse to
deviate from its normal course of performance, (b) modified by Purchaser
or its contractors after delivery, or (c) combined by Purchaser or its
contractors with items not furnished hereunder and by reason of said
design, instruction, modification, or combination a suit is brought
against Purchaser. In addition, if by reason of such design, instruction,
modification or combination, a suit or proceeding is brought against
Westinghouse, Purchaser shall protect Westinghouse in the same manner and
to the same extent that Westinghouse has agreed to protect Purchaser under
the provisions of Paragraph A above.
C. THIS ARTICLE IS AN EXCLUSIVE STATEMENT OF ALL THE DUTIES OF THE PARTIES
RELATING TO PATENTS AND DIRECT OR CONTRIBUTORY PATENT INFRINGEMENT AND OF
ALL THE REMEDIES OF PURCHASER RELATING TO ANY CLAIMS, SUITS, OR
PROCEEDINGS INVOLVING PATENTS. Compliance with this Article as provided
herein shall constitute fulfillment of all liabilities of the parties
under the Agreement with respect to patents.
13. Proprietary Information
A. Westinghouse may have a proprietary interest in information that may be
furnished pursuant to the Agreement. Purchaser will keep in confidence and
will not disclose any such information which is specifically designated as
being proprietary to Westinghouse without the prior written permission of
Westinghouse or use any such information for other than the purpose for
which it is supplied. The provisions of this paragraph shall not apply to
information, notwithstanding any confidential designation thereof, which
is known to Purchaser without any restriction as to disclosure or use at
the time it is furnished, which is or becomes generally available to the
public without breach of any agreement, or which is received from a third
party without limitation or restriction on said third party or Purchaser
at the time of disclosure.
B. Westinghouse also has a proprietary interest in the quotation and the
Agreement. Accordingly, neither document will be disclosed in whole or in
part to third parties without the prior written permission of
Westinghouse.
C. When required by appropriate governmental authority, including
governmental regulations, applicable law or regulation, by order of a
court of competent jurisdiction or lawful subpoena (hereinafter
collectively referred to as "Governmental Authority"), Purchaser may
disclose such proprietary information to such Governmental Authority;
provided, however, that prior to making
<PAGE>
Page 6
any such disclosure, Purchaser will: (a) provide Westinghouse with timely
advance written notice of the proprietary information requested by such
Governmental Authority and Purchaser's intent to so disclose; (b) minimize
the amount of proprietary information to be provided consonant with the
interests of Westinghouse and its Suppliers and the requirements of the
Governmental Authority Involved; and (c) make every reasonable effort
(which shall include participation by Westinghouse in discussions with the
Governmental Authority involved) to secure confidential treatment and
minimization of the proprietary information to be provided. In the event
that efforts to secure confidential treatment are unsuccessful,
Westinghouse shall have the prior right to revise such information to
minimize the disclosure of such information in a manner consonant with its
interests and the requirements of the Governmental Authority involved.
14. Limitation of Liability
PURCHASER EXPRESSLY AGREES THAT NEITHER WESTINGHOUSE NOR ITS SUPPLIERS WILL
UNDER ANY CIRCUMSTANCES BE LIABLE UNDER ANY THEORY OF RECOVERY, WHETHER BASED IN
CONTRACT, IN TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), UNDER WARRANTY,
OR OTHERWISE, FOR: ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSS OR
DAMAGE WHATSOEVER; DAMAGE TO OR LOSS OF PROPERTY OR EQUIPMENT; LOSS OF PROFITS
OR REVENUE; LOSS OF USE OF PURCHASER'S MATERIAL, EQUIPMENT OR POWER SYSTEM;
INCREASED COSTS OF ANY KIND, INCLUDING BUT NOT LIMITED TO CAPITAL COST, FUEL
COST AND COST OF PURCHASED OR REPLACEMENT POWER; OR CLAIMS OF CUSTOMERS OF
PURCHASER.
PURCHASER EXPRESSLY AGREES THAT THE REMEDIES PROVIDED HEREIN ARE EXCLUSIVE AND
THAT UNDER NO CIRCUMSTANCES SHALL THE TOTAL AGGREGATE LIABILITY OF WESTINGHOUSE
UNDER ANY THEORY OF RECOVERY, WHETHER BASED IN CONTRACT, IN TORT (INCLUDING
NEGLIGENCE AND STRICT LIABILITY), UNDER WARRANTY, OR OTHERWISE, EXCEED THE TOTAL
PRICE PAID TO WESTINGHOUSE UNDER THIS AGREEMENT.
THE PROVISIONS OF THIS ARTICLE SHALL PREVAIL OVER ANY CONFLICTING OR
INCONSISTENT PROVISIONS SET FORTH ELSEWHERE IN THIS AGREEMENT.
15. Transfer
Prior to the transfer to another party of any Equipment or Purchaser's Material
or the transfer of any interest in said Equipment or Purchaser's Material or
Purchaser's power generation facility in which said Equipment or Purchaser's
Material is installed, Purchaser shall obtain for Westinghouse written
assurances from the transferee of limitation of and protection against liability
following the proposed transfer at least equivalent to that afforded
Westinghouse and its Suppliers under the Agreement. Transfer contrary to the
provisions of this Article shall make Purchaser the indemnitor of Westinghouse
and its Suppliers against any liabilities incurred by Westinghouse and its
Suppliers in excess of those that would have been incurred had no such transfer
taken place.
16. Compliance with Laws
In the performance of work under the Agreement, Westinghouse and its Suppliers
shall comply with all applicable provisions of Executive Order 11246, as
amended, relating to equal opportunity and nonsegregated facilities, the Fair
Labor Standards Act of 1933, the Occupational Safety and Health Act of 1970. The
price for such work is based on compliance by Westinghouse with these laws and
requirements as they are in effect on the date of the offer submitted by
Westinghouse (or the effective date of the Agreement if no offer is provided).
17. Changes
Purchaser may request changes within the scope of the Agreement and, if accepted
by Westinghouse, the price, performance, schedule and other pertinent provisions
of the Agreement will be adjusted by mutual agreement of the parties prior to
implementation of the change.
Expenses Incurred by Westinghouse due to (i) delays, other than delays which are
deemed to be within the reasonable control of Westinghouse, and (ii) changes in
applicable laws and requirements after the date of the offer submitted by
Westinghouse, as applicable, will be treated as changes to the scope of work and
the Agreement will be adjusted as set forth in the previous paragraph.
Westinghouse may make a change(s) in the Equipment, the work on Purchaser's
Material or the Technical Services without additional compensation from
Purchaser if such change(s) does not adversely affect the warranties, the
interface with Purchasers equipment, materials and plant, the technical
soundness of the work, the operability of the facility where the Equipment or
Purchaser's Material is installed or for which Westinghouse is providing
Technical Services under the Agreement or the schedule.
18. Inspection by Purchaser
Purchaser shall have reasonable access to the areas of the Westinghouse plants
where work under the Agreement is being performed to enable Purchaser to observe
tests on the work. Westinghouse, if requested, will inform the Purchaser of
those tests and procedures which can be witnessed. Should Purchaser elect to
witness specific tests, Purchaser must so specify such requirement in ample time
to permit Westinghouse to include said witness tests in the schedule.
Westinghouse, if requested, will advise Purchaser of the schedule of such tests,
However, no rescheduling of tests or delays in manufacturing or shipment will be
made to accommodate such inspection. Westinghouse will exercise reasonable
efforts to secure similar rights with respect to the inspection of Purchaser's
work at Supplier's premises.
19. Returning Equipment or Purchaser's Material
Prior to the return of any Equipment or Purchaser's Material to Westinghouse,
the Purchaser must obtain authorization and shipping instructions from
Westinghouse and remove all asbestos material.
The Equipment or Purchaser's Material must be returned with complete
identification in accordance with instructions furnished by Westinghouse. In no
event will Westinghouse be responsible for Equipment or Purchaser's Material
returned without proper authorization and identification.
20. Miscellaneous Provisions
A. Shipment Dates
Shipment dates are the dates the Equipment or Purchaser's Material will be
ready for shipment from the factory and are predicated on the prompt
receipt by Westinghouse of all information necessary to commence and
complete the work, without delay or interruption.
B. Waivers
The failure of either party to enforce at any time any of the provisions
of the Agreement or to require at any time performance by the other party
of any of such provisions, shall in no way be construed to be a waiver of
such provision, nor in any way to affect the validity of the Agreement or
any parts thereof, or the right of either party thereafter to enforce each
and every provision.
C. Modification
No waiver, modification, or amendment of any of the provisions of the
Agreement shall be binding unless it is in writing and signed by duly
authorized rep-
<PAGE>
Selling Policy
1270
Page 7
[LOGO]
representatives of both parties.
D. Headings
The headings used in the Agreement are not to be construed as modifying,
limiting or expanding in any way the scope or extent of the provisions in
the Agreement.
E. Assignment
The Agreement will not be assigned by either party without the prior
written consent of the other party, which consent will not be unreasonably
withheld. Any purported assignment without such prior written consent
shall be null and void.
F. Governing Law
The Agreement will be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania without application of its
choice-of-law rules.
G. Integration
The Agreement contains the entire agreement and understanding between the
parties as to the subject matter of the Agreement, and merges and
supersedes all prior agreements, commitments, representations, writings,
and discussions between them. Neither of the parties will be bound by any
prior obligations, conditions, warranties, or representations with respect
to the subject matter of the Agreement.
H. Survival
The provisions entitled "Additional Conditions Applicable to Nuclear
Installations", "Proprietary Information", Limitation of Liability" and
"Transfer" shall survive termination, expiration or cancellation of the
Agreement.
<PAGE>
- Page i -
Service Bulletin PH-36803, Rev. 7
================================================================================
[LOGO]
SERVICE BULLETIN PH-36803
Section: 02 General
Combustion Turbine Maintenance and Inspection Intervals
- --------------------------------------------------------------------------------
Rev. No: 7 Rev. Date: 4/22/97 Created: 07/03/73 Page: Cover Sheet
- --------------------------------------------------------------------------------
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
================================================================================
Notice to Service Bulletin Users
This Combustion Turbine Service Bulletin has been distributed to customers of
Westinghouse, without charge, as a Proprietary Class 3 document. The purpose of
this publication is to provide combustion turbine users with information
considered useful in the maintenance and operation of Westinghouse combustion
turbines. The information in this bulletin represents a compendium of ideas and
experiences by Combustion Turbine Engineering, Energy Services Division, other
Westinghouse Divisions, Westinghouse suppliers, and customers. These
publications are provided to the user so that they will ultimately translate
into improved reliability, efficiency, and maintainability.
Westinghouse reserves the right to withdraw any publication at any time without
notice. Westinghouse does not warrant applicability to any specific combustion
turbine engine (or system) since service bulletins are written to apply to most,
not necessarily all, combustion turbines in most circumstances. In addition,
Westinghouse has no control over the implementation of a service bulletin or the
mechanical configuration of customer-owned and maintained equipment.
It is the sole responsibility of the user to carefully consider the data set
forth in the service bulletin, to determine if the information is specifically
appropriate to the user's specific engine (or system) in a particular
circumstance, and to exercise reasonable care and skill in the implementation of
the suggestions provided therein.
NO WARRANTY, EXPRESSED OR IMPLIED, IS MADE FOR THE INFORMATION AND DESCRIPTIONS
CONTAINED HEREIN WITH RESPECT TO TITLE, FITNESS FOR A PARTICULAR PURPOSE, OR
MERCHANTABILITY.
Westinghouse will not be responsible in contract, in tort (including
negligence), or otherwise for loss of use of equipment or plant, cost of
capital, infringement of patents, loss of profit or revenues, cost of
replacement power. ADDITIONAL expenses in the use of existing power facilities,
claims against the user by his customers or any special, indirect, incidental,
or consequential damage or loss whatsoever. Under no circumstance will any
information in this service bulletin become part of, modify, or negate in any
way any previous agreements, contracts, or commitments unless both the user and
Westinghouse agree in writing.
While Westinghouse does sincerely attempt to eliminate errors and inaccuracies,
on occasion Westinghouse finds it necessary to correct, clarify, and even
withdraw information as experience is gained and feedback is received from the
field. Your constructive criticism and comments can help us to provide more
useful publications in the future.
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 1 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
[LOGO]
SERVICE BULLETIN P11-3 6803
Section: 02 General
Combustion Turbine Maintenance and Inspection Intervals
- --------------------------------------------------------------------------------
Rev. No: 7 Rev. Date: 4/22/97 Created: 07/03/73 Page: 1/17
- --------------------------------------------------------------------------------
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
REASON FOR BULLETIN
To provide the current recommendations for combustion turbine inspection
intervals and inspection requirements
BULLETIN APPLIES TO
All Frames through 501G. Recommendations are included for specific models
or frames.
This bulletin supersedes TIB PH87-67, TIB PH88-103, and TIB PH92-126.
Also see related service bulletins PH39405 and PH37807.
TABLE OF CONTENTS Page
Scope and General Information .......................................... 2
Instructions and Special Instructions .................................. 3
Parts and Materials .................................................... 3
Procedure 1. How to Compile Operating History .................. 4
Figure 1-1. Definitions of Inspections ............ 6
Procedure 2. How to Select an Inspection Interval Table
for Your Unit ..................................... 8
Tables 2-1 - 2-4, Recommended Inspection
Intervals .................................... 9 - 12
Procedure 3. How to Calculate Equivalent Hours
(EBH or Equivalent Base Hours) for Each Type
of Fuel .......................................... 13
3A. How to Calculate Total Equivalent Hours
(EBH) from Multiple Fuels ........................ 14
Procedure 4. How to Calculate Equivalent Starts (ES) .......... 15
Figure 4-1. Fuel Factors, Trip Factors, &
Load Change Factors .............................. 17
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 2 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
SCOPE AND GENERAL GUIDELINES
Scope:
In addition to recommending inspection intervals, this bulletin
provides these guidelines and procedures:
o How to compile required operating history
o How to select and use the correct inspection interval table
for your unit
o How to calculate equivalent operating hours (EBH or Equivalent
Base Hours) and equivalent starts (ES)
o How to convert mixed-load operation hours and mixed-fuel
operation hours
o How to convert starts, trips, and load changes
o Definitions of starts, trips, load changes, and inspection
types
General Guidelines:
Be sure to consider all of these factors:
o Inspection recommendations are based upon a combination of
factors, including: model or frame number, fuel type, number
of operating hours, number of starts, types of starts, whether
operation or starts were performed using a single fuel or
multiple fuels, number of instantaneous changes in load, and
the number of trips from load.
o Guidelines are based on the assumption that the units have
been operated and maintained according to Westinghouse
operation and maintenance recommendations, and that an
operating history for the unit has been compiled.
o Operators should perform inspections at least as frequently as
these recommended intervals, but some site-specific operating
conditions may suggest more frequent and stringent inspection
or maintenance practices.
Westinghouse, a world leader in combustion turbine manufacture and
repair, can provide quotations on specific information or services
that you may request as a result of this bulletin.
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 3 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
INSTRUCTIONS
o All owners/operators of the Westinghouse combustion turbines models
identified on page 1 should implement, as a minimum, the inspection
schedule guidelines in this document.
o If you have questions about how these instructions affect your
particular unit, contact Westinghouse.
o To determine when your unit requires inspection, follow these
instructions:
- --------------------------------------------------------------------------------
Step 1. Compile an operating history. (See Procedure 1, pages 4 and 5.)
Step 2. Refer to the definitions of Inspections. (See Figure 1-1, pages 6
and 7.)
Step 3. Select the inspection table that is appropriate for your unit.
(See Procedure 2, pages 8-12.)
Step 4. Calculate equivalent hours (EBH or Equivalent Base Hours) as
required by the inspection table. (See Procedure 3, pages 13 and
14.)
Step 5. Calculate equivalent starts (ES) as required by the inspection
table. (See Procedure 4, pages 15-17.)
Step 6. Apply the EBH and ES to the inspection table, and perform the
inspections recommended. (See Figure 1-1, pages 6 and 7.)
- --------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS
The inspections and intervals stated in this bulletin may be modified or
supplemented by special instructions. These include any additional
requirements specified by Customer Advisory Letters (CALs), Product
Improvement Bulletins (PIBs), and Service Bulletins (SBs) as recommended
in outage planning instructions and in outage plans established for a
specific unit.
PARTS AND MATERIALS
Parts Required and Source:
See applicable instruction books or renewal parts manuals provided
with unit.
Special Tools Required:
See applicable instruction books and service bulletins for tools to
be used during inspection.
Disposition of Removed Material:
See Service Bulletin PH37405 for instructions about the return of
materials.
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 4 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
Procedure 1. How to Compile Operating History
Use The Spreadsheet on Page 5 to Compile Unit Operating History:
1. Use the Operating History Spreadsheet on page 5 to collect operating data.
Keep an accurate running total of these parameters for each fuel:
o Operating Hours
Part Load Hours
Base Load Hours
Peak Load Hours
System Reserve Hours
o Successful Starts
Normal Starts
Intermediate Starts
Fast Starts
o Fired Aborts
o Trips From Load (since last hot path inspection)
Load at which each trip occurred
o Instantaneous Load Changes (since last hot path inspection)
Load at which each load change occurred
2. Maintain a running total of equivalent operating hours (EBS) and
equivalent starts (ES), by performing the calculations explained in
Procedures 3.3A. and 4.
3. Monitor the running totals on the spreadsheet.
Continuously compare the running totals against inspection interval
tables.
- --------------------------------------------------------------------------------
Note
Unit operating history should be tracked based on operator's log records.
The counters installed on existing units are not configured to track
operating history data at the level of detail required by this procedure.
- --------------------------------------------------------------------------------
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 5 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
Procedure I (Cont.)
OPERATING HISTORY SPREADSHEET
- --------------------------------------------------------------------------------
OPERATING HOURS (TRACK SEPARATELY FOR EACH FUEL.)
- --------------------------------------------------------------------------------
LOAD NATURAL GAS/ DISTILLATE OIL CRUDE / RESIDUAL OIL
PROPANE
- --------------------------------------------------------------------------------
PART LOAD
- --------------------------------------------------------------------------------
BASE LOAD
- --------------------------------------------------------------------------------
PEAK LOAD
- --------------------------------------------------------------------------------
SYSTEM RESERVE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STARTS (TRACK SEPARATELY FOR EACH FUEL.)
- --------------------------------------------------------------------------------
TYPE OF START NATURAL DISTILLATE OIL CRUDE / RESIDUAL OIL
GAS/PROPANE WITH STARTING FUEL:
--------------------------
NATURAL GAS DISTILLATE OIL
- --------------------------------------------------------------------------------
NORMAL START
- --------------------------------------------------------------------------------
INTERMED. START
- --------------------------------------------------------------------------------
FAST START
- --------------------------------------------------------------------------------
FIRED ABORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRIPS FROM LOAD (TRACK SEPARATELY FOR EACH FUEL.)
Note: Record only those that have occurred since last hot path inspection.
- --------------------------------------------------------------------------------
LOAD NATURAL DISTILLATE OIL CRUDE / RESIDUAL
AT WHICH CHANGE OCCURRED** GAS/PROPANE
- --------------------------------------------------------------------------------
GREATER THAN BASE LOAD*
- --------------------------------------------------------------------------------
76 - 100% (OF BASE LOAD)
- --------------------------------------------------------------------------------
51 - 75% (OF BASE LOAD)
- --------------------------------------------------------------------------------
26 - 50% (OF BASE LOAD)
- --------------------------------------------------------------------------------
UP TO 25% (OF BASE LOAD)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTANTANEOUS LOAD CHANGES (TRACK SEPARATELY FOR EACH FUEL.)
Note: Record only those that have occurred since last hot path inspection.
- --------------------------------------------------------------------------------
LOAD NATURAL DISTILLATE OIL CRUDE / RESIDUAL
AT WHICH CHANGE OCCURRED GAS/PROPANE
- --------------------------------------------------------------------------------
GREATER THAN BASE LOAD*
- --------------------------------------------------------------------------------
76 - 100% (OF BASE LOAD)
- --------------------------------------------------------------------------------
51 - 75% (OF BASE LOAD)
- --------------------------------------------------------------------------------
26 - 50% (OF BASE LOAD)
- --------------------------------------------------------------------------------
UP TO 25% (OF BASE LOAD)
- --------------------------------------------------------------------------------
* Record load and load change for each event that occurs at greater than
base load.
** Should be counted as a full load trip if the trip occurs on a combined
cycle unit that is operating on external control (IGVs modulated at
reduced load to maintain exhaust temperature at upper limit).
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
- Page 6 -
Service Bulletin PH-36803, Rev. 7
Westinghouse Electric Corporation, Orlando, FL. USA Proprietary Class 3
Information. Use this document solely for the purpose given.
Do not disclose, reproduce, or use otherwise without the written consent of WEC.
Copyright(c) 1997 by WEC. All Rights Reserved.
- --------------------------------------------------------------------------------
Figure 1-1. Definitions of Inspections
Inspection Categories
These are overall descriptions of inspections. For detailed information and
instructions, consult applicable books and procedures issued by Westinghouse.
o Running Inspections
Performed while the unit is operating.
o Combustion Section (Minor Combustor)
Involves the fuel nozzle assemblies, and the interior surface of the
combustors and transitions (through the nozzle openings).
o Combustion Section (Major Combustor)
Involves all combustor and turbine end components that are accessible
without performing a cover lift
o Turbine Section (Hot-Path)
Involves a major combustor inspection, plus inspection of the remainder of
the turbine hot gas path, with removal of appropriate cylinder cover and
blade rings.
o Major
Comprehensive inspection: includes a turbine section (hot-path)
inspection, plus lifting of the inlet compressor, and compressor-combustor
cylinder covers.
RUNNING INSPECTIONS
The running inspection is performed while the unit is operating. This
inspection involves monitoring various engine operating parameters to
identify changes from a new or clean / overhaul condition.
Engine monitoring includes, but is not be limited to:
o Blade path temperatures, spreads, and trends
o Exhaust temperatures
o Disc cavity temperatures
o Vibration levels and trends
o Bearing temperatures and oil pressure
o Compressor fouling
o Combustor shell pressure.
During normal operation, the operating data should be monitored and
trended. An abnormal reading or trend in the direction of a problem area
in any parameter should prompt an investigation and the correction of the
cause (even if data levels are still within acceptable ranges).
Copyright(c) Westinghouse Electric Corporation 1997: All Rights Reserved.
<PAGE>
Exhibit 10.15
AD VALOREM TAX CONTRACT
THIS Ad Valorem Tax Contract ("Contract"), dated as of August 24, 1998, is
made and entered into effective as of the last date of its execution by the
respective parties hereto, determined by reference to the dates set forth
opposite their respective names on the signature pages attached hereto, by and
among the following (collectively "Parties"): PANOLA COUNTY, MISSISSIPPI
("County"), acting by and through its Board of Supervisors; the CITY OF
BATESVILLE, MISSISSIPPI ("City"), acting by and through its Mayor and Board of
Aldermen; the MISSISSIPPI DEPARTMENT OF ECONOMIC AND COMMUNITY DEVELOPMENT
("MDECD"), acting for and on behalf of the State of Mississippi ("State"); the
PANOLA COUNTY TAX ASSESSOR/COLLECTOR ("Tax Assessor"); and LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership ("Company").
W I T N E S S E T H:
WHEREAS, Company plans to develop a natural gas-fired combustion turbine
combined cycle electric power generation facility ("Facility") located in the
City, County, and State, which will also necessitate the construction of certain
on-site and off-site public infrastructure, as generally described in Section 10
(collectively "Facility Components"), to be located in the City, County, and
State, to be constructed by the County, and, upon completion of construction, to
be transferred by the County to, and thereafter owned by, the Industrial
Development Authority of the Second Judicial District of Panola County,
Mississippi ("IDA") but operated and maintained by the Company (collectively
"Project"); and
WHEREAS, the Facility is currently projected to involve an expenditure by
the Company in excess of Two Hundred Fifty Million Dollars ($250,000,000.00);
and
WHEREAS, Company has requested certain tax incentives from the County and
City, representing that these incentives are necessary to make the Facility
economically viable in the State; and
WHEREAS, the City, County, and MDECD recognize that the Company can locate
the Project in other locations outside the City, County, and State; desire to
encourage the Company to locate the Project in the City, County, and State for
the benefit of the citizens of the City, County and State; and enter into this
Contract in consideration of the Company locating, and as inducements to the
Company to locate, the Facility in the City, County, and State and in
consideration of the economic benefits to be realized by the City, County and
State, including, but not limited to, the economic impact, the increased tax
revenues, and other benefits to be received by the City, County, State, and the
general public; and
<PAGE>
WHEREAS, the City, County, and MDECD recognize that the Company would not
locate the Project in the City, County, and State without the inducements
provided herein for the entire period for which such inducements are available
(pursuant to existing law, as presently interpreted and construed); and
WHEREAS, since the Facility is costing in excess of One Hundred Million
Dollars ($100,000,000.00), the Company and Facility are eligible either (i) for
a new enterprise exemption under ss.ss. 27-31-101 et seq. for the Facility
(including any assessable interest of the Company in the Facility Components and
any inventories of raw materials and work-in-process [collectively "Process
Inventories"] but excluding any inventories of manufactured products and/or
finished goods [collectively "Products Inventories"] related to the Facility
[collectively "Inventories"]) and, to the extent financed out of the proceeds of
an issuance of industrial development revenue bonds ("IDBs") issued by the
County and/or the State, an exemption for projects financed with IDBs under ss.
57-3-33 by the County and/or ss. 57-10-255 by the State for the Facility itself
(excluding any Inventories) (collectively "Facility Exemptions") from the ad
valorem real and personal property taxes otherwise leviable and assessable on
the Facility and Process Inventories by the City and/or the County ("Taxes"),
excluding Taxes for South Panola Consolidated School District ("District")
purposes ("School Taxes"), or (ii) for a negotiated fee-in-lieu of Taxes of not
less than one-third (1/3rd) of the Taxes on the Company, the Facility, any
Inventories, and any assessable interests of the Company in the Facility
Components, including School Taxes, under ss. 27-31-104 ("Fee-in-Lieu"); and
WHEREAS, in order to attract Company's Facility to the City, County, and
State, the MDECD, County, and City have negotiated this Contract as part of the
inducements and incentives for the location of the Project in the City, County,
and State; and
WHEREAS, the County and City, pursuant to ss. 27-31-101, et seq., have
agreed to grant to the Facility, Company, and Process Inventories contingent,
protective Facility Exemptions for a period of ten (10) years ("Term"),
excepting only School Taxes, and, pursuant to ss.ss. 27-31-7 and 27-31-51, et
seq., have also agreed to grant to the Company a protective finished goods
inventory exemption (excluding School Taxes) under ss. 27-31-7 and a protective
free port inventory exemption (including School Taxes) under ss. 27-31-51 et
seq. on the Products Inventories (collectively "Products Exemptions")
(collectively "Protective Exemptions");
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WHEREAS, the MDECD, with the participation and approval of the City and
County, have agreed to grant a Fee-in-Lieu to the Company, the Facility, and the
Inventories for the Term in the amount of one-third (1/3rd) of the then current
total Taxes in effect from time to time during the Term, subject to a certain
minimum hereinafter indicated ("Fee-in-Lieu Amount"); and
WHEREAS, the City and County agree that, to the extent permissible and
necessary under Mississippi law, the Company, as a manufacturer, is also
eligible for and entitled to Protective Exemptions in the event of the
invalidity and unavailability, for any reason, of the Fee-in-Lieu; and
WHEREAS, the MDECD, County, City, and Company have reached agreement with
respect to the Taxes, the Fee-in-Lieu, the Fee-in-Lieu Amount, the Protective
Exemptions, and the Term; the Company's lenders for the Facility have required
the execution of this Contract as a condition precedent to the closing of the
Company's financing for the Facility; and it is now appropriate for the Parties
to enter into this Contract in order to implement the agreements already reached
in their negotiations with respect to the subject matter hereof.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing, the mutual covenants,
promises and agreements contained in this Contract, the Company's location of
the Facility in the City, County, and State, the various economic benefits to be
realized by the City, County, and State as a result of the Project, and other
good and valuable consideration, each to the other given, the receipt and
sufficiency of all of which are both hereby expressly acknowledged, the Parties
hereto, intending legally to be bound, do hereby mutually agree as follows:
Section 1. Undertakings Re: Taxes. The City, the County, the MDECD, the
Tax Assessor, and the Company agree, individually and collectively, as
indicated, as follows:
(1) MDECD, City, County, and the Tax Assessor agree that the
Facility is a "new enterprise" enumerated in ss. 27-31-101,
constituting, more particularly, a manufacturing business, and that
the Company, Facility, any assessable interests of the Company in
the Facility Components, and Inventories are eligible both for a
Fee-in-Lieu and for the Facility Exemptions and Products Exemptions;
provided, however, that the City, County, MDECD, the Tax Assessor,
and the Company acknowledge that qualification for the Facility
Exemptions and Products Exemptions is subject to the approval
thereof by the State Tax Commission ("Tax Commission").
(2) MDECD hereby consents to and approves the City's and
County's agreement to grant to the Company, Facility, and
Inventories a Fee-in-Lieu as set forth in Section 3 in lieu of the
Facility Exemptions and Products
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Exemptions, and City and County, pursuant to a resolution duly
approved and adopted by the City and County in the
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form and manner required by law, hereby contract for and grant a
Fee-in-Lieu, and the Tax Assessor hereby agrees to recognize and
implement the Fee-in-Lieu so granted, to the Company on the
Facility, Inventories, and any assessable interest of the Company in
the Facility Components, in the Fee-in-Lieu Amount for the Term, as
more particularly described in Section 3 hereof.
(3) City, County, and Tax Assessor agree that the Company,
Facility, any assessable interests of the Company in the Facility
Components, and Inventories are eligible for the Facility Exemptions
and for the Products Exemptions, and the City and County, pursuant
to a resolution duly approved and adopted by the City and County in
the form and manner required by law, hereby contract for and agree
to grant the Protective Exemptions, and the Tax Assessor hereby
agrees to recognize and implement the Protective Exemptions so
granted, to the Company for the Term as more particularly described
in Section 4 hereof.
(4) The City and County expressly disapprove and do not
consent to the Facility Exemptions otherwise provided by ss.ss.
57-3-33 and 57-10-255 except as Protective Exemptions pursuant to
Section 1(3), with the Taxes on the Company and Facility for City,
County and District purposes to be determined in accordance with
this Section 1 and Section 3.
(5) The Tax Assessor agrees to the determinations referenced
in Section 6.
(6) The Company warrants that the aggregate cost of the
Facility will exceed One Hundred Million Dollars ($100,000,000) as
required by ss. 27-31-104 for a Fee-in-Lieu to be authorized
("Minimum Capital Investment") prior to the Substantial Completion
Date as defined in Section 3(4)(A) and agrees that, upon
satisfaction of the Minimum Capital Investment, it will provide a
certificate to that effect, duly executed by an officer thereof, to
the County, City, MDECD, and Tax Assessor.
Section 2. Waiver. In consideration of the granting of the Fee-in-Lieu,
the Company agrees not to take advantage of the Facility Exemptions and Products
Exemptions available from the City and/or the County for the Facility, the
Inventories, and any assessable interest of the Company in the Facility
Components through ss.ss. 57-10-255, 57-3-33, and/or 27-31-101 et seq.
(excluding the Fee-in-Lieu under ss. 27-31-104 thereof) except as Protective
Exemptions pursuant to Section 4, and the Company hereby waives such Facility
Exemptions and Products Exemptions from the City and the County except as
Protective Exemptions pursuant to Section 4.
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Instead, the Company will pay a Fee-in-Lieu to the City and the County in
accordance with Section 3.
Section 3. Fee-in-Lieu.
(1) Amount. The Fee-in-Lieu Amount shall be equal to one-third
(1/3rd) of the Taxes on the Company, Facility, Inventories, and any
assessable interest of the Company in the Facility Components,
including County Taxes, City Taxes, and School Taxes; provided,
however, that the Fee-in-Lieu Amount payable annually by the Company
to the City, County, and District shall not be less, in the
aggregate, than One Million Nine Hundred Thousand Dollars
($1,900,000.00) for each year of the Term during which a Fee-in-Lieu
Amount is due and payable by the Company.
(2) Apportionment. The City, County, and MDECD agree that the
Fee-in-Lieu Amount paid by the Company shall be apportioned between
the City, County, and the District as follows:
(i) The amount of the Fee-in-Lieu Amount which shall be
apportioned to the District shall be equal to the
greater of:
(A) Seventy percent (70%) of the Fee-in-Lieu Amount; or
(B) The District's pro rata share of the Fee-in-Lieu
Amount calculated as follows:
(a) From the total Fee-in-Lieu Amount shall be
subtracted the City's minimum Fee-in-Lieu Amount
determined in accordance with Section 3(2)(ii)(B)
in order to arrive at the District's and County's
joint Fee-in-Lieu Amount; and
(b) The District's pro rata share of the Fee-in-Lieu
Amount shall be the proportion of the District's
and County's joint Fee-in-Lieu Amount determined
under Section 3(2)(i)(B)(a) that the millage
imposed for the District by the County bears to
the total millage imposed for both the District's
and all other County purposes;
(ii) The amount of the Fee-in-Lieu Amount which shall be
apportioned to the City shall be equal to the greater
of:
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(A) One-sixth (1/6th) of the balance of the
Fee-in-Lieu Amount remaining after allocation of
the District's position; or
(B) The amount of the Fee-in-Lieu Amount equal to
one-third (1/3rd) of the Taxes otherwise leviable
on the Company, Facility, Inventories, and any
assessable interest of the Company in the Facility
Components by the City; and
(iii) The amount of the Fee-in-Lieu Amount which shall be
apportioned to the County shall be equal to the balance
of the Fee-in-Lieu Amount remaining after allocation of
the District's and City's portions.
(3) Coverage. The Fee-in-Lieu shall be in lieu of all Taxes,
including School Taxes, which would otherwise be imposed by the
County and the City on the Company, Facility, and Inventories
(including, without limitation, equipment, real property, personal
property, and all mortgages, deeds of trust, easements,
rights-of-way, leasehold interests, other assessable property
interests, and purchase agreements thereon), as well as on any
Facility Components owned by the Company and/or any assessable
interests of the Company in any such Facility Components owned by
the County or IDA, with said Fee-in-Lieu to remain in effect for the
entire Term, in the manner allowed by law, commencing in accordance
with Section 3(4).
(4) Term. The Term of the Fee-in-Lieu shall commence on the
first January 1st on or after which both of the following events
have occurred:
(A) The date when the Project is substantially complete,
as evidenced by a certificate of substantial completion
issued by the independent engineer retained by the
lenders providing the Company's permanent, long-term
financing for the Facility ("Substantial Completion
Date"); and
(B) The Company has then satisfied the Minimum Capital
Investment;
provided, however, that, if the Substantial Completion Date occurs
on or after January 1st but before March 1st of the calendar year,
then the Project shall be deemed to have been completed, and the
Term shall commence, on January 1st immediately preceding such
Substantial Completion Date if the Company has also satisfied the
Minimum Capital Investment with respect to the Facility
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<PAGE>
on or before the Substantial Completion Date (collectively the
"First Assessment Date"). (As hereinafter used, the term "First
Assessment Year" shall mean the period beginning with the First
Assessment Date and ending on December 31st of the same calendar
year.) Provided further, however, if for any reason separate
portions of the Facility are completed in different calendar years,
then, to the extent permitted by law, each such separate portion
shall have its own Substantial Completion Date, First Assessment
Date, First Assessment Year, and Term, with the Minimum Capital
Investment requirement being applied to the aggregate cost of the
Facility incurred to date instead of to each separate portion as
each separate portion is completed.
(5) Payment. The Company shall pay the Fee-in-Lieu Amount for
the Term of ten (10) consecutive years with respect to the Facility
by the first day of February immediately following the year for
which such Fee-in-Lieu is assessed. Such Term shall commence on the
First Assessment Date. (For example, if the Substantial Completion
Date/Minimum Capital Investment requirements under Section 3(4) are
met on November 15, 1999, or on February 15, 2000, then the First
Assessment Date would be January 1, 2000, and the First Assessment
Year would be the calendar year 2000, with the Term also commencing
on January 1, 2000. Before February 1, 2001, the Company would pay
the Fee-in-Lieu Amount for the First Assessment Year with respect to
the Company's property subject to Taxes on January 1, 2000 (the
First Assessment Date).
(6) Millage Changes. Subject to the minimum Fee-in-Lieu Amount
required by Section 3(1), if the aggregate City, County, and
District millage rate is increased or decreased and such increase or
decrease is applicable generally to all taxpayers, then the
Fee-in-Lieu Amount will be increased or decreased based upon
one-third (1/3rd) of such higher or lower aggregate millage.
(7) Law Requirements. The Parties agree that the Fee-in-Lieu
shall always meet the minimum requirements of State law as provided
in ss. 27-31-104.
(8) Approvals. The MDECD hereby gives its approval to the
terms and provisions of the Fee-in-Lieu. The Tax Assessor hereby
acknowledges the terms of the Fee-in-Lieu described herein and
agrees to abide by such terms as they involve or require the Tax
Assessor's acquiescence or approval.
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<PAGE>
Section 4. Protective Exemptions.
(1) Upon the request of the Company or, if required by law,
upon receipt from the Company of a timely and complete application,
the County and City do hereby approve, consent to, and declare their
intention and agreement, to the extent permissible and available
under applicable law and subject to receipt of any required
approvals by or licenses from the Tax Commission, to grant
Protective Exemptions from Taxes (excluding, however, any State and
School Taxes where required by State law to be so excluded) for the
Term in the form of Facility Exemptions on the Facility itself, any
Process Inventories, and on any Facility Components owned by the
Company and/or any assessable interests of the Company in the
Facility Components owned by the County or IDA, and in the form of
Products Exemptions on any Products Inventories of the Company
related to the Facility.
(2) The Protective Exemptions shall not be applicable,
effective, or operational during any period of the Term during which
the Fee-in-Lieu granted hereunder is applicable, effective, and
operational. The Company expressly acknowledges that the intention
of this Contract is that the Taxes on the Facility, the Inventories,
and any Facility Components owned by the Company and/or any
assessable interests of the Company in the Facility Components owned
by the County or IDA are to be determined and paid in the form of
the Fee-in-Lieu and that the Protective Exemptions shall become
applicable, effective, and operational only if the Fee-in-Lieu, for
any reason, becomes inapplicable, ineffective, and inoperable with
respect to any particular class or item of, or interest in, the
assessable real and/or personal property of the Company
(collectively "Property") otherwise intended to be subject to the
Fee-in-Lieu under this Contract.
(3) If, for any reason, all or any portion of the Fee-in-Lieu
shall be held illegal or invalid by any court of competent
jurisdiction with respect to any Property otherwise intended to be
subject to the Fee-in-Lieu under this Contract, then the Protective
Exemptions, or the necessary applicable portions thereof, shall then
automatically become applicable, effective, and operational with
respect to such Property for any period of the Term for which all or
any portion of the Fee-in-Lieu shall be held to have been or to be
illegal or invalid with respect to such Property.
(4) If any or all of the Protective Exemptions become
effective and operational, then the Taxes annually paid by the
Company shall be aggregated with any valid
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and legal remaining portion of the Fee-in-Lieu Amount paid by the
Company in order to determine whether the Taxes so paid by the
Company, or a combination of the Taxes and any valid and legal
portion of the Fee-in-Lieu Amount so paid by the Company, satisfy
the minimum amount required to be paid annually by the Company
pursuant to Section 3(1) and, if not, then, notwithstanding the
Protective Exemptions, the Company shall pay any additional amount
necessary in order to make a total, aggregate annual payment equal
to the minimum amount required by Section 3(1).
(5) Solely for purposes of Sections 3(1) and (2), any Taxes
paid by the Company as a result of the operation of the Protective
Exemptions shall be deemed to be, and treated as, part of the
Fee-in-Lieu Amount, and, except to the extent otherwise required by
law, the total, aggregate annual payment of Taxes and the balance of
the Fee-in-Lieu Amount shall be apportioned as provided by Section
3(2).
(6) The Term of the Protective Exemptions shall commence on
the Substantial Completion Date in accordance with Section 3(4)(A)
but without regard to the necessity of otherwise satisfying the
minimum capital investment requirement of Section 3(4)(B). The
intention of the City, County, Tax Assessor, and Company is that the
Terms of the Protective Exemptions and the Fee-in-Lieu shall
correspond and run concurrently, but, in the event for any reason
the Terms of a Protective Exemption and the Fee-in-Lieu applicable
to any Property do not begin at the same time, then the City,
County, Tax Assessor, and Company agree that the aggregate of the
periods of time during which the Fee-in-Lieu and a Protective
Exemption are applicable, effective and operational with respect to
a particular Property shall not exceed the Term, but the City,
County, and Tax Assessor agree that the Company shall be entitled to
the Fee-in-Lieu and/or a Protective Exemption with respect to each
such particular Property for an aggregate period of time equal to
the Term.
(7) Any Taxes payable during the Term while a Protective
Exemption is applicable, effective, and operational shall be payable
in accordance with Section 3(5). In addition, the provisions of
Section 3(6) shall be applicable to the Taxes during the Term while
a Protective Exemption is applicable, effective, and operational.
The Protective Exemptions shall always meet the minimum requirements
of State law provided in ss.ss. 27-31-7, 27-31-51 et seq., 27-31-101
et seq., 57-3-33, and 57-10-255, as applicable.
Section 5. Conditions. The Fee-in-Lieu granted and Protective Exemptions
agreed to be granted by this Contract, as
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well as the other terms and provisions hereof, are contingent upon the
subsequent actual construction and placement into service of the Facility. The
Company agrees that, except during maintenance periods scheduled in accordance
with good utility practices, nondispatch periods scheduled in accordance with
the terms of power sales agreements entered into between the Company and the
purchasers of its electricity, and periods when the Facility is not operational
due to events beyond the reasonable control of the Company, including, but not
limited to, those outage periods caused by the Force Majeure events hereinafter
described, it will cause the Facility to be capable of generating electric power
for the entire period of time which is coextensive with the Term. In the event
that the Company fails to meet such requirement, then the Term of the
Fee-in-Lieu and Protective Exemptions shall, upon receipt by the Company of
prior written notice to that effect from the MDECD, County and City, terminate
effective as of the next succeeding January 1st. For purposes of this Section 5,
"Force Majeure" is defined as something beyond the Company's reasonable control,
including, but not limited to, acts of God, governmental acts (including delay
or denial of necessary permits or approvals and whether or not within the power
of the government or governmental agency), acts of the public enemy, terrorism,
sabotage and civil disturbance, floods, landslides, earthquakes, fires,
washouts, droughts, unusually severe weather (including, without limitation,
lightning, hurricanes, tornadoes, and other storms), epidemics, quarantine,
restrictions, strikes, labor slowdowns, labor troubles, freight embargoes, and
breakdowns or damages to equipment and necessary facilities (including emergency
outages of equipment or facilities used for making repairs to avoid breakdown,
damage, or imminent danger and specifically excepting economic conditions or
events or business decisions or judgment, but specifically excluding a failure
to make any payment (collectively "Force Majeure"). The Company shall exercise
reasonable business efforts to remove the event of Force Majeure; provided,
however, that nothing in this Section shall require the Company to settle or
resolve any labor dispute if it deems the settlement to be contrary to its best
interests.
Section 6. Assessment.
(1) Valuation. With respect to the calculation of the assessed
valuation of the Property, the Tax Assessor agrees that such
assessment shall be made in accordance with the values and methods
resulting from the application of ss. 27-35-50 and such other
applicable rules, regulations, and guidelines consistent therewith
adopted from time to time by the Tax Commission for such purposes;
provided, however, that the Tax Assessor further:
(1) Acknowledges that, pursuant to the current edition
of the "Mississippi Appraisal Manual" published by the
Property Assessment Division of the Tax Commission
("Manual"),
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property generally does not have a value in excess of
its replacement cost and that the cost approach to
valuation usually establishes the upper limit of
property values (Manual pp. VII-2 and VII-3), with the
result that the Tax Assessor also agrees that, absent
unusual or exceptional circumstances, the initial
assessment of the Property, as of the First Assessment
Date, should not exceed the actual cost thereof; and
(2) Agrees that the Property constitutes, under the
Manual, "industrial property" and that, under the
Manual, original acquisition cost new, including all
costs associated with installing equipment in place, is
the base for assessment of "industrial property," with
the result that the Tax Assessor also agrees that the
initial assessment of the Property, as of the First
Assessment Date, should not exceed the cost thereof; and
(3) Agrees that, thereafter, based upon the Property's
industrial classification pursuant to the Manual, this
base cost will be multiplied by the appropriate
industrial index complex multiplier (the inflation
factor) for that particular industry furnished by the
Tax Commission annually, based upon the age of the
Facility, in order to arrive at the then current
reproduction cost, which will then be multiplied by the
appropriate percentage of depreciation factor for that
particular industry from the industrial depreciation
schedules also provided annually by the Tax Commission
(Manual p. XI-7), with any economic and/or functional
obsolescence to be considered by the Tax Assessor at the
request of the Company following appropriate Tax
Commission guidelines but with office furniture,
fixtures, and equipment being assessed separately using
the appropriate Tax Commission tables and indices.
(Manual p. XI-10, XI-26, and XI-60).
(2) Classification. With respect to the classification of the
Property for purposes of the calculation of the assessed valuation
thereof, the Tax Assessor agrees with the application of the
following general methodology to determine the portion of the
Property which constitutes real property and personal property:
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(1) Land and improvements thereto constitute real
property;
(2) Any Property which can be removed without
substantial harm or devaluation of the real property
shall be classified as personal property; and
(3) Based upon the past assessment practices in the
State and of the Tax Commission, in those areas of
questionable classification of property as either real
property or personal property, a preference for
classification as personal property will be utilized.
(3) Assessment Ratio. The Tax Assessor acknowledges and agrees
that:
(1) neither the Facility nor the Project nor any portion
thereof constitutes a public utility or a public service
corporation for any ad valorem tax purposes;
(2) neither the Facility nor the Project nor any portion
thereof constitutes "Class IV Property" as described in
Section 112 of the State Constitution and ss. 27-35-4;
(3) neither the Facility nor the Project nor any portion
thereof is subject to assessment by the Tax Commission
under ss. 27-35-301 et seq.; and
(4) the Facility, Inventories, and any Facility
Components owned by the Company and/or any assessable
interests of the Company in the Facility Components are
subject to a fifteen percent (15%) of true value
assessment ratio.
(4) Inventories. The Tax Assessor acknowledges and agrees
that:
(A) neither the Company's contractual rights under its
natural gas supply contracts with its natural gas
suppliers nor its contractual rights under its water
supply agreement with the United States Army Corps of
Engineers ("Corps") constitute Process Inventory
assessable for purposes of Taxes;
(B) the Company's contractual rights under its
electricity sales agreements with its
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customers do not constitute Products Inventory
assessable for purposes of Taxes;
(3) the inventory of water obtained by the Company from
the Corps has no assessable value;
(4) due to the nature of the electric power generation
business of the Company and the operations of the
Facility, the Company will have no work-in-process
inventory; and
(5) pursuant to ss. 27-35-1(1), the values of the
Inventories annually reportable by the Company to the
Tax Assessor may, at the option of the Company from
year-to-year, be either the value thereof on January 1st
of that year or the average monthly inventory
(consistently calculated as of the last day of each
month) during the twelve (12) months preceding January
1st of each year, with the amount thereof being
determined as follows:
(1) Company's Process Inventory of natural gas shall,
on the appropriate measurement day, be the lesser
of either the total amount or volume of natural
gas used by the Facility on that particular day or
the maximum volume capacity of the natural gas
pipeline constituting a Facility Component between
the pipeline interconnections and the Facility at
any single moment; and
(2) Company's Products Inventory of electricity shall,
on the appropriate measurement day, be the lesser
of either the total amount or volume of
electricity produced by the Facility on that
particular day or the maximum capacity of the
electrical interconnection system between the
Entergy/TVA interconnections and the Facility at
any single moment.
Section 7. Facility Components. The City, the County, and the Tax Assessor
acknowledge that the Facility Components owned by the County or IDA consist of
publicly-owned improvements which will be exempt from Taxes under ss.
27-31-1(b). Consequently, the Tax Assessor agrees that the Company will not be
required to pay Taxes or a Fee-in-Lieu to the City, County, or District with
respect to
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the County's or IDA's interest in the Facility Components, whether
such Components or portions thereof are located inside or outside the County.
The City, County, and the Tax Assessor acknowledge that it is their and the
Company's intention that the Fee-in-Lieu cover not only the Taxes on the
Facility itself but also the Taxes, if any, on any Inventories and on the
Company's assessable interest, if any, in the Facility Components owned by the
County or IDA, as well as the Taxes on any of the Facility Components owned by
the Company.
Section 8. Future.
(1) To the extent lawfully available to the Company and if the
Company is then in substantial compliance with its material
obligations contained in this Contract, City, County, and MDECD,
agree to provide, and Tax Assessor agrees to recognize and
implement, maximum statutory tax exemptions and fee-in-lieu-of-taxes
treatment to the Company for any future additions, expansions,
improvements, or equipment replacements to the Facility and/or
Facility Components upon proper application of Company for such
exemptions or fee-in-lieu-of-taxes treatment pursuant to applicable
law. Such exemptions and fee-in-lieu treatment shall include, but
not necessarily be limited to, ad valorem exemptions and fee-in-lieu
treatment for real and personal property, raw materials,
work-in-process, furniture and fixtures, machinery and equipment
(including computer hardware and software), and finished products.
(2) To the extent lawfully available to the Company and if the
Company is then in substantial compliance with its material
obligations contained in this Contract, the Company shall be
permitted to take full advantage of, and the MDECD, City, and County
agree that, upon receipt of a timely and complete application from
the Company, if required by applicable statutes, each of them will
approve and provide, and Tax Assessor agrees to recognize and
implement, any additional tax exemptions and other ad valorem tax
incentives hereafter provided by Mississippi law which may be
provided by, or which are subject to the approval of, the MDECD,
City, or County.
(3) If any of the exemptions or credits described herein
expire pursuant to statute, the Company shall be "grandfathered"
into such exemptions or credits to the extent permissible under
applicable law.
(4) Provided, however, that the Company expressly acknowledges
its understanding that the present Board of Aldermen, Board of
Supervisors, Tax Assessor, or
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<PAGE>
Executive Director of MDECD may not be able to obligate a future
Board of Aldermen, Board of Supervisors, Tax Assessor, or Executive
Director of MDECD; however, said officials who are a party to this
Contract agree to use their best efforts to assure the compliance by
the MDECD, City, County, and Tax Assessor, as applicable, with the
provisions of this Section 8.
Section 9. Miscellaneous.
(1) Amendments. Any amendments to this Contract shall be in
writing and signed by all Parties who are affected by such amendment
or their respective successors and assigns.
(2) Applicable Law. This Contract shall be governed by the
laws of the State of Mississippi notwithstanding the fact that one
or more of the Parties to this Contract may be or become a resident
or a citizen of, or be or become domiciled in, a different state.
(3) Forum Selection. To the extent permitted by law, venue for
any legal action involving the City, County, Tax Assessor, and/or
the Company arising from this Contract shall be in Panola County,
Mississippi.
(4) Counterparts. This Contract may be executed in two or more
counterparts, each and all of which shall be deemed an original and
all of which together shall constitute but one and the same
instrument.
(5) Headings. The use of captions and headings in this
Contract are solely for convenience and shall have no legal effect
in construing the provisions of this Contract.
(6) Gender; Number. Whenever the context of this Contract
requires, the gender of all words herein shall include the
masculine, feminine and neuter, and the number of all words herein
shall include the singular and plural.
(7) Entire Agreement. This Contract constitutes the essential
terms of the agreement between the Parties for the purposes stated
herein, and no other offers, agreements, understandings, warranties,
or representations exist between the Parties with respect to the
subject matter hereof.
(8) Statutory References. Unless otherwise specifically
indicated herein to the contrary, all references herein to statutory
sections refer to the Mississippi Code Annotated of 1972, as
amended.
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<PAGE>
(9) Severability. If any clause, provision or section of this
Contract be held illegal or invalid by any court, the invalidity of
such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Contract
shall be construed and enforced as if such illegal or invalid
clause, provision or section had not been contained herein.
(10) Assignability. So long as the Company is in substantial
compliance with its obligations under this Contract, this Contract
is assignable by the Company to any person acquiring the Facility
upon receipt by the Company of prior written approval for such
assignment from the County, which approval shall not be unreasonably
withheld; provided, however, that, in any and all circumstances,
this Contract may be collaterally assigned, and/or assigned outright
upon a default in its obligations to its lenders, by the Company to
or on behalf of the lenders for the Facility. Any such assignment
shall be binding upon, and inure to the benefit of, both the Parties
hereto and the respective successors and the assigns of the Company.
(11) Authority. The Parties hereto recognize, acknowledge, and
agree that the agreements contained herein have been the subject of
arm's length negotiations between the Parties, and each of the
Parties recognizes, acknowledges, represents, and warrants that, to
the best of their knowledge and to the extent permissible under
applicable law (as to which no representation or warranty is made or
implied by the MDECD, County, City, and the Tax Assessor), the
obligations set forth herein are the valid and legally and mutually
binding reciprocal obligations of such Party, enforceable in a court
of competent jurisdiction against such respective Party in
accordance with the terms hereof. Each of the Parties and each of
the officers or officials thereof represents and warrants that the
terms and provisions of this Contract applicable to, and his or her
execution of this Contract in the name of and on behalf of, such
Party has been authorized and approved, as required by law, by any
and all necessary actions of the applicable Board of Aldermen, Board
of Supervisors, Board of Directors, or other appropriate governing
body of the Party and that such officer or official has been duly
authorized by such Party to execute this Contract on behalf of and
in the name of such Party.
(12) No Personal Liability. The Parties acknowledge and agree
that in no event shall any individual, partner, member, shareholder,
owner, officer,
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<PAGE>
director, employee, affiliate, beneficiary, or elected or appointed
public official of any Party be personally liable to another Party
for any payments, obligations or performance due under this
Contract, or any breach or failure of performance of a Party
hereunder and that the sole recourse for payment or performance of
the obligations hereunder shall be against the Parties themselves
and each of their respective assets and not against any other
Person, except for such liability as may be expressly assumed by an
assignee pursuant to an assignment of, or pursuant to, this Contract
in accordance with the terms hereof. ("Person" shall mean, solely
for this Section 9(13), an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, limited liability company, joint venture, state or
local government or any political subdivision or department, agency
or instrumentality thereof, or any other entity of whatever nature.)
Section 10. Facility Components. For purposes of this Contract, the term
"Facility Components" is defined, and the Facility Components are generally
described, as follows:
(1) Industrial Water Supply System: An industrial water supply
system to the Facility from Enid Lake, including, but not limited
to, the following:
(1) An intake structure and pumping station located at
Enid Lake.
(2) A water line for approximately 13.5 miles from Enid
Lake to the Facility.
(3) A service road at Enid Lake.
(4) Water filtering, treatment, storage and pumping
facilities at the Facility Site for raw water and
demineralized water.
(2) Process Wastewater Disposal System: A process wastewater
disposal system designed to pump the Company's discharged wastewater
into a pipeline of approximately 5800 feet in length from the
Facility to the Little Tallahatchie River.
(3) Fire Protection System: Construction and equipping of an
installed fire protection system on the Facility Site, including an
emergency, diesel-powered water pump with fuel storage.
(4) Natural Gas Pipeline: A lateral natural gas pipeline to be
constructed between existing interstate natural gas pipelines and
the Facility, including, but not limited to, connections, regulation
equipment, and the pipeline.
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<PAGE>
(5) Other Facility Components for the Project which may
lawfully be financed under the Impact Act.
EXECUTION
IN WITNESS WHEREOF, the undersigned individuals, acting in their indicated
official capacity, have executed this Contract on behalf of and in the name of
the Parties on the dates set forth opposite their respective names, having first
been duly authorized so to do.
Company: LSP Energy Limited Partnership
By: LSP Energy, Inc.,
General Partner
Date: August 20, 1998 By: /s/ Frank E. Hardenbergh
-------------------------
Frank E. Hardenbergh
Its: Senior Vice President
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<PAGE>
County: PANOLA COUNTY, MISSISSIPPI
Date: August 24, 1998 By: /s/ Robert Avant
--------------------------------
Robert Avant
President, Board of
Supervisors
Date: August 24, 1998 /s/ Sallie H. Fisher
--------------------------------
Sallie H. Fisher, Clerk
(Seal) Board of Supervisors
Tax Assessor: PANOLA COUNTY TAX
ASSESSOR/COLLECTOR
Date: August 21, 1998 By: /s/ David Garner
-------------------------
David Garner
Tax Assessor/Collector
City: CITY OF BATESVILLE, MISSISSIPPI
Date: August 21, 1998 By: /s/ Bobby Baker
-------------------------------
Bobby Baker
Mayor
Date: August 21, 1998 /s/ Judy F. Savage
-------------------------------
Judy F. Savage, City Clerk
(Seal)
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<PAGE>
MDECD: MISSISSIPPI DEPARTMENT OF ECONOMIC
AND COMMUNITY DEVELOPMENT, acting
for and on behalf of the State of
Mississippi
Date: August 21, 1998 By: /s/ James B. Heidel
---------------------------
James B. Heidel
Its: Executive Director
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<PAGE>
Exhibit 10.16
================================================================================
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
dated as of August 28, 1998
among
LSP ENERGY LIMITED PARTNERSHIP,
CREDIT SUISSE FIRST BOSTON,
as L/C Facility Agent,
CREDIT SUISSE FIRST BOSTON,
as Letter of Credit Issuer,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS...........................................................1
AGREEMENT..........................................................1
ARTICLE 1 DEFINED TERMS; RULES OF INTERPRETATION.................2
Section 1.1 Defined Terms.....................................2
Section 1.2 Rules of Interpretation...........................6
ARTICLE 2 LETTER OF CREDIT FACILITY..............................6
Section 2.1 Letter of Credit Commitment.......................6
Section 2.2 LOC Loans........................................10
Section 2.3 Fees.............................................14
Section 2.4 Other Payment Terms..............................15
Section 2.5 Pro Rata Treatment...............................21
Section 2.6 Change of Circumstances..........................22
Section 2.7 Funding Losses...................................25
Section 2.8 Alternate Office; Minimization of Costs;
Replacement of Letter of Credit Bank.............25
ARTICLE 3 CONDITIONS PRECEDENT..................................27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES........................27
ARTICLE 5 COVENANTS.............................................28
ARTICLE 6 EVENTS OF DEFAULT; REMEDIES...........................28
Section 6.1 Events of Default................................28
Section 6.2 Remedies.........................................28
ARTICLE 7 L/C FACILITY AGENT; SUBSTITUTION......................29
Section 7.1 Appointment, Powers and Immunities...............29
Section 7.2 Reliance.........................................30
Section 7.3 Non-Reliance.....................................31
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Page
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Section 7.4 Defaults.........................................31
Section 7.5 Indemnification..................................31
Section 7.6 Successor L/C Facility Agent.....................32
Section 7.7 Authorization....................................33
Section 7.8 L/C Facility Agent as Lender.....................33
Section 7.9 Amendments: Waivers..............................33
Section 7.10 Withholding Tax..................................35
Section 7.11 General Provisions as to Payments................35
Section 7.12 Substitution of Letter of Credit Bank............36
Section 7.13 Participation....................................36
Section 7.14 Transfer of Letter of Credit Commitment..........37
Section 7.15 Assignability to Federal Reserve Lender..........38
Section 7.16 Voting...........................................39
ARTICLE 8 MISCELLANEOUS PROVISIONS..............................40
Section 8.1 Notices..........................................40
Section 8.2 Right to Set-Off.................................40
Section 8.3 Successors and Assigns...........................40
Section 8.4 Survival.........................................40
Section 8.5 No Waiver; Remedies Cumulative...................41
Section 8.6 Headings Descriptive.............................41
Section 8.7 Severability.....................................41
Section 8.8 Reinstatement....................................41
Section 8.9 Counterparts.....................................41
Section 8.10 Accounting Terms.................................41
Section 8.11 Additional Financing.............................42
Section 8.12 No Partnership. Etc..............................42
Section 8.13 Deed of Trust/Collateral Documents...............42
Section 8.14 Limitation on Liability..........................42
Section 8.15 Knowledge and Attribution........................43
Section 8.16 No Approval of Work..............................43
Section 8.17 Governing Law....................................43
Section 8.18 Consent to Jurisdiction..........................43
Section 8.19 Waiver of Jury Trial.............................44
Section 8.20 Indemnities and Expenses.........................44
Section 8.21 Entire Agreement.................................44
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Page
----
Section 8.22 Third Party Beneficiaries........................44
Section 8.23 Scope of Liability...............................45
SCHEDULE I - LETTER OF CREDIT BANKS AND
LETTER OF CREDIT COMMITMENTS
SCHEDULE II - AMORTIZATION SCHEDULE FOR LOC LOANS
EXHIBIT A - FORM OF VEPCO LETTER OF CREDIT-A
EXHIBIT B - FORM OF VEPCO LETTER OF CREDIT-B
EXHIBIT C - FORM OF VEPCO LETTER OF CREDIT-C
EXHIBIT D - FORM OF REQUEST FOR ISSUANCE
EXHIBIT E - FORM OF LOC LOAN NOTE
EXHIBIT F - NOTICE OF LOC LOANS
EXHIBIT G - FORM OF CONFIRMATION OF INTEREST
PERIOD SELECTION
EXHIBIT H - FORM OF NOTICE OF CONVERSION OF
LOAN TYPE
EXHIBIT I-1 - BANK WITHHOLDING CERTIFICATE (TREATY)
EXHIBIT I-2
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<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this
"Agreement"), dated as of August 28, 1998, is by and among LSP ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Partner ship"), CREDIT SUISSE
FIRST BOSTON, as agent for the Letter of Credit Banks (as defined below) (in
such capacity, the "L/C Facility Agent"), CREDIT SUISSE FIRST BOSTON, as issuer
of the Letters of Credit hereunder (in such capacity, the "Letter of Credit
Issuer"), and the other financial institutions from time to time party hereto
(collectively with the Letter of Credit Issuer, the "Letter of Credit Banks").
RECITALS
A. The Partnership has entered or will enter into certain Project
Documents and Credit Documents providing for, among other things, the ownership,
development, construction, operation, maintenance and financing of a nominal 800
MW gas-fired combined cycle electric generating facility to be located in
Batesville, Mississippi.
B. Pursuant to the Power Purchase Agreements, the Partnership has
agreed to render, and Aquila and VEPCO, respectively, have agreed to receive and
pay for, the service of providing capacity and energy for the term of each of
the Power Purchase Agreements on the terms and conditions set forth therein.
C. The Partnership is required to provide letters of credit or other
security in favor of VEPCO to support its obligations under the VEPCO PPA.
D. Subject to and upon the terms and conditions herein set forth,
the Letter of Credit Issuer is willing to provide the Letters of Credit to the
Partnership as provided for herein.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
<PAGE>
ARTICLE 1
DEFINED TERMS; RULES OF INTERPRETATION
Section 1.1 Defined Terms. (a) Unless otherwise defined herein,
terms defined in Exhibit A to the Common Agreement shall have such defined
meanings when used herein.
(b) The following terms shall have the following respective
meanings:
"Applicable Margin" shall mean:
(i) at all times with respect to the Base Rate LOC Loans, (a) from
and including the Closing Date to but excluding the date of Term-Conversion,
0.625%, (b) from and including the date of Term-Conversion to but excluding the
third anniversary thereof, 0.750%, and (c) from and including the third
anniversary of the date of Term-Conversion to and including the Letter of Credit
Maturity Date, 0.875%; and
(ii) with respect to the LIBOR LOC Loans, (a) from and including the
Closing Date to but excluding the date of Term-Conversion, 1.50%, (b) from and
including the date of Term-Conversion to but excluding the third anniversary
thereof, 1.625%, and (c) from and including the third anniversary of the date of
Term-Conversion to and including the Letter of Credit Maturity Date, 1.75%.
"Availability Date" shall mean: (i) in the case of the VEPCO Letter
of Credit-A, the Closing Date; (ii) in the case of the VEPCO Letter of Credit-B,
on any date on which the Partnership is required to provide additional
Completion Security (as defined in the VEPCO PPA) under Section 3.3(b) of the
VEPCO PPA; and (iii) in the case of the VEPCO Letter of Credit-C, the Commercial
Operation Date (as defined in the VEPCO PPA).
"Base Rate LOC Loan" shall mean any LOC Loan made and/or being
maintained at a rate of interest based upon the Base Rate.
"Capital Adequacy Requirement" shall have the meaning given to such
term in Section 2.6(d).
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<PAGE>
"Change of Law" shall have the meaning given to such term in Section
2.6(b).
"Expiration Date" shall mean the expiration date of the relevant
Letter of Credit as set forth therein.
"Interest Period Confirmation" shall have the meaning given to such
term in Section 2.2(f)(ii).
"L/C Facility Agent's Office" shall mean Eleven Madison Avenue, New
York, New York 10022, or such other office as the L/C Facility Agent may
hereafter designate in writing as such to the other parties hereto.
"L/C Facility Documents" shall mean this Agreement, each Letter of
Credit, each LOC Loan Note and any other document or instrument entered into in
connection with the transactions contemplated thereby.
"Lending Office" shall mean, with respect to any Letter of Credit
Bank, the office designated as such for such Letter of Credit Bank on Schedule I
or such other office of such Letter of Credit Bank as such Letter of Credit Bank
may specify from time to time to the L/C Facility Agent and the Partnership.
"Letter of Credit Fee" shall have the meaning given to such term in
Section 2.3(a).
"Letter of Credit Commitment" shall mean at any time, for any Letter
of Credit Bank, the amount set forth opposite such Letter of Credit Bank's name
on Schedule I hereto under the heading "Letter of Credit Commitment," as such
amount may be reduced from time to time pursuant to Section 2.1(e) or Section
7.14, or increased pursuant to Section 7.14 in the case of an assignment
thereunder to such Letter of Credit Bank of all or a portion of the Letter of
Credit Commitment, Reimbursement Obligations and LOC Loans of another Letter of
Credit Bank.
"Letters of Credit" shall have the meaning given to such term in
Section 2.1(a).
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<PAGE>
"LIBOR Rate LOC Loan" shall mean any LOC Loan made and/or being
maintained at a rate of interest equal to the LIBOR Rate.
"Liquidation Costs" shall have the meaning given to such term in
Section 2.7.
"LOC Loan" shall have the meaning given to such term in Section
2.1(f)(ii).
"LOC Loan Letter of Credit" shall mean the VEPCO Letter of Credit-A
or the VEPCO Letter of Credit-B, as applicable.
"LOC Loan Maturity Date" shall mean the earlier of (i) the date
which is five (5) years from the Termination Date for the LOC Loan Letters of
Credit and (ii) the date on which all outstanding LOC Loans shall become due and
payable pursuant to Section 6.2(a).
"LOC Loan Note" shall have the meaning given to such term in Section
2.2(a).
"Minimum Notice Period" shall mean (i) at least three (3) Banking
Days before (a) the last day of any Interest Period or (b) the date of
conversion of a Type of LOC Loan resulting in whole or in part in the Letter of
Credit Banks making LIBOR LOC Loans, and (ii) at least two (2) Banking Days
before the date of conversion of a Type of LOC Loan resulting in whole of Base
Rate LOC Loans.
"Non-Advancing Letter of Credit Bank" shall have the meaning given
to such term in Section 7.12.
"Notice of Conversion of Loan Type" shall have the meaning given to
such term in Section 2.2(g).
"Notice of LOC Loan" shall have the meaning given to such term in
Section 2.2(b).
"Other Taxes" shall have the meaning given to such term in Section
2.4(d).
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<PAGE>
"Pro Rata Share" shall mean as to any Letter of Credit Bank, a
fraction (expressed as a percentage), the numerator of which shall be the
aggregate amount of such Letter of Credit Bank's outstanding LOC Loans and
Letters of Credit (or Letter of Credit Commitments if no LOC Loans or Letters of
Credit are then outstanding), and the denominator of which shall be the
aggregate amount of out standing LOC Loans and Letters of Credit for all of the
Letter of Credit Banks (or the total Letter of Credit Commitments if no LOC
Loans or Letters of Credit are then outstanding).
"Reimbursement Obligation" shall have the meaning given to such term
in Section 2.1(f).
"Request for Issuance" shall have the meaning given to such term in
Section 2.1(b).
"Required Letter of Credit Banks" shall mean Letter of Credit Banks
with an aggregate of Pro Rata Shares of more than sixty-six and two thirds
percent (66 2/3%).
"Stated Amount" shall mean the face amount of the relevant Letter of
Credit as set forth therein.
"Taxes" shall have the meaning given to such term in Section 2.4(d).
"Termination Date" shall mean: (i) in the case of the LOC Loan
Letters of Credit, the earlier of (a) June 1, 2001 and (b) the Commercial
Operation Date (as defined in the VEPCO PPA); and (ii) in the case of the VEPCO
Letter of Credit-C, the date which is three (3) years after the earlier of (a)
June 1, 2000 and (b) the Commercial Operation Date (as defined in the VEPCO
PPA).
"Total Letter of Credit Commitment" shall mean the sum of the Letter
of Credit Commitments of all of the Letter of Credit Banks.
"VEPCO Letter of Credit-A" shall have the meaning given to such term
in Section 2.1(a).
"VEPCO Letter of Credit-B" shall have the meaning given to such term
in Section 2.1(a).
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<PAGE>
"VEPCO Letter of Credit-C" shall have the meaning given to such term
in Section 2.1(a).
"Type" means the type of LOC Loan, whether a Base Rate LOC Loan or
LIBOR LOC Loan.
Section 1.2 Rules of Interpretation. Except as otherwise expressly
provided herein, the rules of interpretation set forth in Exhibit A to the
Common Agreement shall apply to this Agreement.
ARTICLE 2
LETTER OF CREDIT FACILITY
Section 2.1 Letter of Credit Commitment. (a) Subject to and upon the
terms and conditions hereof, the Letter of Credit Commitments may be utilized,
upon the written request of the Partnership, by the issuance by the Letter of
Credit Issuer of: (i) an irrevocable stand-by letter of credit substantially in
the form of Exhibit A for the account of the Partnership and naming VEPCO as the
beneficiary thereof to secure the Partnership's obligations under Section 3.3(a)
of the VEPCO PPA prior to the Commercial Operation Date (as defined in the VEPCO
PPA) (the "VEPCO Letter of Credit-A"); (ii) an irrevocable stand-by letter of
credit substantially in the form of Exhibit B for the account of the
Partnership and naming VEPCO as the beneficiary thereof to secure the
Partnership's obligations under Section 3.3(b) of the VEPCO PPA prior to the
Commercial Operation Date (as defined in the VEPCO PPA) (the "VEPCO Letter of
Credit-B"); or (iii) an irrevocable stand-by letter of credit substantially in
the form of Exhibit C for the account of the Partner ship and naming VEPCO as
the beneficiary thereof to secure the Partnership's obligations under Section
3.3(a) of the VEPCO PPA on and after the Commercial Operation Date (as defined
in the VEPCO PPA) (the "VEPCO Letter of Credit-C" and, together with the VEPCO
Letter of Credit-A and the VEPCO Letter of Credit-B, the "Letters of Credit");
provided that in no event shall (i) the aggregate Stated Amount of all Letters
of Credit, together with the aggregate amount of all outstanding Reimbursement
Obligations and LOC Loans, exceed the Total Letter of Credit Commitment as in
effect from time to time, or (ii) the expiration date of any Letter of Credit
extend beyond the Termination Date for such Letter of Credit. Each Letter of
Credit shall, subject to the satisfaction of the terms and conditions set forth
herein, be available on and after the Availability Date for such Letter of
Credit until the Termination Date for such Letter of Credit.
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<PAGE>
(b) The Partnership shall give the L/C Facility Agent at least
four (4) Banking Days irrevocable prior written notice, substantially in the
form of Exhibit D (effective upon receipt), specifying the date (which shall be
no later than ninety (90) days preceding the applicable Termination Date) each
Letter of Credit is to be issued, describing in reasonable detail the proposed
terms of such Letter of Credit (including the Stated Amount thereof) and the
nature of the transactions or obligations proposed to be supported thereby (such
notice, a "Request for Issuance"); provided that the expiration date of any
Letter of Credit shall be on or prior to the Termination Date for such Letter of
Credit. Upon receipt of any Request for Issuance, the L/C Facility Agent shall
advise the Letter of Credit Issuer of the contents thereof.
(c) The issuance by the Letter of Credit Issuer of each Letter
of Credit shall, in addition to the conditions precedent set forth in Article 3,
be subject to the conditions precedent that: (i) such Letter of Credit shall be
in such form and contain such terms as shall be satisfactory to the Letter of
Credit Issuer consistent with its then current practices and procedures with
respect to letters of credit of the same type; (ii) such Letter of Credit shall
be posted in connection with the Partnership's obligations under (A) in the case
of the VEPCO Letter of Credit-A, Section 3.3(a) of the VEPCO PPA prior to the
Commercial Operation Date (as defined in the VEPCO PPA), (B) in the case of the
VEPCO Letter of Credit-B, Section 3.3(b) of the VEPCO PPA prior to the
Commercial Operation Date (as defined in the VEPCO PPA), and (C) in the case of
the VEPCO Letter of Credit-C, Section 3.3(a) of the VEPCO PPA on and after the
Commercial Operation Date (as defined in the VEPCO PPA); and (iii) the
Partnership shall have executed and delivered such other instruments and
agreements relating to such Letter of Credit as the Letter of Credit Issuer
shall have reasonably requested consistent with its then current practices and
procedures with respect to letters of credit of the same type.
(d) On each day during the period commencing with the issuance
by the Letter of Credit Issuer of any Letter of Credit and until such Letter of
Credit shall have expired or been terminated, the Letter of Credit Commitment of
each Letter of Credit Bank shall be deemed to be utilized for all purposes
hereof in an amount equal to such Letter of Credit Bank's Pro Rata Share of the
then undrawn face amount of such Letter of Credit. Each Letter of Credit Bank
(other than the Letter of Credit Issuer) agrees that, upon the issuance of any
Letter of Credit hereunder, it shall automatically acquire a participation in
the Letter of Credit Issuer's liability under such Letter of Credit in an amount
equal to such Letter of Credit Bank's Pro Rata Share of such liability, and each
Letter of Credit Bank (other than the Letter of Credit Issuer) thereby shall
absolutely, uncondition-
7
<PAGE>
ally and irrevocably assume, as primary obligor and not as surety, and shall be
unconditionally obligated to the Letter of Credit Issuer to pay and discharge
when due, its Pro Rata Share of the Letter of Credit Issuer's liability under
such Letter of Credit.
(e) Upon at least five (5) Banking Days' prior irrevocable
written notice (or telephonic notice promptly confirmed in writing) to the L/C
Facility Agent (which notice the L/C Facility Agent shall promptly transmit to
each of the Letter of Credit Banks), the Partnership shall have the right,
without premium or penalty, to permanently reduce each Letter of Credit Bank's
Pro Rata Share of all or part of the unused Total Letter of Credit Commitment;
provided that any partial reduction shall be in a minimum aggregate amount of
$1,000,000.
(f) (i) Upon any drawing under the VEPCO Letter of Credit-C,
the Partnership hereby unconditionally agrees to pay and reimburse the L/C
Facility Agent for the account of the Letter of Credit Issuer for the amount of
such drawing (the "Reimbursement Obligation") at or prior to the date on which
payment is to be made by the Letter of Credit Issuer in accordance with the
terms of the VEPCO Letter of Credit-C to the beneficiary thereunder, without
further action on the part of the Letter of Credit Issuer, the L/C Facility
Agent or any Letter of Credit Bank, and without presentment, demand, notice,
protest or other formalities of any kind. In the event that the Partnership does
not pay the full amount of any proposed drawing with respect to the VEPCO Letter
of Credit-C referred to in the preceding sentence on or prior to the date
payment is to be made by the Letter of Credit Issuer, the Partnership shall also
pay, to the L/C Facility Agent for the account of the Letter of Credit Banks,
interest on such amount at a rate per annum equal to the Default Rate.
(ii) Upon any drawing under any LOC Loan Letter of
Credit, unless the Partnership shall pay and reimburse the Letter of Credit
Issuer for the amount of such drawing at or prior to the date on which payment
is to be made by the Letter of Credit Issuer in accordance with the terms of
such LOC Loan Letter of Credit to the beneficiary thereunder, the Partnership
shall be deemed to have received a loan (each an "LOC Loan") from each Letter of
Credit Bank in the amount of the payment made by such Letter of Credit Bank to
the L/C Facility Agent for the account of the Letter of Credit Issuer pursuant
to clause (h) of this Section 2.1.
(g) If the Partnership fails to reimburse the Letter of Credit
Issuer for a demand for payment under any Letter of Credit by the date of
payment by the Letter
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<PAGE>
of Credit Issuer thereunder, the L/C Facility Agent shall give each Letter of
Credit Bank prompt notice of the amount of the demand for payment, specifying
such Letter of Credit Bank's Pro Rata Share of the amount of the related demand
for payment.
(h) Each Letter of Credit Bank (other than the Letter of
Credit Issuer) shall pay to the L/C Facility Agent for account of the Letter of
Credit Issuer at the L/C Facility Agent's Office in dollars and in immediately
available funds, the amount of such Letter of Credit Bank's Pro Rata Share of
any payment under any Letter of Credit upon notice by the Letter of Credit
Issuer (through the L/C Facility Agent) to such Letter of Credit Bank requesting
such payment and specifying such amount. Each such Letter of Credit Bank's
obligation to make such payments to the L/C Facility Agent for account of the
Letter of Credit Issuer under this clause (h), and the Letter of Credit Issuer's
right to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
failure of any other Letter of Credit Bank to make its payment under this clause
(h), the financial condition of the Partnership (or any other account party),
the existence of any Inchoate Default or Event of Default or the termination of
the Letter of Credit Commitments. Each such payment to the Letter of Credit
Issuer shall be made without any offset, abatement, withholding or reduction
whatsoever.
(i) (i) Upon the making of each payment by a Letter of Credit
Bank to the Letter of Credit Issuer pursuant to clause (h) above in respect of
the VEPCO Letter of Credit-C, such Letter of Credit Bank shall, automatically
and without any further action on the part of the L/C Facility Agent, the Letter
of Credit Issuer or such Letter of Credit Bank, acquire (i) a participation in
an amount equal to such payment in the Reimbursement Obligation owing to the
Letter of Credit Issuer by the Partnership hereunder and (ii) a participation in
a percentage equal to such Letter of Credit Bank's Pro Rata Share of any
interest or other amounts payable by the Partnership hereunder in respect of
such Reimbursement Obligation.
(ii) Upon the making of each payment by a Letter of
Credit Bank to the Letter of Credit Issuer pursuant to clause (h) above in
respect of any LOC Loan Letter of Credit, such Letter of Credit Bank shall,
automatically and without any further action on the part of the L/C Facility
Agent, the Letter of Credit Issuer or such Letter of Credit Bank, be deemed to
have made an LOC Loan to the Partnership in the amount of such payment.
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(j) To the extent that any Letter of Credit Bank fails to pay
any amount required to be paid pursuant to clause (h) of this Section 2.1 on the
due date therefor, such Letter of Credit Bank shall pay interest to the Letter
of Credit Issuer (through the L/C Facility Agent) on such amount from and
including such due date to but excluding the date such payment is made (i)
during the period from and including such due date to but excluding the date
three (3) Banking Days thereafter, at a rate per annum equal to the Base Rate
and (ii) thereafter, at a rate per annum equal to the Default Rate.
(k) Promptly following the end of each calendar month, the
Letter of Credit Issuer shall deliver (through the L/C Facility Agent) to each
Letter of Credit Bank and the Partnership a notice describing the aggregate
amount of all Letters of Credit outstanding at the end of such month. Upon the
request of any Letter of Credit Bank from time to time, the Letter of Credit
Issuer shall deliver any other information reasonably requested by such Letter
of Credit Bank with respect to each Letter of Credit then outstanding.
(l) The Partnership hereby indemnifies and holds harmless each
Letter of Credit Bank and the L/C Facility Agent from and against any and all
claims and damages, losses, liabilities, costs or expenses which such Letter of
Credit Bank or the L/C Facility Agent may incur (or which may be claimed against
such Letter of Credit Bank or the L/C Facility Agent by any Person whatsoever)
by reason of or in connection with the execution and delivery or transfer of or
payment or refusal to pay by the Letter of Credit Issuer under any Letter of
Credit; provided that the Partnership shall not be required to indemnify any
Letter of Credit Bank or the L/C Facility Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(a) the willful misconduct or gross negligence of the Letter of Credit Issuer in
determining whether a request presented under any Letter of Credit complies with
the terms of such Letter of Credit or (ii) in the case of the Letter of Credit
Issuer, its failure to pay under any Letter of Credit after the presentation to
it of a request strictly complying with the terms and conditions of such Letter
of Credit. Nothing in this clause (l) is intended to limit the other rights and
obligations of the Partnership, any Letter of Credit Bank or the L/C Facility
Agent under this Agreement or under applicable law.
Section 2.2 LOC Loans. (a) The LOC Loans outstanding to each Letter
of Credit Bank, and the obligation of the Partnership to repay the LOC Loans and
to pay interest thereon at the rates provided herein, shall be evidenced by one
or more promissory notes in substantially the form attached hereto as Exhibit E
(each an "LOC Loan
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Note"), each payable to the order of such Letter of Credit Bank in an aggregate
principal amount equal to the portion of such Letter of Credit Bank's Letter of
Credit Commitment allocated to the LOC Loan Letters of Credit. The Partnership
authorizes each Letter of Credit Bank to record on the schedule annexed to such
Letter of Credit Bank's LOC Loan Note the date and amount of each LOC Loan made
by such Letter of Credit Bank and each payment or prepayment of principal
thereunder, and the Partnership agrees that all such notations shall constitute
prima facie evidence of the accuracy of the matters noted. The Partnership
further authorizes each Letter of Credit Bank to attach to and make a part of
such Letter of Credit Bank's LOC Loan Note continuations of the schedule
attached thereto as necessary. No failure to make any such notations, nor any
errors in making any such notations, shall affect the validity of the
Partnership's obligations to repay the full unpaid principal amount of the LOC
Loans in accordance with this Agreement.
(b) On each date on which LOC Loans are made pursuant to
Section 2.1(f)(ii), the Partnership shall submit a written notice to the L/C
Facility Agent substantially in the form of Exhibit F (each a "Notice of LOC
Loans"), which notice shall specify, for the LOC Loans made on such date: (i)
the dollar amount of LOC Loans which are to be Base Rate LOC Loans; (ii) the
dollar amount of LOC Loans which are to be LIBOR LOC Loans; and (iii) for any
LOC Loans which are to be LIBOR LOC Loans, the Interest Periods applicable to
such LOC Loans. The L/C Facility Agent shall promptly notify each Letter of
Credit Bank of the contents of each Notice of LOC Loans.
(c) The Partnership shall pay to the L/C Facility Agent for
the benefit of the Letter of Credit Banks the aggregate principal amount of the
LOC Loans outstanding on the Termination Date for the LOC Loan Letters of Credit
in installments payable on each Repayment Date occurring on or after such
Termination Date in accordance with the schedule set forth in Schedule II. Any
remaining principal amounts outstanding shall be due and payable on the LOC Loan
Maturity Date. The Stated Amounts of the LOC Loan Letters of Credit shall not be
reinstated upon repayment of the principal of any LOC Loan.
(d) (i) The Partnership shall pay interest on the unpaid
principal amount of each Base Rate LOC Loan from the date of the making of such
Base Rate LOC Loan until such Base Rate LOC Loan shall be paid in full or
converted to a LIBOR LOC Loan at a rate per annum which shall be equal to the
sum of the Base Rate in effect from time to time plus the Applicable Margin.
Interest accruing at the Base Rate will
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be calculated on the basis of the actual number of days elapsed in a year of 365
or 366 days, as appropriate.
(ii) The Partnership shall pay interest on the unpaid
principal amount of each LIBOR LOC Loan from the date of the making of such
LIBOR LOC Loan until such LIBOR LOC Loan shall be paid in full or converted to a
Base Rate LOC Loan at a rate per annum which shall be equal to the sum of the
relevant LIBOR Rate plus the Applicable Margin. Interest accruing at the LIBOR
Rate will be calculated on the basis of the actual number of days elapsed in a
year of 360 days.
(e) The Partnership shall pay accrued interest on the unpaid
principal amount of each LOC Loan (i) in the case of each Base Rate LOC Loan, on
the last Banking Day of each calendar quarter, (ii) in the case of each LIBOR
LOC Loan, on the last day of each Interest Period related to such LIBOR LOC Loan
and, if such Interest Period is longer than three months, every three months
after the date of such LIBOR LOC Loan, and (iii) in all cases, upon prepayment
(to the extent thereof and including any optional prepayments or mandatory
prepayments), upon conversion from one Type of LOC Loan to another Type, and at
maturity (whether by acceleration or otherwise).
(f) (i) The initial and subsequent Interest Period for LIBOR
LOC Loans shall be a maximum of one month until the earlier to occur of (A) the
L/C Facility Agent notifies the Partnership that syndication of the Letter of
Credit Commitments is complete or (B) the expiration of the one (1) year period
immediately following the Closing Date; provided that the L/C Facility Agent may
other wise approve, in its sole discretion, a longer Interest Period which is
requested by the Partnership and otherwise complies with the following
provisions of this clause (f). Thereafter, each subsequent Interest Period
(including any Interest Period referenced in the proviso of the first sentence
of this clause (f)) selected by the Partnership for all LIBOR LOC Loans shall be
one, two, three, six, nine or twelve months; provided, however, that (A) any
Interest Period which would otherwise end on a day which is not a Banking Day
shall be extended to the next succeeding Banking Day unless such next Banking
Day falls in another calendar month, in which case such Interest Period shall
end on the immediately preceding Banking Day; (B) any Interest Period which
begins on the last Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day of a calendar month; (C) the
Partnership may not select Interest Periods which would leave a greater
principal amount of LOC Loans subject to Interest Periods ending after a date
upon which LOC Loans are or may
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be required to be repaid than principal amount of LOC Loans scheduled to be
outstanding after such date; (D) the Partnership may not select an Interest
Period for an LOC Loan which would end after the LOC Loan Maturity Date; and (E)
the Partnership may not at any time have outstanding more than seven (7)
different Interest Periods relating to LIBOR LOC Loans.
(ii) Subject to the provisions of clause (i) immediately
above, the Partnership shall specify the initial Interest Period for each LOC
Loan (or portion thereof) in the Notice of LOC Loans submitted in connection
with such LOC Loan. The Partnership may contact the L/C Facility Agent at any
time prior to the end of such initial and each subsequent Interest Period for a
quotation of interest rates in effect at such time for given Interest Periods
and the L/C Facility Agent shall promptly provide such quotation. The
Partnership may select an Interest Period telephonically within the Minimum
Notice Period, which selection shall be irrevocable as of and after the
applicable Minimum Notice Period. An Authorized Person shall confirm such
telephonic notice to the L/C Facility Agent by telecopy on the day such notice
is given in substantially the form of Exhibit G (such notice, an "Interest
Period Confirmation"). If the Partnership fails to notify the L/C Facility Agent
of the next Interest Period for any LIBOR LOC Loans in accordance with this
clause (h), such LOC Loans shall automatically convert to Base Rate LOC Loans on
the last day of the current Interest Period therefor. The L/C Facility Agent
shall promptly notify the Partnership and the Letter of Credit Banks of each
determination of the interest rate applicable to each LIBOR LOC Loan.
(g) The Partnership may convert LOC Loans from one Type of LOC
Loans to another Type; provided, however, that (i) any conversion of LIBOR LOC
Loans into Base Rate LOC Loans shall be made on, and only on, the first day
after the last day of an Interest Period for such LIBOR LOC Loans, and (ii) LOC
Loans shall be converted only in integral multiples of $100,000. The Partnership
shall request such a conversion by a written notice from an Authorized Person to
the L/C Facility Agent in the form of Exhibit H, appropriately completed (a
"Notice of Conversion of LOC Loan Type"), which specifies: (i) the LOC Loans, or
portion thereof, which are to be converted; (ii) the Type into which such LOC
Loans, or portion thereof, are to be converted; (iii) if such LOC Loans are to
be converted into LIBOR LOC Loans, the initial Interest Period selected by the
Partnership for such LOC Loans in accordance with Section 2.2(f)(i); and (iv)
the date of the requested conversion, which shall be a Banking Day. The
Partnership shall so deliver each Notice of Conversion of LOC Loan Type so as to
provide at least the applicable Minimum Notice Period. Any Notice of Conversion
of LOC Loan Type may
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be modified or revoked by written notice sent by facsimile transmission with
telephonic confirmation by the Partnership up to 2:00 p.m. on the Banking Day
prior to the Minimum Notice Period, and shall thereafter be irrevocable. Each
Notice of Conversion of LOC Loan Type shall be delivered by telecopy to the L/C
Facility Agent at the telecopy number specified in Section 8.1. The L/C Facility
Agent shall promptly notify each Letter of Credit Bank that holds the LOC Loan
being converted of the contents of each Notice of Conversion of LOC Loan Type.
(h) (i) Subject to clause (iii) below, the Partnership may, at
its option and without penalty, upon three (3) Banking Days notice to the L/C
Facility Agent, prepay any LOC Loans in whole or in part in a minimum amount of
$100,000 or any integral multiple of $100,000 in excess thereof.
(ii) The Partnership shall prepay (or cause to be
prepaid) LOC Loans to the extent required by (A) Section 2.6(b) of this
Agreement, (B) Section 7.2(c)(ii), 7.2(d), 7.3(c), 7.9(c), 7.9(g), 7.10,
7.11(a), 7.11(c), 7.11(d), 7.11(e), 7.11(f) or 7.11(g) of the Common Agreement
or (C) any other provision of this Agreement or the Common Agreement which
requires prepayment of LOC Loans.
(iii) All prepayments, whether voluntary prepayments
or mandatory prepayments, will be allocated to the LOC Loans pro rata in inverse
order of maturity. The Stated Amount of the LOC Loan Letters of Credit shall not
be reinstated upon the prepayment of any LOC Loan. Upon the prepayment of any
LOC Loan (whether such prepayment is an optional prepayment or a mandatory
prepayment), the Partnership shall pay to the L/C Facility Agent, for the
account of the Letter of Credit Bank which made such LOC Loan, (A) all accrued
interest to the date of such prepayment on the amount being prepaid, (B) all
accrued fees to the date of such prepayment on the amount being prepaid, and (C)
if such prepayment is the prepayment of a LIBOR LOC Loan on a day other than the
last day of the current Interest Period for such LIBOR LOC Loan, all Liquidation
Costs incurred by such Letter of Credit Bank as a result of such prepayment.
LIBOR LOC Loans shall only be prepaid in a minimum amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof.
Section 2.3 Fees. (a) On the last Banking Day in each calendar
quarter (or portion thereof) commencing on the Closing Date and ending on the
Letter of Credit Termination Date and on the Expiration Date of each Letter of
Credit, the Partnership shall pay to the L/C Facility Agent for the benefit of
the Letter of Credit Banks a letter of credit
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fee (the "Letter of Credit Fee") for such quarter then ending and such
Expiration Date, as applicable, at the rates per annum described below and
computed in the following manner. For each of the VEPCO Letter of Credit-B and
the VEPCO Letter of Credit-C, from and including the Closing Date to but
excluding the Availability Date for such Letter of Credit, the Letter of Credit
Fee shall be equal to the Total Letter of Credit Commitment allocated to such
Letter of Credit multiplied by 0.375%. For each Letter of Credit, on and after
the Availability Date for such Letter of Credit, the Letter of Credit Fee shall
be equal to the sum of: (i) the product of (A) (1) from and including the date
of issuance of such Letter of Credit to but excluding the date of
Term-Conversion, 1.500%, (2) from and including the date of Term-Conversion to
but excluding the date which is three (3) years after the date of
Term-Conversion, 1.625%, and (3) from and including the date which is three (3)
years after the date of Term-Conversion to and including the Letter of Credit
Maturity Date, 1.750%, multiplied by (B) the daily average Stated Amount of such
Letter of Credit multiplied by (C) a fraction the numerator of which is the
number of days in such quarter (or portion thereof) or the number of days in the
period beginning on the last day of the previous quarter and ending on the
Expiration Date of such Letter of Credit, as applicable, and the denominator of
which is 360, as applicable; plus (ii) (A) the daily average for such quarter of
the excess of (1) the Total Letter of Credit Commitment allocated to such Letter
of Credit over (2) the Stated Amount of such Letter of Credit, multiplied by (B)
0.375%.
(b) The Partnership shall pay to the L/C Facility Agent for
account of the Letter of Credit Issuer all charges, costs, fees and expenses in
the amounts customarily charged by the Letter of Credit Issuer from time to time
in like circumstances with respect to the issuance of each Letter of Credit,
drawings thereunder and other transactions relating thereto.
(c) The Partnership shall pay when due to the L/C Facility
Agent such other fees as shall have been separately agreed to by the Partnership
and the L/C Facility Agent in writing.
Section 2.4 Other Payment Terms. (a) Place and Manner. The
Partnership shall make all payments due to each Letter of Credit Bank or the L/C
Facility Agent hereunder to the L/C Facility Agent, for the account of such
Letter of Credit Bank or the L/C Facility Agent by wire transfer to ABA No.
026009179 for advice to and credit of "Credit Suisse First Boston" in lawful
money of the United States and in immediately available funds not later than
12:00 noon on the date on which such payment is due. The L/C Facility Agent may
treat any payment made after such time on any day as being
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received on the Banking Day after such payment is received. The L/C Facility
Agent shall disburse to each Letter of Credit Bank or the Letter of Credit
Issuer, as applicable, by wire transfer pursuant to the wire transfer
instructions for each such person set forth on Schedule I or pursuant to such
other wire instructions provided by such Person to the L/C Facility Agent by
notice, each such payment received by the L/C Facility Agent for such Letter of
Credit Bank or the Letter of Credit Issuer, as applicable, such disbursement to
occur on the day such payment is received if received by 12:00 noon or if
otherwise reasonably possible and otherwise on the next Banking Day.
(b) Date. Whenever any payment due hereunder shall fall due on
a day other than a Banking Day, such payment shall be made on the next
succeeding Banking Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by the
Partnership under this Agreement, any LOC Loan Note or the other Credit
Documents (including principal and interest payable on any LOC Loans and any
Letter of Credit Fees payable to the L/C Facility Agent or any Letter of Credit
Bank) remain unpaid after such amounts are due, the Partnership shall pay
interest on the aggregate outstanding balance of such amounts from the date due
therefor until such amounts are paid in full at a rate per annum equal to the
Default Rate.
(d) Net of Taxes, Etc. (i) Any and all payments to or for the
benefit of the L/C Facility Agent or any Letter of Credit Bank by the
Partnership hereunder or under any other Credit Document shall be made without
set off, counterclaim or other defense and free and clear of and without
deduction or with holding for or on account of any present or future taxes,
levies, imposts, duties, fees, assessments, deductions, charges, withholdings or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (but
excluding any tax imposed on or measured by the net income of the L/C Facility
Agent or any Letter of Credit Bank, as the case may be, or any tax on overall
gross receipts or franchise tax imposed in either case in lieu of such net
income tax pursuant to the laws of the jurisdiction or any political subdivision
or taxing authority thereof or therein in which the principal office or the
Lending Office of such Person is located, other than a tax imposed on or
measured by amounts payable under this clause (d)) and all interest, penalties
or similar liabilities with respect thereto (collectively, "Taxes"). If the
Partnership shall be required by law to withhold or deduct any Taxes imposed by
the United States or any
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political subdivision thereof from or in respect of any sum payable hereunder,
under any LOC Loan Note or under any other Credit Document to the L/C Facility
Agent or any Letter of Credit Bank, (A) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this clause (d)), the L/C
Facility Agent or such Letter of Credit Bank receives an amount equal to the sum
it would have received had no such deductions been made, (B) the Partnership
shall make such deductions and (C) the Partnership shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law. In addition, the Partnership agrees to pay any present or future
stamp, recording or documentary taxes and any other excise or property taxes,
charges or similar levies that arise from any payment made hereunder, under any
LOC Loan Note or under any other Credit Document or from the execution,
delivery, recording or otherwise with respect to this Agreement, any LOC Loan
Note or any other Credit Document (hereinafter referred to as "Other Taxes").
(ii) The Partnership shall indemnify each Letter of
Credit Bank and the L/C Facility Agent for the full amount of Taxes and Other
Taxes paid by any Letter of Credit Bank or the L/C Facility Agent, or any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Each Letter of Credit Bank and the L/C Facility Agent agrees
to give written notice to the Partnership of the assertion of any claim against
such Person relating to such Taxes or Other Taxes as promptly as is practicable
after being notified of such assertion; provided that any failure to notify the
Partnership promptly of such assertion shall not relieve the Partnership of its
obligation under this clause (d). Payments by the Partnership pursuant to this
indemnification shall be made within thirty (30) days from the date such Letter
of Credit Bank or the L/C Facility Agent makes written demand therefor (in the
case of such Letter of Credit Bank, submitted through the L/C Facility Agent),
which demand shall be accompanied by a certificate describing in reasonable
detail the basis thereof. Each Letter of Credit Bank and the L/C Facility Agent
agrees to repay to the Partnership any refund (including that portion of any
interest that was included as part of such refund with respect to Taxes or Other
Taxes paid by the Partnership pursuant to this (d)) received by such Person for
Taxes or Other Taxes that were paid by the Partnership pursuant to this clause
(d).
(iii) A certificate as to the amount of the claim
prepared by the Letter of Credit Bank or the L/C Facility Agent, as the case may
be, absent manifest error, shall be final, conclusive and binding for all
purposes.
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(iv) If the Partnership determines in good faith that
there is a reasonable basis to contest a Tax or Other Tax, on the request of the
Partnership and at the Partnership's expense, the L/C Facility Agent and/or any
Letter of Credit Bank shall cooperate with efforts of the Partnership to contest
the Govern mental Authority's imposition of, or the amount of, such Tax or Other
Tax (it being understood and agreed that neither the L/C Facility Agent or such
Letter of Credit Bank shall have any obligation to contest, or any
responsibility for contesting, any such Tax or Other Tax), provided that (x) the
Partnership delivers to the L/C Facility Agent or such Letter of Credit Bank an
opinion of independent tax counsel selected by the Partnership and reasonably
acceptable to the L/C Facility Agent or such Letter of Credit Bank to the effect
that there is a reasonable possibility of success, (y) the L/C Facility Agent or
such Letter of Credit Bank shall have received from the Partnership, in such
form as the L/C Facility Agent or such Letter of Credit Bank shall reasonably
deem satisfactory, indemnification and security for any and all actual or
anticipated liability, loss, cost or expense arising out of or relating to such
amount or the contest thereof, including, but not limited to, all legal and
accountants' fees and expenses, penalties, interest and additions to tax, and
(z) if the contest shall be conducted in a manner requiring the payment of all
or part of such amount, the Partnership shall have paid the amount required.
(v) Within thirty (30) days after the date of any
payment of Taxes by the Partnership, the Partnership shall furnish to the L/C
Facility Agent, at its address referred to in Section 8.1, the original or a
certified copy of a receipt evidencing payment thereof. The Partnership shall
compensate each Letter of Credit Bank and the L/C Facility Agent for all
reasonable losses and expenses sustained by such Letter of Credit Bank as a
result of any failure by the Partnership to so furnish such copy of such
receipt.
(vi) The obligations of the Partnership under this
clause (d) shall survive the termination of this Agreement and the repayment of
the Reimbursement Obligations and the LOC Loans but shall not survive the
expiration of the statute of limitations applicable to the collection of Taxes
and Other Taxes contemplated hereby.
(e) Application of Payments. Except as otherwise set forth
herein, payments made under this Agreement, the LOC Loan Notes or the other
Credit Documents and other amounts received by the L/C Facility Agent and the
Letter of Credit Banks under this Agreement, the LOC Loan Notes or the other
Credit Documents shall (i) first be applied to any fees, costs, charges or
expenses payable to the L/C Facility Agent
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or the other Letter of Credit Banks hereunder, under any LOC Loan Note or under
the other Credit Documents, (ii) next be applied to any accrued but unpaid
interest then due and owing, and (iii) then be applied to outstanding principal
then due and owing or otherwise to be prepaid.
(f) Failure to Pay the L/C Facility Agent. Unless the L/C
Facility Agent shall have received notice from the Partnership at least two (2)
Banking Days prior to the date on which any payment is due to the Letter of
Credit Banks hereunder that the Partnership will not make such payment in full,
the L/C Facility Agent may assume that the Partnership has made such payment in
full to the L/C Facility Agent on such date and the L/C Facility Agent may, in
reliance upon such assumption, cause to be distributed to each Letter of Credit
Bank on such due date an amount equal to the amount then due to such Letter of
Credit Bank. If and to the extent the Partnership shall not have so made such
payment in full to the L/C Facility Agent, such Letter of Credit Bank shall
repay to the L/C Facility Agent forthwith upon demand such amount distributed to
such Letter of Credit Bank, together with interest thereon, for each day from
the date such amount is distributed to such Letter of Credit Bank until the date
such Letter of Credit Bank repays such amount to the L/C Facility Agent, at the
Federal Funds Rate for the first five (5) days after such date, and subsequent
thereto at the Base Rate. A certificate of the L/C Facility Agent submitted to
any Letter of Credit Bank with respect to any amounts owing by such Letter of
Credit Bank under this clause (f) shall be conclusive in the absence of manifest
error.
(g) Withholding Exemption Certificates. (i) The L/C Facility
Agent on the Closing Date and each Letter of Credit Bank upon becoming a Letter
of Credit Bank hereunder including any entity to which any Letter of Credit Bank
grants a participation, or otherwise transfers its interest in this Agreement,
agree that they will deliver to the Partnership and the L/C Facility Agent (and
the L/C Facility Agent agrees that it will deliver to the Partnership) either
(i) a statement that it is incorporated under the laws of the United States of
America or a state thereof or (ii) if it is not so incorporated, a letter in the
form of Exhibit I-1 or Exhibit I-2, as appropriate, and two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224 or successor
applicable form, as the case may be, certifying in each case that such Letter of
Credit Bank is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes. Each Letter
of Credit Bank which delivers to the Partnership and the L/C Facility Agent a
Form 1001 or 4224 pursuant to the preceding sentence further undertakes to
deliver to the Partnership and the L/C Facility Agent further copies of the said
letter and Form 1001 or 4224, or successor applicable forms, or other
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manner of certification or procedure, as the case may be, on or before the date
that any such letter or form expires or becomes obsolete or within a reasonable
time after gaining knowledge of the occurrence of any event requiring a change
in the most recent letter and forms previously delivered by it to the
Partnership, and such extensions or renewals thereof as may reasonably be
requested by the Partnership, certifying in the case of a Form 1001 or 4224 that
such Letter of Credit Bank is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
unless in any such case an event (including any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent a Letter of Credit Bank from duly completing and delivering any such
letter or form with respect to it and such Letter of Credit Bank advises the
Partnership that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax, and in the case of Form W-8
or W-9, establishing an exemption from United States backup withholding tax. The
Partnership shall not be obligated, however, to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 2.4(d) (or make
an indemnification payment pursuant to Section 2.4(d)) to any Letter of Credit
Bank (including any entity to which any Letter of Credit Bank sells, assigns,
grants a participation in, or otherwise transfers its rights under this
Agreement) if the obligation to pay such additional amounts (or such
indemnification) would not have arisen but for a failure of such Letter of
Credit Bank to comply with its obligations under this clause (g).
(ii) In addition, if (A) any Letter of Credit Bank has
previously delivered to the Partnership and the L/C Facility Agent a Form 4224
or successor applicable form and (B) by virtue of any action taken or not taken
voluntarily by such Letter of Credit Bank, such Letter of Credit Bank is not
lawfully entitled to deliver a subsequent Form 4224 or applicable successor form
solely as a result of the such Letter of Credit Bank's failure to be engaged in
the active conduct or a trade or business in the United States or a
determination that all amounts to be paid to the such Letter of Credit Bank
hereunder are not effectively connected to such trade or business, the
Partnership shall be under no obligation to compensate such Letter of Credit
Bank with respect to any Tax required to be paid or withheld under United States
federal income tax law that would not have been required to be paid or withheld
had such Letter of Credit Bank so delivered such Form 4224 or applicable
successor form.
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Section 2.5 Pro Rata Treatment. (a) Borrowings, Letter of Credit
Commitment Reductions, Etc. Except as otherwise provided herein, (i) each
drawing and each reduction of any Letter of Credit Commitment shall be made or
allocated pro rata among the Letter of Credit Banks in accordance with their
respective Pro Rata Shares of such drawing or Letter of Credit Commitment, (ii)
each payment of any Reimbursement Obligation or interest thereon shall be made
or shared pro rata among the Letter of Credit Banks in accordance with their
respective Pro Rata Shares of such Reimbursement Obligation, (iii) each payment
of principal of and interest on any LOC Loan shall be made or shared pro rata
among the Letter of Credit Banks in accordance with their respective Pro Rata
Shares of such LOC Loan, and (iv) each payment of the Letter of Credit Fee shall
be shared pro rata among the Letter of Credit Banks in accordance with their
respective Pro Rata Shares of such the Letter of Credit Fee.
(b) Sharing of Payments, Etc. If any Letter of Credit Bank
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise) on account of any Reimbursement Obligation
or LOC Loan owed to it in excess of its ratable share of payments on account of
such Reimbursement Obligation or LOC Loan obtained by all Letter of Credit Banks
entitled to such payments, such Letter of Credit Bank shall forthwith purchase
from the other Letter of Credit Banks such participation in such Reimbursement
Obligation or LOC Loan, as the case may be, as shall be necessary to cause such
purchasing Letter of Credit Bank to share the excess payment ratably with each
of the other Letter of Credit Banks; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Letter of Credit Bank, such purchase from such Letter of Credit Bank shall be
rescinded and each other Letter of Credit Bank shall repay to the purchasing
Letter of Credit Bank the purchase price to the extent of such recovery together
with an amount equal to such other Letter of Credit Bank's ratable share
(according to the proportion of (i) the amount of such other Letter of Credit
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Letter of Credit Bank) of any interest or other amount paid or
payable by the purchasing Letter of Credit Bank in respect of the total amount
so recovered. The Partnership agrees that any Letter of Credit Bank so
purchasing a participation from another Letter of Credit Bank pursuant to this
clause (b) may, to the fullest extent permitted by law, exercise all its rights
of payment (including the right of set-off) with respect to such participation
as fully as if such Letter of Credit Bank were the direct creditor of the
Partnership in the amount of such participation.
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Section 2.6 Change of Circumstances. (a) Inability to Determine
Rates. If, on or before the first day of any Interest Period for any LIBOR LOC
Loans, (i) the L/C Facility Agent determines that the LIBOR Rate for such
Interest Period cannot be adequately and reasonably determined due to the
unavailability of funds in or other circumstances affecting the London interbank
market, or (ii) Letter of Credit Banks holding aggregate Pro Rata Shares of 33
1/3% or more shall advise the L/C Facility Agent that (A) the rates of interest
for such LIBOR LOC Loans do not adequately and fairly reflect the cost to such
Letter of Credit Banks of making or maintaining such LIBOR LOC Loans or (B)
deposits in Dollars in the London interbank market are not available to such
Letter of Credit Banks (as conclusively certified by each such Letter of Credit
Bank in good faith in writing to the L/C Facility Agent and to the Partnership)
in the ordinary course of business in sufficient amounts to make and/or maintain
such LIBOR LOC Loans, the L/C Facility Agent shall immediately give notice of
such condition to the Partnership and the Letter of Credit Banks. After the
giving of any such notice and until the L/C Facility Agent shall otherwise
notify the Partnership that the circumstances giving rise to such condition no
longer exist, the Partnership's right to request the making of or conversion to,
and the Letter of Credit Banks' obligations to make or convert to, LIBOR LOC
Loans shall be suspended. Any LIBOR LOC Loans outstanding at the commencement of
any such suspension shall be converted at the end of the then current Interest
Period for such LIBOR LOC Loans into Base Rate LOC Loans unless such suspension
has then ended.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule or the
application or requirements thereof (whether such change occurs in accordance
with the terms of such Governmental Rule as enacted, as a result of amendment,
or otherwise), any change in the interpretation or administration of any
Governmental Rule by any Governmental Authority, or compliance by any Letter of
Credit Bank or the Partnership with any request or directive (whether or not
having the force of law) of any Governmental Authority (each a "Change of Law")
shall make it unlawful or impossible for any Letter of Credit Bank to make or
maintain any LIBOR LOC Loan, such Letter of Credit Bank shall immediately notify
the L/C Facility Agent, which shall notify the other Letter of Credit Banks and
the Partnership, of such Change of Law. Upon receipt of such notice, (i) the
Partnership's right to request the making of or conversion to, and the Letter of
Credit Banks' obligations to make or convert to, LIBOR LOC Loans shall be
suspended for so long as such condition shall exist, and (ii) the Partnership
shall, at the request of such Letter of Credit Bank, either (A) pursuant to
Section 2.2(g), convert any then outstanding LIBOR LOC Loans into Base Rate LOC
Loans at the end of the current Interest Periods for such
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LIBOR LOC Loans, or (B) immediately prepay pursuant to Section 2.2(h) or convert
LIBOR LOC Loans of the affected Type into Base Rate LOC Loans if such Letter of
Credit Bank shall notify the Partnership that such Letter of Credit Bank may not
lawfully continue to fund and maintain such LIBOR LOC Loans. Any conversion or
prepayment of LIBOR LOC Loans made pursuant to the preceding sentence prior to
the last day of an Interest Period for such LIBOR LOC Loans shall be deemed a
prepayment thereof for purposes of Section 2.7.
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
(i) shall subject any Letter of Credit Bank to any tax,
duty or other charge with respect to any Reimbursement Obligation, LOC
Loan or Letter of Credit Commitment, or shall change the basis of taxation
of payments by the Partnership to any Letter of Credit Bank on such
Reimbursement Obligation or LOC Loan or with respect to any Letter of
Credit Commitment (except for Taxes, Other Taxes or changes in the rate of
taxation on the overall net income of any Letter of Credit Bank); or
(ii) shall impose, modify or hold applicable any
reserve, special deposit or similar requirement (without duplication of
any reserve requirement included within the applicable interest rate
through the definition of "Reserve Requirement") against assets held by,
deposits or other liabilities in or for the account of, advances or loans
by, or any other acquisition of funds by, any Letter of Credit Bank for
any Reimbursement Obligation or LOC Loan; or
(iii) shall impose on any Letter of Credit Bank any
other condition directly related to any Reimbursement Obligation, LOC Loan
or Letter of Credit Commitment;
and the effect of any of the foregoing is to increase the cost to such Letter of
Credit Bank of making, issuing, creating, renewing, participating in or
maintaining any such Reimbursement Obligation, LOC Loan or Letter of Credit
Commitment above the cost such Letter of Credit Bank would have incurred, or to
reduce any amount receivable by such Letter of Credit Bank hereunder below the
amount such Letter of Credit Bank would have received, but for that Letter of
Credit Bank's Reimbursement Obligations, LOC Loans or Letter of Credit
Commitment, then the Partnership shall from time to time, within thirty (30)
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days after written demand by such Letter of Credit Bank, pay to the L/C Facility
Agent on behalf of such Letter of Credit Bank additional amounts sufficient to
reimburse such Letter of Credit Bank for such increased costs or to compensate
such Letter of Credit Bank for such reduced amounts. A certificate setting forth
in reasonable detail the amount of such increased costs or reduced amounts and
the basis for determination of such amount, submitted by such Letter of Credit
Bank to the Partnership, shall, in the absence of manifest error, be conclusive
and binding on the Partnership for all purposes.
(d) Capital Requirements. If any Letter of Credit Bank
determines that (i) any Change of Law after the date of this Agreement increases
the amount of capital required or expected to be maintained by such Letter of
Credit Bank (or the Lending Office of such Letter of Credit Bank) or any Person
controlling such Letter of Credit Bank above the cost such Letter of Credit Bank
would have incurred (each a "Capital Adequacy Requirement"), and (ii) the amount
of capital maintained by such Letter of Credit Bank or such Person which is
attributable to or based upon Reimbursement Obligations, LOC Loans, Letter of
Credit Commitments or this Agreement must be increased as a result of such
Capital Adequacy Requirement (taking into account such Letter of Credit Bank's
or such Person's policies with respect to capital adequacy), the Partnership
shall pay to the L/C Facility Agent on behalf of such Letter of Credit Bank or
such Person, within thirty (30) days after notice by the L/C Facility Agent on
behalf of such Letter of Credit Bank or such Person, such amounts as are
necessary to compensate such Letter of Credit Bank or such Person for the
increased costs to such Letter of Credit Bank or such Person of such increased
capital. A certificate of such Letter of Credit Bank or such Person, setting
forth in reasonable detail the computation of any such increased costs,
delivered to the Partnership by the L/C Facility Agent on behalf of such Letter
of Credit Bank or such Person, shall, in the absence of manifest error, be
conclusive and binding on the Partnership for all purposes.
(e) Notice; Participating Letter of Credit Banks' Rights. Each
Letter of Credit Bank will notify the Partnership of any event occurring after
the date of this Agreement that will entitle such Letter of Credit Bank to
compensation pursuant to this Section 2.6, as promptly as practicable and in no
event later than ninety (90) days after the principal officer of such Letter of
Credit Bank responsible for administering this Agreement obtains knowledge
thereof; provided that any Letter of Credit Bank's failure to so notify the
Partnership shall not relieve the Partnership of its obligation under this
Section 2.6 with respect to claims arising prior to the end of such period, but
shall relieve the Partnership of its obligations under this Section 2.6 with
respect to the time between the end of such
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period and such time as the Partnership receives notice from the indemnitee as
provided herein. No Person purchasing from a Letter of Credit Bank a
participation in any Letter of Credit Commitment (as opposed to an assignment)
shall be entitled to any payment from or on behalf of the Partnership pursuant
to Section 2.6(c) or Section 2.6(d) which would be in excess of the applicable
proportionate amount (based on the portion of the Letter of Credit Commitment in
which such Person is participating) which would then be payable to such Letter
of Credit Bank if such Letter of Credit Bank had not sold a participation in
that portion of such Letter of Credit Commitment.
Section 2.7 Funding Losses. If the Partnership shall (a) repay or
prepay any LIBOR LOC Loans on any day other than the last day of an Interest
Period for such LIBOR LOC Loans (whether an optional prepayment or a mandatory
prepayment), (b) fail to convert any LIBOR LOC Loans in accordance with a Notice
of Conversion of LOC Loan Type delivered to the L/C Facility Agent (whether as a
result of the failure to satisfy any applicable conditions or otherwise,
excepting an unexcused failure to fund by any Letter of Credit Bank), or (c)
fail to make any prepayment in accordance with any notice of prepayment
delivered to the L/C Facility Agent, then, in each such case, the Partnership
shall, within fifteen (15) days after written demand by any Letter of Credit
Bank, reimburse such Letter of Credit Bank for all costs and losses (excluding
lost profits) incurred by such Letter of Credit Bank as a result of such
repayment, prepayment or failure ("Liquidation Costs"). The Partnership
understands that such costs and losses may include losses incurred by a Letter
of Credit Bank as a result of funding and other contracts entered into by such
Letter of Credit Bank to fund LIBOR LOC Loans or reallocating any costs incurred
or allocated to fund such LIBOR LOC Loans. Each Letter of Credit Bank demanding
payment under this Section 2.7 shall deliver to the Partnership, with a copy to
the L/C Facility Agent, a certificate setting forth in reasonable detail the
basis for the calculation of, and the amount of, costs and losses for which
demand is made. Such a certificate so delivered to the Partnership shall, in the
absence of manifest error, be conclusive and binding as to the amount of such
loss.
Section 2.8 Alternate Office; Minimization of Costs; Replacement of
Letter of Credit Bank. (a) With respect to each Letter of Credit Bank, upon an
officer of such Letter of Credit Bank with responsibility for administering the
Letter of Credit Bank's Letter of Credit Commitment and LOC Loans obtaining
actual knowledge of the Letter of Credit Bank's right to compensation under
Section 2.4(d), 2.6(c) or 2.6(d) or the Letter of Credit Bank's inability to
make available LIBOR LOC Loans as described in Section 2.6(b), such Letter of
Credit Bank will notify the Partnership and the L/C Facility Agent as
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promptly as practicable of such Letter of Credit Bank's right to such
compensation or such inability to make available LIBOR LOC Loans. To the extent
reasonably possible, each Letter of Credit Bank shall designate an alternative
Lending Office with respect to its LIBOR LOC Loans and otherwise take any
reasonable actions to reduce any liability of the Partnership to any Letter of
Credit Bank under Section 2.4(d), 2.6(c) or 2.6(d), or to avoid the
unavailability of LIBOR LOC Loans under Section 2.6(b) so long as such Letter of
Credit Bank, in its sole discretion, does not determine that such designation is
materially disadvantageous to such Letter of Credit Bank.
(b) If and on each occasion that a Letter of Credit Bank
either makes a demand for compensation pursuant to Section 2.4(d), 2.6(c) or
2.6(d) or is unable for a period of six consecutive months to fund LIBOR LOC
Loans pursuant to Section 2.6(b) or such Letter of Credit Bank wrongfully fails
to fund a LOC Loan (it being agreed that such Letter of Credit Bank shall not be
entitled to compensation pursuant to Section 2.4(d), 2.6(c) or 2.6(d) with
respect to any portion of a LOC Loan it has wrongfully failed to fund), the
Partnership may, upon at least five (5) Banking Days prior irrevocable written
notice to such Letter of Credit Bank and the L/C Facility Agent, in whole
permanently replace the Letter of Credit Commitment of such Letter of Credit
Bank; provided that the Partnership shall replace such Letter of Credit
Commitment with the Letter of Credit Commitment of a financial institution
reasonably satisfactory to the L/C Facility Agent. Such replacement Letter of
Credit Bank shall upon the effective date of replacement purchase the
Reimbursement Obligations and LOC Loans owed to such replaced Letter of Credit
Bank for the aggregate amount thereof and shall thereupon for all purposes
become a "Letter of Credit Bank" hereunder. Such notice from the Partnership
shall specify an effective date for the replacement of such Letter of Credit
Bank's Letter of Credit Commitment, which date shall not be later than the 30th
day after the day such notice is given. Except to the extent a Letter of Credit
Bank has wrongfully failed to fund any part of an LOC Loan, on the effective
date of any replacement of such Letter of Credit Bank's Letter of Credit
Commitment pursuant to this clause (b), the Partner ship shall pay to the L/C
Facility Agent for the account of such Letter of Credit Bank (i) any fees due to
such Letter of Credit Bank to the date of such replacement, (ii) accrued
interest on the principal amount of outstanding Reimbursement Obligations and
LOC Loans held by such Letter of Credit Bank to the date of such replacement,
and (iii) the amount or amounts requested by such Letter of Credit Bank pursuant
to each of Section 2.4(d), 2.6(c) and 2.6(d), as applicable. The Partnership
will remain liable to such replaced Letter of Credit Bank for any Liquidation
Costs that such Letter of Credit Bank may sustain or incur as a consequence of
repayment of such Letter of Credit Bank's LOC
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Loans (unless such Letter of Credit Bank has defaulted on its obligation to fund
an LOC Loan hereunder). Upon the effective date of repayment of any Letter of
Credit Bank's LOC Loans and termination of such Letter of Credit Bank's Letter
of Credit Commitment pursuant to this clause (b), such Letter of Credit Bank
shall cease to be a Letter of Credit Bank hereunder. No such termination of any
such Letter of Credit Bank's Letter of Credit Commitment and the purchase of
such Letter of Credit Bank's Reimbursement Obligations and LOC Loans pursuant to
this clause (b) shall affect (x) any liability or obligation of the Partnership
or any other Letter of Credit Bank to such terminated Letter of Credit Bank
which accrued on or prior to the date of such termination or (y) such terminated
Letter of Credit Bank's rights hereunder in respect of any such liability or
obligation.
(c) Any Letter of Credit Bank may designate a Lending Office
other than that set forth on Schedule I and may assign all of its interests
under this Agreement, its LOC Loan Note and the other Credit Documents to such
Lending Office; provided that such designation and assignment do not at the time
of such designation and assignment increase the reasonably foreseeable liability
of the Partnership under Section 2.4(d), 2.6(c), or 2.6(d) or make an Interest
Rate option unavailable pursuant to Section 2.6(b).
ARTICLE 3
CONDITIONS PRECEDENT
In addition to the satisfaction of all other conditions precedent
set forth herein, the obligation of the Letter of Credit Issuer to issue any
Letter of Credit is subject to the satisfaction (or waiver by the L/C Facility
Agent in accordance with the terms of this Agreement) on the date such Letter of
Credit is to be issued of the conditions precedent set forth in Sections 3.2 and
3.3 of the Common Agreement, which conditions precedent are incorporated herein
by reference as if set forth in full herein, and all of which shall be
satisfactory to each Letter of Credit Bank.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Partnership hereby repeats for the benefit of the L/C Facility
Agent and the Letter of Credit Banks, as of the Closing Date and, subject to
Section 3.2(l) of the Common Agreement, as of the date on which a Letter of
Credit is issued or an LOC Loan is made, each of the representations and
warranties of the Partner ship set forth in Section
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4.1 of the Common Agreement, which representations and warranties are
incorporated herein by reference as if set forth in full herein and which will
survive the execution and delivery of this Agreement, the issuance of each
Letter of Credit and the incurrence of each Reimbursement Obligation and each
LOC Loan.
ARTICLE 5
COVENANTS
Until all Reimbursement Obligations, LOC Loans and other amounts due
hereunder shall have been indefeasibly paid in full in cash or cash equivalents
and all of the Letter of Credit Commitments shall have been terminated, the
Partner ship shall perform and observe for the benefit of the L/C Facility Agent
and the Letter of Credit Banks each of its covenants set forth in Section 5.1
and Section 6.1 of the Common Agreement, which covenants are incorporated herein
by reference as if set forth in full herein.
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
Section 6.1 Events of Default. Each of the Events of Default
described in Section 8.1 of the Common Agreement, which Events of Default are
incorporated herein by reference as if set forth in full herein, shall
constitute an "Event of Default" hereunder.
Section 6.2 Remedies. (a) Upon the occurrence of an Event of Default
under Section 8.1(d) of the Common Agreement, the Letter of Credit Commitments
shall automatically and immediately terminate and all principal, interest and
other amounts due on or with respect to outstanding Reimbursement Obligations
and LOC Loans shall become immediately due and payable without any giving of
notice or taking of other action by any Person. Upon the occurrence and during
the continuance of any Event of Default (other than an Event of Default under
Section 8.1(d) of the Common Agreement), the L/C Facility Bank shall at the
request, or may with the consent, of the Required Letter of Credit Banks, by
written notice to the Partnership, declare the Letter of Credit Commitments
terminated and all principal, interest and other amounts due on or with respect
to outstanding Reimbursement Obligations and LOC Loans due and payable,
whereupon the Letter of Credit Commitments shall immediately terminate and all
principal, interest and other amounts due on or with respect to outstanding
Reimbursement Obligations and LOC Loans shall become immediately due and
payable.
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(b) Subject to the Intercreditor Agreement, upon the
occurrence and during the continuance of an Event of Default, in addition to the
remedies set forth in clause (a) of this Section 6.2, the L/C Facility Agent and
the Letter of Credit Banks shall be entitled to exercise all of the remedies set
forth in Section 8.2 of the Common Agreement, which remedies are incorporated
herein by reference as if set forth in full herein.
ARTICLE 7
L/C FACILITY AGENT; SUBSTITUTION
Section 7.1 Appointment, Powers and Immunities. (a) Each Letter of
Credit Bank hereby appoints and authorizes the L/C Facility Agent to act as its
agent hereunder and under the other Credit Documents with such powers as are
expressly delegated to the L/C Facility Agent by the terms of this Agreement,
the L/C Facility Documents and the other Credit Documents, together with such
other powers as are reasonably incidental thereto. The L/C Facility Agent shall
not have any duties or responsibilities except those expressly set forth in this
Agreement, the L/C Facility Documents or any other Credit Document, or be a
trustee for any Letter of Credit Bank. Notwithstanding anything to the contrary
contained herein, the L/C Facility Agent shall not be required to take any
action which is contrary to this Agreement, the L/C Facility Documents or any
other Credit Document or any Legal Requirement or exposes the L/C Facility Agent
to any liability. Each of the L/C Facility Agent, the Letter of Credit Banks and
any of their respective Affiliates shall not be responsible to any other Letter
of Credit Bank for any recitals, statements, representations or warranties made
by the Partnership, its Affiliates or the Partners contained in this Agreement
or in any certificate or other document referred to or provided for in, or
received by the L/C Facility Agent or any Letter of Credit Bank under, this
Agreement, for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement, the LOC Loan Notes or any other document
referred to or provided for herein or for any failure by the Partnership, its
Affiliates, its Partners or the Sponsors to perform their respective obligations
hereunder or thereunder. The L/C Facility Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
(b) The L/C Facility Agent and its respective directors,
officers, employees or agents shall not be responsible for any action taken or
omitted to be taken by it or them hereunder, under any L/C Facility Document or
under any other Credit Document or in connection herewith or therewith, except
for its or their own gross
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negligence or willful misconduct. Without limiting the generality of the
foregoing, the L/C Facility Agent (i) may treat the payee of any Note as the
holder thereof until the L/C Facility Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
the L/C Facility Agent; (ii) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by them in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Letter of Credit Bank for any statements, warranties or
representations made in or in connection with any Project Document or Credit
Document; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Operative Document on the part of any party thereto or to inspect the property
(including the books and records) of the Partnership or any other Person; and
(v) shall not be responsible to any Letter of Credit Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Operative Document or any other instrument or document furnished pursuant
hereto. Except as otherwise provided under this Agreement, the L/C Facility
Agent shall take such action with respect to the Credit Documents as shall be
directed by the Required Letter of Credit Banks.
Section 7.2 Reliance. The L/C Facility Agent shall be entitled to
rely upon any certificate, notice or other document (including any cable,
telegram, telecopy or telex) believed by it in good faith to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the L/C Facility Agent. As to any
other matters not expressly provided for by this Agreement, the L/C Facility
Agent shall not be required to take any action or exercise any discretion, but
shall be required to act or to refrain from acting upon instructions of the
Required Letter of Credit Banks (except that the L/C Facility Agent shall not be
required to take any action which exposes the L/C Facility Agent to personal
liability or which is contrary to this Agreement, any other L/C Facility
Document, any other Credit Document or any Legal Requirement) and shall in all
cases be fully protected in acting, or in refraining from acting, hereunder,
under any other L/C Facility Document or under any other Credit Document in
accordance with the instructions of the Required Letter of Credit Banks and such
instructions of the Required Letter of Credit Banks and any action taken or
failure to act pursuant thereto shall be binding on all of the Letter of Credit
Banks.
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Section 7.3 Non-Reliance. Each Letter of Credit Bank represents that
it has, independently and without reliance on the L/C Facility Agent or any
other Letter of Credit Bank, and based on such documents and information as it
has deemed appropriate, made its own appraisal of the financial condition and
affairs of the Partnership and its decision to enter into this Agreement and
agrees that it will, independently and without reliance upon the L/C Facility
Agent or any other Letter of Credit Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement.
The L/C Facility Agent and the Letter of Credit Banks shall not be required to
keep informed as to the performance or observance by the Partnership, its
Affiliates, its Partners or the Sponsors under this Agreement or any other
document referred to or provided for herein or to make inquiry of, or to inspect
the properties or books of, the Partnership, its Affiliates, its Partners or the
Sponsors.
Section 7.4 Defaults. The L/C Facility Agent shall not be deemed to
have knowledge or notice of the occurrence of any Inchoate Default or Event of
Default unless the L/C Facility Agent has received a written notice from a
Letter of Credit Bank or the Partnership referring to this Agreement, describing
such Inchoate Default or Event of Default and indicating that such notice is a
notice of default. If the L/C Facility Agent receives such a notice of the
occurrence of an Inchoate Default or Event of Default, the L/C Facility Agent
shall give notice thereof to the Letter of Credit Banks. The L/C Facility Agent
shall take such action with respect to such Inchoate Default or Event of Default
as is provided in Article 6 or if not provided for in Article 6, as the L/C
Facility Agent shall be reasonably directed by the Required Letter of Credit
Banks; provided, however, that unless and until the L/C Facility Agent shall
have received such directions, the L/C Facility Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Inchoate Default or Event of Default as it shall deem advisable in the
best interest of the Letter of Credit Banks (except that the L/C Facility Agent
shall only exercise remedies in a manner consistent with Article 6).
Section 7.5 Indemnification. Without limiting the obligations of the
Partnership hereunder, each Letter of Credit Bank agrees to indemnify the L/C
Facility Agent ratably in accordance with its respective Pro Rata Share for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
the L/C Facility Agent in any way relating to or arising out of this Agreement
or any documents contemplated by or referred to herein or therein or
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the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided, however, that
no Letter of Credit Bank shall be liable for any of the foregoing to the extent
they arise from the L/C Facility Agent's gross negligence, bad faith or willful
misconduct. The L/C Facility Agent shall be fully justified in refusing to take
or to continue to take any action unless it shall first be indemnified to its
satisfaction by the Letter of Credit Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Without limitation of the foregoing, each Letter of Credit Bank
agrees to reimburse the L/C Facility Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the L/C
Facility Agent in connection with the preparation, execution, administration or
enforcement of, or legal advice in respect of rights or responsibilities under,
the Operative Documents, to the extent that the L/C Facility Agent is not
reimbursed for such expenses by the Partnership.
Section 7.6 Successor L/C Facility Agent. The L/C Facility Agent
acknowledges that its current intention is to remain the L/C Facility Agent
hereunder. Nevertheless, the L/C Facility Agent may resign at any time by giving
sixty (60) days written notice thereof to the Letter of Credit Banks and the
Partnership. The L/C Facility Agent may be removed involuntarily only for a
material breach of its duties and obligations hereunder or under the other
Credit Documents or for gross negligence, bad faith or willful misconduct in
connection with the performance of its duties hereunder or under the other
Credit Documents and then only upon the affirmative vote of the Required Letter
of Credit Banks (excluding the L/C Facility Agent from such vote and the L/C
Facility Agent's Pro Rata Share from the amounts used to determine the required
Pro Rata Shares of the remaining Letter of Credit Banks). Upon any such
resignation or removal, the Required Letter of Credit Banks shall have the
right, with the consent of the Partnership (such consent not to be unreasonably
withheld or delayed) to appoint a successor the L/C Facility Agent. If no
successor the L/C Facility Agent shall have been so appointed by the Required
Letter of Credit Banks, and shall have accepted such appointment, within thirty
(30) days after the retiring the L/C Facility Agent's giving of notice of
resignation or the Letter of Credit Banks' removal of the retiring the L/C
Facility Agent, the retiring the L/C Facility Agent may, on behalf of the Letter
of Credit Banks, appoint a successor the L/C Facility Agent which shall be a
Letter of Credit Bank, if any Letter of Credit Bank shall be willing to serve,
and otherwise shall be a commercial Letter of Credit Bank having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as L/C Facility Agent under the Operative Documents by a successor
L/C Facility Agent, such successor L/C Facility Agent shall thereupon succeed to
and become
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vested with all the rights, powers, privileges and duties of the retiring L/C
Facility Agent, and the retiring L/C Facility Agent shall be discharged from its
duties and obligations as L/C Facility Agent only under the Credit Documents.
After any retiring L/C Facility Agent's resignation or removal hereunder as L/C
Facility Agent, the provisions of this Article 7 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was the L/C Facility
Agent under the Operative Documents.
Section 7.7 Authorization. The L/C Facility Agent is hereby
authorized by the Letter of Credit Banks to execute, deliver and perform each of
the Credit Documents to which the L/C Facility Agent is or is intended to be a
party and each Letter of Credit Bank agrees to be bound by all of the agreements
of the L/C Facility Agent contained in the Credit Documents. The L/C Facility
Agent is further authorized by the Letter of Credit Banks to release liens on
property that the Partnership is permitted to sell or transfer pursuant to the
terms of this Agreement, the other Credit Documents and the Operative Documents,
and to enter into agreements supplemental hereto for the purpose of curing any
formal defect, inconsistency, omission or ambiguity in this Agreement or any
Credit Document to which it is a party.
Section 7.8 L/C Facility Agent as Lender. With respect to its Letter
of Credit Commitment, the LOC Loans made by it and any LOC Loan Note issued to
it, the L/C Facility Agent shall have the same rights and powers under the
Operative Documents as any other Letter of Credit Bank and may exercise the same
as though it were not the L/C Facility Agent (except respecting voting as
provided in Section 7.16). The term "Letter of Credit Bank" or "Letter of Credit
Banks" shall, unless otherwise expressly indicated, include the L/C Facility
Agent in its individual capacity. The L/C Facility Agent and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of and
generally engage in any kind of business with the Partnership or any other
Person without any duty to account therefor to the Letter of Credit Banks.
Section 7.9 Amendments: Waivers. Subject to the provisions of the
Intercreditor Agreement and of this Section 7.9, unless otherwise specified in
this Agreement, any L/C Facility Document or another Credit Document, the
Required Letter of Credit Banks (or the L/C Facility Agent with the consent in
writing of the Required Letter of Credit Banks) and the Partnership may enter
into agreements supplemental hereto for the purpose of adding, modifying or
waiving any provisions to or of the Credit Documents or changing in any manner
the rights of the Letter of Credit Banks or the Partnership
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hereunder or waiving any Inchoate Default or Event of Default; provided,
however, that no such supplemental agreement shall, without the consent of all
of the Letter of Credit Banks:
(a) extend the maturity of any Reimbursement Obligation, any
LOC Loan or any LOC Loan Note or reduce the principal amount thereof, or
reduce the rate or change the time of payment of interest due on any
Reimbursement Obligation, any LOC Loan or any LOC Loan Note; or
(b) extend the LOC Loan Maturity Date; or
(c) modify Section 2.2(c), 2.5, 2.6, 2.7, 7.1, 7.13, 7.14,
7.15 or 7.16; or
(d) reduce the amount or extend the payment date for any
amount due under Article 2; or
(e) increase the amount of the Letter of Credit Commitment of
any Letter of Credit Bank hereunder; or
(f) reduce or change the time of payment or amount of any fee
due and payable hereunder; or
(g) reduce or change the percentages specified in the
definition of Required Letter of Credit Banks; or
(h) permit the Partnership to assign its rights under this
Agreement or any Senior Collateral Document; or
(i) amend this Section 7.9; or
(j) release any Senior Collateral from the Lien of any of the
Senior Collateral Documents or allow release of any funds from any Account
otherwise than in accordance with the terms of the Senior Collateral
Documents and the other Credit Documents.
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and provided, further, however, that no amendment of any provision of this
Agreement relating to the L/C Facility Agent shall be effective without the
written consent of the L/C Facility Agent.
Section 7.10 Withholding Tax. (a) The L/C Facility Agent may
withhold from any interest payment to any Letter of Credit Bank an amount
equivalent to any applicable withholding tax. If the forms or other
documentation required by Section 2.4 are not delivered to the L/C Facility
Agent, then the L/C Facility Agent may withhold from any interest payment to any
Letter of Credit Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
(b) If the Internal Revenue Service or any authority of the
United States or other jurisdiction asserts a claim that the L/C Facility Agent
did not properly withhold tax from amounts paid to or for the account of any
Letter of Credit Bank (because the appropriate form was not delivered, was not
properly executed or because such Letter of Credit Bank failed to notify the L/C
Facility Agent of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Letter of Credit Bank shall indemnify the L/C Facility Agent fully for all
amounts paid, directly or indirectly, by the L/C Facility Agent as tax or
otherwise, including penalties and interest, together with all expenses
incurred, including legal expenses, allocated staff costs and any out of pocket
expenses.
(c) If any Letter of Credit Bank sells, assigns, grants
participations in or otherwise transfers its rights under this Agreement, the
purchaser, assignee, participant or transferee, as applicable, shall comply and
be bound by the terms of Sections 2.4(g), 7.10(a) and 7.10(b) as though it were
such Letter of Credit Bank.
Section 7.11 General Provisions as to Payments. The L/C Facility
Agent shall promptly distribute to each Letter of Credit Bank, subject to the
terms of the assignment and assumption agreement between the L/C Facility Agent
and such Letter of Credit Bank, its pro rata share of each payment of principal
and interest payable to the Letter of Credit Banks on the Reimbursement
Obligations and the LOC Loans and of fees hereunder received by the L/C Facility
Agent for the account of the Letter of Credit Banks and of any other amounts
owing on the Reimbursement Obligations or the LOC Loans. The payments made for
the account of each Letter of Credit Bank shall be made, and distributed to it,
for the account of (i) its domestic lending office in the case of payments of
principal of, and interest on, its Base Rate LOC Loans, (ii) its domestic or
foreign lending
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office, as each Letter of Credit Bank may designate in writing to the L/C
Facility Agent, in the case of its LIBOR LOC Loans, and (iii) its domestic
lending office, or such other lending office as it may designate for the purpose
from time to time, in the case of payments of fees and other amounts payable
hereunder. The Letter of Credit Banks shall have the right to alter designated
domestic lending offices upon written notice to the L/C Facility Agent and the
Partnership.
Section 7.12 Substitution of Letter of Credit Bank. Should any
Letter of Credit Bank fail to make an LOC Loan in violation of its obligations
under this Agreement (a "Non-Advancing Letter of Credit Bank"), the L/C Facility
Agent shall (a) in its sole discretion fund the LOC Loan on behalf of the
Non-Advancing Letter of Credit Bank or (b) cooperate with the Partnership or any
other Letter of Credit Bank to find another Person that shall be acceptable to
the L/C Facility Agent and that shall be willing to assume the Non-Advancing
Letter of Credit Bank's obligations under this Agreement (including the
obligation to make the LOC Loan which the Non-Advancing Letter of Credit Bank
failed to make but without assuming any liability for damages for failing to
have made such LOC Loan or any previously required LOC Loan). Subject to the
provisions of the next following sentence and complying with Section 2.4(g),
such Person shall be substituted for the Non-Advancing Letter of Credit Bank
hereunder upon execution and delivery to the L/C Facility Agent of an agreement
acceptable to the L/C Facility Agent by such Person assuming the Non-Advancing
Letter of Credit Banks's obligations under this Agreement (which shall also
amend Schedule I to reflect such substitution), and all interest and fees which
would otherwise have been payable to the Non-Advancing Letter of Credit Bank
shall thereafter be payable to such Person. Prior to any such substitution, the
Non-Advancing Letter of Credit Bank's Pro Rata Share shall be commensurately
reduced (and the Pro Rata Share of any Letter of Credit Bank which funded such
amount shall be commensurately increased) until such failure to fund is cured,
notwithstanding that the calculation of Pro Rata Shares would otherwise be based
solely upon Letter of Credit Commitments rather than funded amounts. Nothing in
(and no action taken pursuant to) this Section 7.12 shall relieve the
Non-Advancing Letter of Credit Bank from any liability it might have to the
Partnership or to the other Letter of Credit Banks (including to reimburse the
L/C Facility Agent for any funding by the L/C Facility Agent pursuant to clause
(a)) as a result of its failure to make any LOC Loan.
Section 7.13 Participation. Nothing herein provided shall prevent
any Letter of Credit Bank from selling a participation in its Letter of Credit
Commitment (including any Reimbursement Obligations and LOC Loans funded
thereunder) in an
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aggregate amount of at least $1,000,000 with respect to any participant;
provided that (a) no such sale of a participation shall alter such Letter of
Credit Bank's or the Partnership's obligations hereunder, (b) the Partnership
shall have no liability for any costs or expenses associated with such sale and
(c) any agreement pursuant to which any Letter of Credit Bank may grant a
participation in its rights with respect to its Letter of Credit Commitment
shall provide that, with respect to such Letter of Credit Commitment, subject to
the following proviso, such Letter of Credit Bank shall retain the sole right
and responsibility to exercise the rights of such Letter of Credit Bank and
enforce the obligations of the Partnership relating to such Letter of Credit
Commitment, including the right to approve any amendment, modification or waiver
of any provision of this Agreement or any other Credit Document and the right to
take action to have the LOC Loan Notes declared due and payable pursuant to
Article 6; provided, however, that such agreement may provide that the
participant may have rights to approve or disapprove decreases in interest rates
or fees, lengthening of maturity of any Reimbursement Obligations or LOC Loans,
or release of any material Senior Collateral. No recipient of a participation in
any Letter of Credit Commitment, Reimbursement Obligations or LOC Loans of any
Letter of Credit Bank shall have any rights under this Agreement or any other
Credit Document or shall be entitled to any reimbursement for increased costs or
reserve requirements under Section 2.6 or any other indemnity or payment rights
against the Partnership (but shall be permitted to receive from the Letter of
Credit Bank granting such participation a proportionate amount which would have
been payable to the Letter of Credit Bank from whom such Person acquired its
participation). Any Letter of Credit Bank selling a participation in its Letter
of Credit Commitment, Reimbursement Obligations and/or LOC Loans shall provide
concurrent notice to the Partnership identifying the participant and confirming
that the participation interest being sold is in compliance with this Section
7.13. Notwithstanding the foregoing, no Letter of Credit Bank shall have any
liability, to the Partnership or otherwise, for failing to provide the notice to
the Partnership required by the preceding sentence.
Section 7.14 Transfer of Letter of Credit Commitment.
Notwithstanding anything else herein to the contrary, any Letter of Credit Bank,
after receiving the L/C Facility Agent's prior written consent and paying to the
L/C Facility Agent a $5,000 transfer fee for each transfer, and after reasonable
notice to and consultation with the Partnership, may from time to time, at its
option, sell, assign, transfer, negotiate or otherwise dispose of a portion of
its Letter of Credit Commitment (including the Letter of Credit Bank's interest
in this Agreement and the other Credit Documents) to any Letter of Credit Bank
or other lending institution which in such assigning Letter of Credit Bank's
judgment
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is reasonably capable of performing the obligations of a Letter of Credit Bank
hereunder and reasonably experienced in project financing; provided, however,
that no Letter of Credit Bank (including any assignee of any Letter of Credit
Bank) may assign any portion of its Letter of Credit Commitment (including
Reimbursement Obligations and LOC Loans) of less than $1,000,000 (unless to
another Letter of Credit Bank) or which leaves the assigning Letter of Credit
Bank with a Letter of Credit Commitment of less than $1,000,000 after giving
effect to such assignment and all previous assignments (except that a Letter of
Credit Bank may be left with no Letter of Credit Commitment, Reimbursement
Obligations and LOC Loans if it assigns its entire Letter of Credit Commitment,
Reimbursement Obligations and LOC Loans). In the event of any such assignment,
(a) the assigning Letter of Credit Bank's Pro Rata Share shall be reduced by the
amount of the Pro Rata Share assigned to the new lender, (b) the parties to such
assignment shall execute and deliver an appropriate agreement evidencing such
sale, assignment, transfer or other disposition (which shall also amend Schedule
I to reflect such assignment, transfer or other disposition), and (c) at the
assigning Letter of Credit Bank's option, the Partnership shall execute and
deliver to such new lender a new LOC Loan Note in the form attached hereto as
Exhibit E in a principal amount equal to such new lender's Letter of Credit
Commitment, and the Partnership shall execute and exchange with the assigning
Letter of Credit Bank a replacement note for any LOC Loan Note in an amount
equal to the Letter of Credit Commitment retained by the Letter of Credit Bank,
if any. Thereafter, such new lender shall be deemed to be a Letter of Credit
Bank and shall have all of the rights and duties of a Letter of Credit Bank
(except as otherwise provided in this Article 7), in accordance with its Pro
Rata Share, under each of the Credit Documents. Without derogation from the
Partnership's obligations under Section 8.12, the Partnership shall have no
liability for out of pocket costs and expenses arising from a transfer pursuant
to this Section 7.14.
Section 7.15 Assignability to Federal Reserve Lender.
Notwithstanding any other provision contained in this Agreement or any other
Credit Document to the contrary, any Letter of Credit Bank may assign all or any
portion of the Reimbursement Obligations, LOC Loans or LOC Loan Notes held by it
to any Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank, provided that
any payment in respect of such assigned Reimbursement Obligations, LOC Loans or
LOC Loan Notes made by the Partnership to or for the account of the assigning
and/or pledging Letter of Credit Bank in accordance with the terms of this
Agreement shall satisfy the Partnership's obligations hereunder in respect to
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such assigned Reimbursement Obligations, LOC Loans or Notes to the extent of
such payment. No such assignment shall release the assigning Letter of Credit
Bank from its obligations hereunder.
Section 7.16 Voting. (a) In each instance that the L/C Facility
Agent is required to cast a vote with respect to any consent, waiver, approval
or direction in accordance with Article 4 of the Intercreditor Agreement or the
Letter of Credit Banks are required to vote, a vote shall be taken among the
Letter of Credit Banks in the timeframe specified by the L/C Facility Agent
(which shall be at least five (5) Banking Days prior to the expiration of the
timeframe specified in the Common Agreement or in the notice provided by the
Intercreditor Agent to the L/C Facility Agent pursuant to Article 4 of the
Intercreditor Agreement). The number of votes allocated to each Letter of Credit
Bank will be calculated based on its Pro Rata Share.
(b) Subject to the provisions of the Intercreditor Agreement,
the number of votes required for the L/C Facility Agent to approve, waive,
consent to or provide direction shall be as follows:
(i) Any amendments, consents or waivers to this
Agreement (except those specified in Section 7.9 of this Agreement) shall
require the approval of the Required Letter of Credit Banks;
(ii) All amendments, consents or waivers set forth in
Section 7.9 of this Agreement shall require the approval of all Letter of
Credit Banks; and
(iii) Any other consent, waiver of other decision of
the L/C Facility Agent put to a vote of the Letter of Credit Banks and not
provided for therein or in the Intercreditor Agreement shall require the
approval of the Required Letter of Credit Banks.
(c) In calculating the percentage of Letter of Credit Banks
consenting to, approving, waiving or providing direction, the number of votes
cast in favor of such decision shall be divided by the total number of votes
cast with respect to such decision. In the event any Letter of Credit Bank does
not cast its votes within the timeframe specified by the L/C Facility Agent
pursuant to Section 7.16(a), such Letter of Credit Bank shall be deemed to have
waived its right to consent, approve, waive or
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provide direction with respect to the subject issue. Such Letter of Credit Bank
hereby waives any and all rights it may have to object to or seek relief against
the decision of the Letter of Credit Banks voting with respect to such issue and
agrees to be bound by such decision.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.1 Notices. Unless otherwise specifically herein provided,
all notices required or permitted under the terms and provisions hereof shall be
in writing and any such notice shall become effective if given in accordance
with the provisions of Section 12.1 of the Common Agreement. The address for
notices for each Letter of Credit Bank shall be as set forth opposite such
Letter of Credit Bank's name on Schedule I hereto.
Section 8.2 Right to Set-Off. Regardless of the adequacy of any
other collateral, the L/C Facility Agent may at any time after the occurrence
and during the continuance of any Event of Default execute or realize on the
Letter of Credit Banks' security interest in any deposits or other sums at any
time credited or due from the Letter of Credit Banks and any Project Revenues,
securities or other property of the Partnership in the possession of the L/C
Facility Agent, and may apply any such sums, securities or other property to or
set them off against the Partnership's obligations to the Letter of Credit Banks
under the LOC Loan Notes and this Agreement.
Section 8.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Partnership, the L/C Facility Agent and the
Letter of Credit Banks and their respective successors, transferees and assigns,
except that the Partnership may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Required Letter of Credit Banks. No Letter of Credit Bank may participate,
assign or sell any of its Letter of Credit Commitment, Reimbursement Obligations
or LOC Loans, except as required by operation of law, in connection with the
merger, consolidation or dissolution of such Letter of Credit Bank or as
provided in Article 7.
Section 8.4 Survival. All agreements, statements, representations
and warranties made by the Partnership herein or in any certificate or other
instrument delivered by the Partnership or on its behalf under this Agreement
shall be considered to
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have been relied upon by the L/C Facility Agent and the Letter of Credit Banks
and shall survive the execution and delivery of this Agreement regardless of any
investigation made by the L/C Facility Agent or any Letter of Credit Bank or
made on their behalf.
Section 8.5 No Waiver; Remedies Cumulative. No failure or delay on
the part of the L/C Facility Agent or the Letter of Credit Banks in exercising
any right, power or privilege hereunder and no course of dealing between the
Partnership and the L/C Facility Agent or any Letter of Credit Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the L/C Facility Agent or the
Letter of Credit Banks would otherwise have.
Section 8.6 Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
Section 8.7 Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any
jurisdiction, shall not in any way be affected or impaired thereby.
Section 8.8 Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the L/C Facility Agent or any Letter of Credit Bank hereunder or
pursuant hereto is rescinded or must otherwise be restored or returned by the
L/C Facility Agent or such Letter of Credit Bank upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Partnership or
upon the appointment of any intervenor or conservator of, or trustee or similar
official for, the Partnership or any substantial part of the Partnership's
assets, or upon the entry of an order by any court avoiding the payment of such
amount, or otherwise, all as though such payments had not been made.
Section 8.9 Counterparts. This Agreement may be executed in any
number of counterparts, each of which, taken together, shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
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Section 8.10 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and practices
consistent with those applied in the preparation of the financial statements
submitted by the Partnership to the L/C Facility Agent, and all financial data
submitted pursuant to this Agreement shall be prepared in accordance with such
principles and practices.
Section 8.11 Additional Financing. The parties hereto acknowledge
that the Letter of Credit Banks have made no agreement or commitment to provide
any financing except as set forth herein.
Section 8.12 No Partnership. Etc. The Letter of Credit Banks and the
Partnership intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement, the LOC Loan Notes or
in any of the other Credit Documents shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or co-ownership by
or between the Letter of Credit Banks and the Partnership or any other Person.
The Letter of Credit Banks shall not be in any way responsible or liable for the
debts, losses, obligations or duties of the Partnership or any other Person with
respect to the Project or otherwise. As between the Letter of Credit Banks and
the Partnership, all obligations to pay real property or other taxes,
assessments, insurance premiums, and all other fees and charges arising from the
ownership, operation or occupancy of the Project and to perform all obligations
and other agreements and contracts relating to the Project shall be the sole
responsibility of the Partnership.
Section 8.13 Deed of Trust/Collateral Documents. The Reimbursement
Obligations, LOC Loans and other obligations of the Partnership hereunder are
secured in part by the Deed of Trust encumbering certain properties in the State
of Mississippi. Reference is hereby made to the Deed of Trust and the other
Senior Collateral Documents for the provisions, among others, relating to the
nature and extent of the security provided thereunder, the rights, duties and
obligations of the Partnership and the rights of the L/C Facility Agent, the
Collateral Agent and the Letter of Credit Banks with respect to such security.
Section 8.14 Limitation on Liability. No claim shall be made by the
Partnership, any Partner or any of their Affiliates against the Letter of Credit
Banks or any of their Affiliates, directors, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any
breach or wrongful conduct (whether
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or not the claim therefor is based on contract, tort or duty imposed by law), in
connection with, arising out of or in any way related to the transactions
contemplated by this Agreement or the other Operative Documents or any act or
omission or event occurring in connection therewith; and the Partnership hereby
waives, releases and agrees not to sue upon any such claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
Section 8.15 Knowledge and Attribution. References in this
Agreement, the L/C Facility Documents and the other Credit Documents to the
"knowledge" or "best knowledge" of the Partnership, and all like references,
mean "knowledge" or "best knowledge" of a Responsible Officer of the Managing
General Partner of the Partnership. References in this Agreement, the L/C
Facility Documents and the other Credit Documents to facts and circumstances
"known to" the Partnership, and all like references, mean facts or circumstances
of which a Responsible Officer of the Managing General Partner of the
Partnership has actual knowledge.
Section 8.16 No Approval of Work. The making of any LOC Loan
hereunder shall not be deemed an approval or acceptance by the L/C Facility
Agent or the Letter of Credit Banks of any work, labor, supplies, materials or
equipment furnished or supplied with respect to the Project.
Section 8.17 Governing Law. This Agreement shall be governed by the
laws of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 8.18 Consent to Jurisdiction. Any legal action or proceeding
by or against the Partnership with respect to or arising out of this Agreement
may be brought in or removed to the courts of the State of New York, in and for
the County of New York, or of the United States of America for the Southern
District of New York. By execution and delivery of this Agreement, the
Partnership accepts, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts for legal proceedings
arising out of or in connection with this Agreement and irrevocably consents to
the appointment of CT Corporation System, with offices on the date hereof at
1633 Broadway, New York, New York 10019, as its agent to receive service of
process in New York, New York. If for any reason such agent shall cease to be
available to act
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as such, the Partnership agrees to appoint a new agent satisfactory to the L/C
Facility Agent on the terms and for the purposes of this provision. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or any right to bring legal action or proceedings in any other competent
jurisdiction. The Partnership further agrees that the aforesaid courts of the
State of New York and of the United States of America for the Southern District
of New York shall have exclusive jurisdiction with respect to any claim or
counterclaim of the Partnership based upon the assertion that the rate of
interest charged by or under this Agreement or any other Credit Document is
usurious. The Partnership hereby waives any right to stay or dismiss any action
or proceeding under or in connection with the Project, this Agreement or any
other Operative Document brought before the foregoing courts on the basis of
forum non-conveniens or improper venue.
Section 8.19 Waiver of Jury Trial. EACH OF THE PARTNERSHIP, THE L/C
FACILITY AGENT AND EACH LETTER OF CREDIT BANK HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF THE OTHER PARTIES HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE L/C FACILITY AGENT AND THE LETTER OF CREDIT BANKS TO
ENTER INTO THIS AGREEMENT.
Section 8.20 Indemnities and Expenses. The obligation of the
Partnership to pay the costs and expenses of, and to indemnify, defend and hold
harmless, the L/C Facility Agent and the Letter of Credit Banks under and in
connection with this Agreement shall be as provided in Section 5.1(j) and
Section 12.4 of the Common Agreement as in effect as of the date hereof. No
amendment to such Section 5.1(j) or Section 12.4 or termination of the Common
Agreement shall affect the provisions of this Section 8.20 unless such amendment
or termination shall have been consented to by the parties to this Agreement in
accordance with the provisions hereof and of the other Credit Documents.
Section 8.21 Entire Agreement. This Agreement, together with any
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement as to the matters covered hereby and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
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Section 8.22 Third Party Beneficiaries. The agreement of the parties
contained herein are solely for the benefit of the Partnership, the L/C Facility
Agent and the Letter of Credit Banks, and no other Person (including any
obligor, contractor, subcontractor, supplier or materialman furnishing supplies,
goods or services to or for the benefit of the Project) shall have any rights
hereunder.
Section 8.23 Scope of Liability. The provisions of Section 9.1 of
the Common Agreement shall apply to this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Credit and Reimbursement Agreement to be duly executed and delivered by their
officers thereunto duly authorized as of the date first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
---------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
CREDIT SUISSE FIRST BOSTON,
in its capacity as the L/C Facility Agent
By: /s/ Brian T. Caldwell
----------------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
----------------------------------
Name: Pilarcita V. Naval
Title: Associate
CREDIT SUISSE FIRST BOSTON,
in its capacity as the Letter of Credit Issuer
By: /s/ Brian T. Caldwell
----------------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
----------------------------------
Name: Pilarcita V. Naval
Title:
<PAGE>
Signature Page to Letter of Credit Agreement
<PAGE>
CREDIT SUISSE FIRST BOSTON,
in its capacity as a Letter of Credit Bank
By: /s/ Brian T. Caldwell
--------------------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
--------------------------------
Name: Pilarcita V. Naval
Title: Associate
<PAGE>
Signature Page to Letter of Credit Agreement
<PAGE>
SCHEDULE I
LETTER OF CREDIT BANKS AND LETTER OF CREDIT COMMITMENTS
Letter of Credit Bank Letter of Credit
(and Lending Office) Address for Notices Commitment
- -------------------- ------------------- ----------
Credit Suisse First Boston Eleven Madison Avenue $16,980,000
Eleven Madison Avenue New York, New York 10010
New York, New York 10010
<PAGE>
SCHEDULE II
AMORTIZATION SCHEDULE FOR LOC LOANS
The principal amount of outstanding LOC Loans will be repaid in
twenty (20) equal quarterly installments.
<PAGE>
EXHIBIT A
FORM OF VEPCO LETTER OF CREDIT-A
Credit Suisse First Boston Letter of Credit No. TS06001015
Eleven Madison Avenue Irrevocable Standby Credit
New York, NY 10010
Attention: Global Project Finance
Date and Place of Issue: Date and Place of Expiry:
New York, New York Credit Suisse First Boston
August 28, 1998 Eleven Madison Avenue
New York, NY 10010
Attention: Global Project Finance
The earlier of (i) June 1, 2001
and (ii) the Commercial Operation
Date (as defined in the VEPCO PPA
(as defined herein)).
Applicant:
LSP Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: Treasurer
Beneficiary: Amount: Up to an aggregate of Five Million
Virginia Electric and Power Company Six Hundred Sixty Thousand Dollars
P.O. Box 26666 (US$5,660,000)
Richmond, Virginia 23261
Credit Available With:
OR Credit Suisse First Boston
By: Negotiation, Against Presentation
(For Hand Delivery)
701 East Cary Street
A-1
<PAGE>
Richmond, Virginia 23219 of the Documents Detailed Herein and of
Your Draft(s) at Sight Drawn on Credit
Suisse First Boston
Ladies and Gentlemen:
We irrevocably authorize you to draw on us for the account of the Applicant in
accordance with the terms and conditions hereinafter set forth, an amount not
exceeding in the aggregate Five Million Six Hundred Sixty Thousand Dollars
(US$5,660,000) (the "Letter of Credit Amount") available against presentation of
a dated drawing request drawn on Credit Suisse First Boston, manually signed by
an authorized officer of the Beneficiary (who is identified as such)
appropriately completed in the form of Annex 1 hereto and sent by the
Beneficiary's authorized officer. This Letter of Credit is effective
immediately.
This Letter of Credit is established pursuant to Section 3.3(a) of the Power
Purchase Agreement, dated as of May 18, 1998 (the "VEPCO PPA"), between
Applicant and Beneficiary.
The above drawing request and all communications with respect to this Letter of
Credit shall be in writing, addressed to us at Eleven Madison Avenue, New York,
New York, 10010, Attention: Global Project Finance, telephone (212) 325-9143,
telecopier (212) 325-8049, referencing this Letter of Credit No. TS06001015 and
presented to us by tested telex, delivery in person or facsimile transmission at
such address, provided that the original of the above drawing request or such
communications, as the case may be, shall be sent to us at such address by
overnight courier for receipt by us within three (3) Business Days of the date
of any such facsimile transmission.
If the drawing request is presented in compliance with the terms of this Letter
of Credit to us at such address by 12:00 noon New York time on any Business Day
(as hereinafter defined), payment will be made not later than 3:00 p.m. New York
time on such day and if such drawing request is so presented to us after 12:00
noon New York time on any Business Day, payment will be made on the following
Business Day not later than 1:00 p.m. New York time. Payment under this Letter
of Credit shall be made in immediately available funds by wire transfer to such
account as may be designated by the Beneficiary in the applicable drawing
request.
As used in this Letter of Credit, "Business Day" means any day on which
commercial banks located in New York, New York are not required or authorized to
remain closed.
A-2
<PAGE>
This Letter of Credit shall expire on the earlier of (i) June 1, 2001 and (ii)
the Commercial Operation Date (as defined in the VEPCO PPA).
In the event that a drawing request fails to comply with the terms of this
Letter of Credit, we shall provide the Beneficiary prompt notice of the same
stating the reasons therefor and shall upon your instructions hold any
nonconforming drawing request and other documents at your disposal or return any
non-conforming drawing request and other documents to the Beneficiary at the
address set forth above by delivery in person or facsimile transmission (with
originals thereof sent by overnight courier for receipt within two (2) Business
Days). Upon being notified that the drawing was not effected in compliance with
this Letter of Credit, the Beneficiary may attempt to correct such non-complying
drawing request in accordance with the terms of this Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and this
undertaking shall not in any way be modified, amended, limited or amplified by
reference to any document, instrument or agreement referred to herein, except
only defined terms used herein and the drawing requests and certificates
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
defined terms, drawing requests and certificates.
This Letter of Credit is transferable. Transfer may only be effected by us upon
our receipt of an acceptable application for transfer accompanied by the
original Letter of Credit and payment of our transfer commission in effect at
the time of transfer.
Partial drawings under this Letter of Credit are allowed and each such partial
drawing shall reduce the amount thereafter available hereunder for drawings
under this Letter of Credit. Each draft honored by us under this Letter of
Credit shall immediately reduce the Letter of Credit Amount by the amount of the
payment made by us in respect of such draft. Upon the payment to you or your
account of the amount specified in a draft drawn hereunder, we shall be fully
discharged of our obligation under this Letter of Credit to the extent of the
amount specified in such draft.
Tested telex reimbursement is allowed.
All banking charges, including any advising and negotiating bank charges, are
for the account of the Applicant.
A-3
<PAGE>
All drawing requests under this Letter of Credit must bear the clause:
"Drawn under Credit Suisse First Boston Letter of Credit Number
TS06001015 dated August 28, 1998."
This Letter of Credit shall not be amended except with the written concurrence
of Credit Suisse First Boston, the Applicant, the Beneficiary and the Required
Letter of Credit Banks (as defined in the Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998, by and among the Applicant, Credit
Suisse First Boston as the L/C Facility Agent and the Letter of Credit Issuer
and the other financial institutions party thereto).
We hereby engage with you that a drawing request drawn strictly in compliance
with the terms of this Letter of Credit and amendments thereto shall meet with
due honor upon presentation.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision in force as from 1st of January 1994),
International Chamber of Commerce Publication Number 500 (the "Uniform
Customs"). This Letter of Credit shall be deemed to be a contract made under the
laws of the State of New York and shall, as to matters not governed by the
Uniform Customs, be governed by and construed in accordance with the laws of
such State.
We irrevocably agree with you that any legal action or proceeding with respect
to this Letter of Credit shall be brought in the courts of the State of New York
in the County of New York or of the United States of America in the Southern
District of New York. By signing this Letter of Credit, we irrevocably submit to
the jurisdiction of such courts solely for the purposes of this Letter of
Credit. We hereby waive, to the fullest extent permitted by law any objection we
may now or hereafter have to the laying of venue in any such action or
proceeding in any such court.
A-4
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
A-5
<PAGE>
ANNEX 1
Credit Suisse First Boston
Letter of Credit Number TS06001015 dated August 28, 1998
DRAWING REQUEST
[Date]
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Global Project Finance
Ladies and Gentlemen:
The undersigned hereby draws on Credit Suisse First Boston Letter of
Credit No. TS06001015 Irrevocable Standby Letter of Credit (the "Letter of
Credit") dated August 28, 1998, issued by you in favor of us. Any capitalized
term used herein and not defined herein shall have its respective meaning as set
forth in the Letter of Credit.
In connection with this drawing, we hereby certify that:
[Select one of paragraph A or paragraph B, as applicable]
[(A) "This drawing in the amount of $[________] is being made pursuant to
Credit Suisse First Boston Letter of Credit No. [________] Irrevocable
Standby Letter of Credit issued to the Beneficiary because:
[(i) Pursuant to Section 3.3(e) of the VEPCO PPA Applicant must pay to
Beneficiary Incremental Replacement Power Costs (as defined in the
VEPCO PPA) in accordance with Appendix G to the VEPCO PPA.]
[(ii) Applicant has failed to pay when due pursuant to Section 3.3(e)(iv)
an undisputed amount owed to Beneficiary under the VEPCO PPA.]
A-6
<PAGE>
[(iii) Pursuant to Section 3.3(e)(iii) of the VEPCO PPA, Applicant has
failed to pay when due to Beneficiary an amount due as a result of
a payment dispute resolved in favor of Beneficiary.]"]
[(B) "Beneficiary is making a drawing in the full available amount of the
Letter of Credit because the term of the Letter of Credit will expire
within five (5) Business Days of the date of this certificate and
Applicant has failed to deliver a replacement or renewal letter of credit
acceptable to Beneficiary and security is still required under Section 3.3
of the VEPCO PPA."]
(C) You are directed to make payment of the requested drawing to account no.
_______ at ________ [insert bank name, address and account number].
IN WITNESS WHEREOF, the undersigned has executed and delivered this
request on this ___ day of _______.
VIRGINIA ELECTRIC AND POWER COMPANY
By: ________________________
Name:
Title:
A-7
<PAGE>
EXHIBIT B
FORM OF VEPCO LETTER OF CREDIT-B
Credit Suisse First Boston Letter of Credit No. [_________]
Eleven Madison Avenue Irrevocable Standby Credit
New York, NY 10010
Attention: Global Project Finance
Date and Place of Issue: Date and Place of Expiry:
New York, New York Credit Suisse First Boston
______ __, ____ Eleven Madison Avenue
New York, NY 10010
Attention: Global Project Finance
The earlier of (i) June 1, 2001
and (ii) the Commercial Operation
Date (as defined in the VEPCO PPA
(as defined herein)).
Applicant:
LSP Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: Treasurer
Beneficiary: Amount: Up to an aggregate of Five Million
Virginia Electric and Power Company Six Hundred Sixty Thousand Dollars
P.O. Box 26666 (US$5,660,000)
Richmond, Virginia 23261
Credit Available With:
OR Credit Suisse First Boston
By: Negotiation, Against Presentation
(For Hand Delivery)
701 East Cary Street
B-1
<PAGE>
Richmond, Virginia 23219 of the Documents Detailed Herein and of
Your Draft(s) at Sight Drawn on Credit
Suisse First Boston
Ladies and Gentlemen:
We irrevocably authorize you to draw on us for the account of the Applicant in
accordance with the terms and conditions hereinafter set forth, an amount not
exceeding in the aggregate Five Million Six Hundred Sixty Thousand Dollars
(US$5,660,000) (the "Letter of Credit Amount") available against presentation of
a dated drawing request drawn on Credit Suisse First Boston, manually signed by
an authorized officer of the Beneficiary (who is identified as such)
appropriately completed in the form of Annex 1 hereto and sent by the
Beneficiary's authorized officer. This Letter of Credit is effective
immediately.
This Letter of Credit is established pursuant to Section 3.3(b) of the Power
Purchase Agreement, dated as of May 18, 1998 (the "VEPCO PPA"), between
Applicant and Beneficiary.
The above drawing request and all communications with respect to this Letter of
Credit shall be in writing, addressed to us at Eleven Madison Avenue, New York,
New York, 10010, Attention: Global Project Finance, telephone (212) 325-9143,
telecopier (212) 325-8049, referencing this Letter of Credit No.[ ] and
presented to us by tested telex, delivery in person or facsimile transmission at
such address, provided that the original of the above drawing request or such
communications, as the case may be, shall be sent to us at such address by
overnight courier for receipt by us within three (3) Business Days of the date
of any such facsimile transmission.
If the drawing request is presented in compliance with the terms of this Letter
of Credit to us at such address by 12:00 noon New York time on any Business Day
(as hereinafter defined), payment will be made not later than 3:00 p.m. New York
time on such day and if such drawing request is so presented to us after 12:00
noon New York time on any Business Day, payment will be made on the following
Business Day not later than 1:00 p.m. New York time. Payment under this Letter
of Credit shall be made in immediately available funds by wire transfer to such
account as may be designated by the Beneficiary in the applicable drawing
request.
As used in this Letter of Credit, "Business Day" means any day on which
commercial banks located in New York, New York are not required or authorized to
remain closed.
B-2
<PAGE>
This Letter of Credit shall expire on the earlier of (i) June 1, 2001 and (ii)
the Commercial Operation Date (as defined in the VEPCO PPA).
In the event that a drawing request fails to comply with the terms of this
Letter of Credit, we shall provide the Beneficiary prompt notice of the same
stating the reasons therefor and shall upon your instructions hold any
nonconforming drawing request and other documents at your disposal or return any
non-conforming drawing request and other documents to the Beneficiary at the
address set forth above by delivery in person or facsimile transmission (with
originals thereof sent by overnight courier for receipt within two (2) Business
Days). Upon being notified that the drawing was not effected in compliance with
this Letter of Credit, the Beneficiary may attempt to correct such non-complying
drawing request in accordance with the terms of this Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and this
undertaking shall not in any way be modified, amended, limited or amplified by
reference to any document, instrument or agreement referred to herein, except
only defined terms used herein and the drawing requests and certificates
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
defined terms, drawing requests and certificates.
This Letter of Credit is transferable. Transfer may only be effected by us upon
our receipt of an acceptable application for transfer accompanied by the
original Letter of Credit and payment of our transfer commission in effect at
the time of transfer.
Partial drawings under this Letter of Credit are allowed and each such partial
drawing shall reduce the amount thereafter available hereunder for drawings
under this Letter of Credit. Each draft honored by us under this Letter of
Credit shall immediately reduce the Letter of Credit Amount by the amount of the
payment made by us in respect of such draft. Upon the payment to you or your
account of the amount specified in a draft drawn hereunder, we shall be fully
discharged of our obligation under this Letter of Credit to the extent of the
amount specified in such draft.
Tested telex reimbursement is allowed.
All banking charges, including any advising and negotiating bank charges, are
for the account of the Applicant.
B-3
<PAGE>
All drawing requests under this Letter of Credit must bear the clause:
"Drawn under Credit Suisse First Boston Letter of Credit Number [____]
dated [________], [____]."
This Letter of Credit shall not be amended except with the written concurrence
of Credit Suisse First Boston, the Applicant, the Beneficiary and the Required
Letter of Credit Banks (as defined in the Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998, by and among the Applicant, Credit
Suisse First Boston as the L/C Facility Agent and the Letter of Credit Issuer
and the other financial institutions party thereto).
We hereby engage with you that a drawing request drawn strictly in compliance
with the terms of this Letter of Credit and amendments thereto shall meet with
due honor upon presentation.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision in force as from 1st of January 1994),
International Chamber of Commerce Publication Number 500 (the "Uniform
Customs"). This Letter of Credit shall be deemed to be a contract made under the
laws of the State of New York and shall, as to matters not governed by the
Uniform Customs, be governed by and construed in accordance with the laws of
such State.
We irrevocably agree with you that any legal action or proceeding with respect
to this Letter of Credit shall be brought in the courts of the State of New York
in the County of New York or of the United States of America in the Southern
District of New York. By signing this Letter of Credit, we irrevocably submit to
the jurisdiction of such courts solely for the purposes of this Letter of
Credit. We hereby waive, to the fullest extent permitted by law any objection we
may now or hereafter have to the laying of venue in any such action or
proceeding in any such court.
B-4
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
B-5
<PAGE>
B-6
<PAGE>
ANNEX 1
Credit Suisse First Boston
Letter of Credit Number [________] dated [________]
DRAWING REQUEST
[Date]
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Global Project Finance
Ladies and Gentlemen:
The undersigned hereby draws on Credit Suisse First Boston Letter of
Credit No. [_______] Irrevocable Standby Letter of Credit (the "Letter of
Credit") dated [________], issued by you in favor of us. Any capitalized term
used herein and not defined herein shall have its respective meaning as set
forth in the Letter of Credit.
In connection with this drawing, we hereby certify that:
[Select one of paragraph A or paragraph B, as applicable]
[(A) "This drawing in the amount of $[________] is being made pursuant to
Credit Suisse First Boston Letter of Credit No. [________] Irrevocable
Standby Letter of Credit issued to the Beneficiary because:
[(i) Pursuant to Section 3.3(e) of the VEPCO PPA Applicant must pay to
Beneficiary Incremental Replacement Power Costs (as defined in the
VEPCO PPA) in accordance with Appendix G to the VEPCO PPA.]
[(ii) Applicant has failed to pay when due pursuant to Section 3.3(e)(iv)
an undisputed amount owed to Beneficiary under the VEPCO PPA.]
B-7
<PAGE>
[(iii) Pursuant to Section 3.3(e)(iii) of the VEPCO PPA, Applicant has
failed to pay when due to Beneficiary an amount due as a result of
a payment dispute resolved in favor of Beneficiary.]"]
[(B) "Beneficiary is making a drawing in the full available amount of the
Letter of Credit because the term of the Letter of Credit will expire
within five (5) Business Days of the date of this certificate and
Applicant has failed to deliver a replacement or renewal letter of credit
acceptable to Beneficiary and security is still required under Section 3.3
of the VEPCO PPA."]
(C) You are directed to make payment of the requested drawing to account no.
________ at _________ [insert bank name, address and account number].
IN WITNESS WHEREOF, the undersigned has executed and delivered this
request on this ___ day of _________.
VIRGINIA ELECTRIC AND POWER COMPANY
By: _________________________
Name:
Title:
B-8
<PAGE>
EXHIBIT C
FORM OF VEPCO LETTER OF CREDIT-C
Credit Suisse First Boston Letter of Credit No. [_________]
Eleven Madison Avenue Irrevocable Standby Credit
New York, NY 10010
Attention: Global Project Finance
Date and Place of Issue: Date and Place of Expiry:
New York, New York Credit Suisse First Boston
______ __, ____ Eleven Madison Avenue
New York, NY 10010
Attention: Global Project Finance
The date which is three (3) years
from the earlier of (i) June 1, 2001
and (ii) the Commercial Operation
Date (as defined in the VEPCO PPA
(as defined herein)).
Applicant:
LSP Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: Treasurer
Beneficiary: Amount: Up to an aggregate of Five Million
Virginia Electric and Power Company Six Hundred Sixty Thousand Dollars
P.O. Box 26666 (US$5,660,000)
Richmond, Virginia 23261
Credit Available With:
OR Credit Suisse First Boston
By: Negotiation, Against Presentation
(For Hand Delivery) of the Documents Detailed Herein and of
701 East Cary Street Your Draft(s) at Sight Drawn on Credit
Suisse First Boston
C-1
<PAGE>
Richmond, Virginia 23219
Ladies and Gentlemen:
We irrevocably authorize you to draw on us for the account of the Applicant in
accordance with the terms and conditions hereinafter set forth, an amount not
exceeding in the aggregate Five Million Six Hundred Sixty Thousand Dollars
(US$5,660,000) (the "Letter of Credit Amount") available against presentation of
a dated drawing request drawn on Credit Suisse First Boston, manually signed by
an authorized officer of the Beneficiary (who is identified as such)
appropriately completed in the form of Annex 1 hereto and sent by the
Beneficiary's authorized officer. This Letter of Credit is effective
immediately.
This Letter of Credit is established pursuant to Section 3.3(a) of the Power
Purchase Agreement, dated as of May 18, 1998 (the "VEPCO PPA"), between
Applicant and Beneficiary.
The above drawing request and all communications with respect to this Letter of
Credit shall be in writing, addressed to us at Eleven Madison Avenue, New York,
New York, 10010, Attention: Global Project Finance, telephone (212) 325-9143,
telecopier (212) 325-8049, referencing this Letter of Credit No.[ ] and
presented to us by tested telex, delivery in person or facsimile transmission at
such address, provided that the original of the above drawing request or such
communications, as the case may be, shall be sent to us at such address by
overnight courier for receipt by us within three (3) Business Days of the date
of any such facsimile transmission.
If the drawing request is presented in compliance with the terms of this Letter
of Credit to us at such address by 12:00 noon New York time on any Business Day
(as hereinafter defined), payment will be made not later than 3:00 p.m. New York
time on such day and if such drawing request is so presented to us after 12:00
noon New York time on any Business Day, payment will be made on the following
Business Day not later than 1:00 p.m. New York time. Payment under this Letter
of Credit shall be made in immediately available funds by wire transfer to such
account as may be designated by the Beneficiary in the applicable drawing
request.
As used in this Letter of Credit, "Business Day" means any day on which
commercial banks located in New York, New York are not required or authorized to
remain closed.
C-2
<PAGE>
This Letter of Credit shall expire on the date which is three (3) years from the
earlier of (i) June 1, 2000 and (ii) the Commercial Operation Date (as defined
in the VEPCO PPA (as defined herein)).
In the event that a drawing request fails to comply with the terms of this
Letter of Credit, we shall provide the Beneficiary prompt notice of the same
stating the reasons therefor and shall upon your instructions hold any
nonconforming drawing request and other documents at your disposal or return any
non-conforming drawing request and other documents to the Beneficiary at the
address set forth above by delivery in person or facsimile transmission (with
originals thereof sent by overnight courier for receipt within two (2) Business
Days). Upon being notified that the drawing was not effected in compliance with
this Letter of Credit, the Beneficiary may attempt to correct such non-complying
drawing request in accordance with the terms of this Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and this
undertaking shall not in any way be modified, amended, limited or amplified by
reference to any document, instrument or agreement referred to herein, except
only defined terms used herein and the drawing requests and certificates
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
defined terms, drawing requests and certificates.
This Letter of Credit is transferable. Transfer may only be effected by us upon
our receipt of an acceptable application for transfer accompanied by the
original Letter of Credit and payment of our transfer commission in effect at
the time of transfer.
Partial drawings under this Letter of Credit are allowed and each such partial
drawing shall reduce the amount thereafter available hereunder for drawings
under this Letter of Credit. Each draft honored by us under this Letter of
Credit shall immediately reduce the Letter of Credit Amount by the amount of the
payment made by us in respect of such draft. Upon the payment to you or your
account of the amount specified in a draft drawn hereunder, we shall be fully
discharged of our obligation under this Letter of Credit to the extent of the
amount specified in such draft.
Tested telex reimbursement is allowed.
All banking charges, including any advising and negotiating bank charges, are
for the account of the Applicant.
C-3
<PAGE>
All drawing requests under this Letter of Credit must bear the clause:
"Drawn under Credit Suisse First Boston Letter of Credit Number [____]
dated [________], [____]."
This Letter of Credit shall not be amended except with the written concurrence
of Credit Suisse First Boston, the Applicant, the Beneficiary and the Required
Letter of Credit Banks (as defined in the Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998 (the "Letter of Credit Agreement"), by
and among the Applicant, Credit Suisse First Boston as the L/C Facility Agent
and the Letter of Credit Issuer and the other financial institutions party
thereto).
We hereby engage with you that a drawing request drawn strictly in compliance
with the terms of this Letter of Credit and amendments thereto shall meet with
due honor upon presentation.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision in force as from 1st of January 1994),
International Chamber of Commerce Publication Number 500 (the "Uniform
Customs"). This Letter of Credit shall be deemed to be a contract made under the
laws of the State of New York and shall, as to matters not governed by the
Uniform Customs, be governed by and construed in accordance with the laws of
such State.
We irrevocably agree with you that any legal action or proceeding with respect
to this Letter of Credit shall be brought in the courts of the State of New York
in the County of New York or of the United States of America in the Southern
District of New York. By signing this Letter of Credit, we irrevocably submit to
the jurisdiction of such courts solely for the purposes of this Letter of
Credit. We hereby waive, to the fullest extent permitted by law any objection we
may now or hereafter have to the laying of venue in any such action or
proceeding in any such court.
C-4
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
C-5
<PAGE>
ANNEX 1
Credit Suisse First Boston
Letter of Credit Number [________] dated [________]
DRAWING REQUEST
[Date]
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Global Project Finance
Ladies and Gentlemen:
The undersigned hereby draws on Credit Suisse First Boston Letter of
Credit No. [_______] Irrevocable Standby Letter of Credit (the "Letter of
Credit") dated [________], issued by you in favor of us. Any capitalized term
used herein and not defined herein shall have its respective meaning as set
forth in the Letter of Credit.
In connection with this drawing, we hereby certify that:
[Select one of paragraph A or paragraph B, as applicable]
[(A) "This drawing in the amount of $[________] is being made pursuant to
Credit Suisse First Boston Letter of Credit No. [________] Irrevocable
Standby Letter of Credit issued to the Beneficiary because:
[(i) Pursuant to Section 3.3(e) of the VEPCO PPA Applicant must pay to
Beneficiary Incremental Replacement Power Costs (as defined in the
VEPCO PPA) in accordance with Appendix G to the VEPCO PPA.]
[(ii) Applicant has failed to pay when due pursuant to Section 3.3(e)(iv)
an undisputed amount owed to Beneficiary under the VEPCO PPA.]
C-6
<PAGE>
[(iii) Pursuant to Section 3.3(e)(iii) of the VEPCO PPA, Applicant has
failed to pay when due to Beneficiary an amount due as a result of
a payment dispute resolved in favor of Beneficiary.]"]
[(B) "Beneficiary is making a drawing in the full available amount of the
Letter of Credit because the term of the Letter of Credit will expire
within five (5) Business Days of the date of this certificate and
Applicant has failed to deliver a replacement or renewal letter of credit
acceptable to Beneficiary and security is still required under Section 3.3
of the VEPCO PPA."]
(C) You are directed to make payment of the requested drawing to account no.
_______ at __________ [insert bank name, address and account number].
IN WITNESS WHEREOF, the undersigned has executed and delivered this
request on this ___ day of __________.
VIRGINIA ELECTRIC AND POWER COMPANY
By: __________________________
Name:
Title:
C-7
<PAGE>
EXHIBIT D
FORM OF REQUEST FOR ISSUANCE
[DATE]
Credit Suisse First Boston,
as the L/C Facility Agent
Eleven Madison Avenue
New York, New York 10010
Attention:
Re: LSP Energy Limited Partnership
Ladies and Gentlemen:
This Request for Issuance is delivered to you pursuant to Section
2.1(b) of the Letter of Credit and Reimbursement Agreement, dated as of August
28, 1998 (the "Letter of Credit Agreement"), among LSP Energy Limited
Partnership (the "Partnership"), Credit Suisse First Boston as agent for the
Letter of Credit Banks (as defined below) (in such capacity, the "the L/C
Facility Agent"), Credit Suisse First Boston as letter of credit issuer (in such
capacity, the "Letter of Credit Issuer") and the other financial institutions
party thereto (collectively with the Letter of Credit Issuer, the "Letter of
Credit Banks"). Capitalized terms used but not otherwise defined herein shall
have the meanings given to such terms in the Letter of Credit Agreement.
1. We request that the [specify Letter of Credit] (the "Letter of
Credit") be issued.
2. The issue date of the Letter of Credit is __________ and the
expiration date of the Letter of Credit is __________, neither of
which is later than the applicable Termination Date.
3. The Stated Amount of the Letter of Credit is $__________, which,
together with the aggregate Stated Amounts of all other outstanding
Letters of Credit and all outstanding Reimbursement Obligations and
LOC Loans
D-1
<PAGE>
thereunder and under the Letter of Credit Agreement, does not exceed
the Total Letter of Credit Commitment.
4. The L/C Facility Agent is instructed to deliver the Letter of Credit
to __________, at __________.
The undersigned further confirms and certifies to the L/C Facility
Agent and to each Letter of Credit Bank that the Letter of Credit requested
hereby shall only be used in the manner and for the purposes specified in and
permitted under the Letter of Credit Agreement, and that, as of the date of the
issuance of the Letter of Credit, each of the conditions set forth in Article 3
of the Letter of Credit Agreement has previously been satisfied or waived in
accordance with the terms thereof.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: ________________________
Name:
Title:
D-2
<PAGE>
D-3
<PAGE>
EXHIBIT E
FORM OF LOC LOAN NOTE
$[________] New York, New York
[________], [____]
For value received, the undersigned LSP ENERGY LIMITED PARTNER SHIP, a
Delaware limited partnership (the "Partnership"), promises to pay to the order
of [________] (the "Letter of Credit Bank"), at the office of the Letter of
Credit Bank located at [________] in lawful money of the United States of
America and in immediately available funds, the principal amount of [________]
DOLLARS ($[________]), or if less, the aggregate unpaid and outstanding
principal amount of LOC Loans advanced by the Letter of Credit Bank to the
Partnership pursuant to that certain Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998 (the "Letter of Credit Agreement"), among
the Partnership, Credit Suisse First Boston as the L/C Facility Agent and the
Letter of Credit Issuer, and the other financial institutions party thereto, as
the same may be amended from time to time, and all other amounts owed by the
Partnership to the Letter of Credit Bank hereunder.
This is one of the LOC Loan Notes referred to in the Letter of Credit
Agreement and is entitled to the benefits thereof and is subject to all terms,
provisions and conditions thereof. Capitalized terms used and not defined herein
shall have the meanings set forth in the Letter of Credit Agreement.
This LOC Loan Note is made in connection with and is secured by, among
other instruments, the provisions of the Senior Collateral Documents. Reference
is hereby made to the Letter of Credit Agreement and the Senior Collateral
Documents for the provisions, among others, with respect to the custody and
application of the Senior Collateral, the nature and extent of the security
provided thereunder, the rights, duties and obligations of the Partnership and
the rights of the holder of this LOC Loan Note.
The principal amount hereof is payable in accordance with the Letter of
Credit Agreement, and such principal amount may be prepaid solely in accordance
with the Letter of Credit Agreement, including without limitation any prepayment
fees and premiums provided for therein.
E-1
<PAGE>
The Partnership further agrees to pay, in lawful money of the United
States of America and in immediately available funds, interest from the date
hereof on the unpaid and outstanding principal amount hereof until such unpaid
and outstanding principal amount shall become due and payable (whether at stated
maturity, by acceleration or otherwise) at the rates of interest and at the
times set forth in the Letter of Credit Agreement and the Partnership agrees to
pay other fees and costs as stated in the Letter of Credit Agreement.
If any payment on this LOC Loan Note becomes due and payable on a date
which is not a Banking Day, such payment shall be made on the first succeeding,
or next preceding, Banking Day, in accordance with the terms of the Letter of
Credit Agreement.
All payments and prepayments made on account of the principal balance of
the LOC Loans shall be recorded by the Letter of Credit Bank on the grid
attached hereto, provided that failure to make such a notation shall not affect
or diminish the Partnership's obligation to repay all amounts due on this LOC
Loan Note, as and when due.
Upon the occurrence and during the continuation of any one or more Events
of Default, all amounts then remaining unpaid on this LOC Loan Note may become
or be declared to be immediately due and payable as provided in the Letter of
Credit Agreement and the other Credit Documents.
The Partnership agrees to pay all costs and expenses, including without
limitation attorneys' fees, incurred in connection with the interpretation or
enforcement of this LOC Loan Note.
This LOC Loan Note has been executed and delivered in and shall be
construed and interpreted in accordance with and governed by the laws of the
State of New York, without reference to conflicts of laws (other than Section
5-1401 of the New York General Obligation Law).
E-2
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: _________________________
Name:
Title:
E-3
<PAGE>
E-4
<PAGE>
Prepayment or Outstanding Notation
Date Advance Repayment Balance Made By
- ---- ------- --------- ------- -------
E-5
<PAGE>
EXHIBIT F
NOTICE OF LOC LOANS
[DATE]
Credit Suisse First Boston,
as L/C Facility Agent
Eleven Madison Avenue
New York, New York 10010
Attn: [______________]
Re: Batesville Project
This Notice of LOC Loans is delivered to you pursuant to Section
2.2(b) of that certain Letter of Credit and Reimbursement Agreement, dated as of
August 28, 1998 (the "Letter of Credit Agreement"), among the Partnership,
Credit Suisse First Boston as the L/C Facility Agent and the Letter of Credit
Issuer, and the other financial institutions party thereto. All capitalized
terms used herein shall have the respective meanings specified in Letter of
Credit Agreement unless otherwise defined herein.
. The Partnership requests the following funding options for the LOC Loans
made on [________ __, ____] in connection with the drawing under the VEPCO
Letter of Credit-[A][B] made on [________ __, ____]:
a. Base Rate Loans: Amount $[__________].
b. LIBOR Loans:
Amount [Requested] Initial Interest Period
------ -----------------------------------
$[________] [________] months
$[________] [________] months
$[________] [________] months
F-1
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP,
By: LSP Energy, Inc.,
its general partner
By: _________________________
Name:
Title:
F-2
<PAGE>
F-3
<PAGE>
EXHIBIT G
FORM OF CONFIRMATION OF INTEREST PERIOD SELECTION
[Date]
Credit Suisse First Boston,
as L/C Facility Agent
Eleven Madison Avenue
New York, New York 10010
Attn: [______________]
Re: Batesville Project
This Confirmation of Interest Period Selection is delivered to you
pursuant to Section 2.2(f)(ii) of that certain Letter of Credit and
Reimbursement Agreement, dated as of August 28, 1998 (the "Letter of Credit
Agreement"), among the Partnership, Credit Suisse First Boston as the L/C
Facility Agent and the Letter of Credit Issuer, and the other financial
institutions party thereto. All capitalized terms used herein shall have the
respective meanings specified in the Letter of Credit Agreement unless otherwise
defined herein.
The Confirmation of Interest Period Selection relates to $[________]
of LIBOR LOC Loans. This Confirmation of Interest Period Selection constitutes a
confirmation that effective [________], [____] (which shall be the last day of
an Interest Period):
1. The [Requested] Interest Period for $[________] [$1,000,000 and
increments of $100,000] of such LIBOR LOC Loans shall be [______] months.
2. The [Requested] Interest Period for $[________] [$1,000,000 and
increments of $100,000] of such LIBOR LOC Loans shall be [______] months.
3. The [Requested] Interest Period for $[________] [$1,000,000 and
increments of $100,000] of such LIBOR LOC Loans shall be [______] months.
G-1
<PAGE>
This notice shall be effective only if delivered to L/C Facility
Agent as a Confirmation of Interest Period Selection made pursuant to Section
2.2(f)(ii) of the Letter of Credit Agreement.
LSP ENERGY LIMITED PARTNERSHIP,
By: LSP Energy, Inc.,
its general partner
By: ________________________
Name:
Title:
The undersigned acknowledges receipt of a copy of this Confirmation of Interest
Period Selection:
Credit Suisse First Boston,
as L/C Facility Agent
By: ________________________
Name:
Title:
G-2
<PAGE>
G-3
<PAGE>
EXHIBIT H
FORM OF NOTICE OF CONVERSION OF LOAN TYPE
[Date]
Credit Suisse First Boston,
as L/C Facility Agent
Eleven Madison Avenue
New York, New York 10010
Attn: [______________]
Re: Batesville Project
1. Reference is hereby made to that certain Letter of Credit and
Reimbursement Agreement, dated as of August 28, 1998 (the "Letter of Credit
Agreement"), among the Partnership, Credit Suisse First Boston as the L/C
Facility Agent and the Letter of Credit Issuer, and the other financial
institutions party thereto. All capitalized terms used herein shall have the
respective meanings specified in the Letter of Credit Agreement unless otherwise
defined herein.
2. Pursuant to Section 2.2(g) of the Letter of Credit Agreement, the
Partnership hereby notifies the L/C Facility Agent that this Notice of
Conversion of Loan Type relates to $[________] of LOC Loans and further notifies
the L/C Facility Agent:
(a) the conversion of $[________] of such LOC Loans from a
[Base Rate/LIBOR] LOC Loan to a [Base Rate/LIBOR] LOC Loan;
(b) that the effective date of the conversion shall be
[________], [____], which is a Banking Day and which shall be the first
day after the last day of an Interest Period if converting from LIBOR LOC
Loans;
H-1
<PAGE>
(c) if converting to LIBOR LOC Loans, the following Interest
Periods are selected:
Amount [Requested] Initial Interest Period
------ -----------------------------------
$[_________] [________] months
$[_________] [________] months
$[_________] [________] months
IN WITNESS WHEREOF, The Partnership has executed this Notice of
Conversion of Loan Type on the date set forth above.
LSP ENERGY LIMITED PARTNERSHIP,
By: LSP Energy, Inc.,
its general partner
By: ________________________
Name:
Title:
The undersigned acknowledges receipt of a copy of this Notice of Conversion of
Loan Type:
Credit Suisse First Boston,
as L/C Facility Agent
By: ________________________
Name:
Title:
H-2
<PAGE>
H-3
<PAGE>
EXHIBIT I-1
BANK WITHHOLDING CERTIFICATE (TREATY)
LSP Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: Treasurer
Credit Suisse First Boston,
as L/C Facility Agent
Eleven Madison Avenue
New York, NY 10010
Attention:
Re: Batesville Project
Ladies and Gentlemen:
In connection with the Letter of Credit and Reimbursement Agreement, dated
as of August 28, 1998 (the "Letter of Credit Agreement"), among the Partnership,
Credit Suisse First Boston as the L/C Facility Agent and the Letter of Credit
Issuer, and the other financial institutions party thereto, the undersigned
hereby certifies, represents and warrants that [Name of relevant Letter of
Credit Bank or the L/C Facility Agent] is a [name of country] corporation and is
currently exempt from any U.S. federal withholding tax on amounts paid to it
from U.S. sources under the Letter of Credit Agreement by virtue of compliance
with the provisions of the Income Tax Convention between the United States and
[name of country], signed [date], [as amended]. Our fiscal year is the twelve
months ending [_________].
The undersigned (a) is a corporation organized under the laws of [name of
country] whose registered business is managed or controlled in [name of
country], (b) [does not have a permanent establishment or fixed based in the
United States/does have a permanent establishment or fixed base in the United
States but the Letter of Credit Agreement is not effectively connected with such
permanent establishment or fixed base],
I-1-1
<PAGE>
(c) is not exempt from tax on the income in [name of country] and (d) is the
beneficial owner of the income.
We enclose two signed copies of Form 1001 of the U.S. Internal Revenue
Service.
Yours faithfully,
[NAME OF RELEVANT LETTER OF CREDIT
BANK]
By: _________________________
Name:
Title:
I-1-2
<PAGE>
EXHIBIT I-2
LSP Energy Limited Partnership
c/o LS Power, LLC
Two Tower Center
10th Floor
East Brunswick, New Jersey 08816
Attention: Treasurer
Credit Suisse First Boston,
as L/C Facility Agent
Eleven Madison Avenue
New York, NY 10010
Attention:
Re: Batesville Project
Ladies and Gentlemen:
In connection with that certain Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998 (the "Letter of Credit Agreement"), among
the Partnership, Credit Suisse First Boston as the L/C Facility Agent and the
Letter of Credit Issuer, and the other financial institutions party thereto, the
undersigned hereby certifies, represents and warrants that [name of
Transferee/Participant] is entitled to exemption from withholding tax on
payments to it under the Letter of Credit Agreement under the provisions of
Section 1441(c) of the Internal Revenue Code of 1986, as amended, of the United
States of America.
We enclose two signed copies of Form 4224 of the U.S. Internal Revenue
Service.
Yours faithfully,
[Name of Transferee/Participant]
By:_________________________
I-2-1
<PAGE>
Name:
Title:
I-2-2
<PAGE>
AMENDMENT NO. 1 TO
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT, dated as of December 15, 1998 (this "Amendment"), is by and among LSP
ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Partnership"),
CREDIT SUISSE FIRST BOSTON in its capacity as the L/C Facility Agent, CREDIT
SUISSE FIRST BOSTON in its capacity as the Letter of Credit Issuer and each of
the Letter of Credit Banks party to the Letter of Credit Agreement (as defined
below).
RECITALS
WHEREAS, the Partnership, the L/C Facility Agent, the Letter of
Credit Issuer and the Letter of Credit Banks entered into the Letter of Credit
and Reimbursement Agreement, dated as of August 28, 1998 (the "Letter of Credit
Agreement");
WHEREAS, simultaneously with the execution and delivery of the
Letter of Credit Agreement, the Partnership, LSP Batesville Funding Corporation,
LSP Batesville Holding, LLC, Credit Suisse First Boston as the Tranche A
Facility Agent, the L/C Facility Agent, the Administrative Agent, the Collateral
Agent, the Securities Intermediary and IBJ Schroder Bank & Trust Company as the
Intercreditor Agent entered into the Common Agreement, dated as of August 28,
1998 (the "Original Common Agreement");
WHEREAS, the Partnership, the Bank Facility Agent, the L/C Facility
Agent, the Administrative Agent, the Collateral Agent and the Securities
Intermediary are entering into the Amended and Restated Common Agreement, dated
as of December 15, 1998 (the "Common Agreement"), in order to amend and restate
the Original Common Agreement in its entirety;
WHEREAS, in connection with the foregoing, the Partnership, the L/C
Facility Agent, the Letter of Credit Issuer and the Letter of Credit Banks wish
to amend the Letter of Credit Agreement in the manner set forth herein;
AGREEMENT
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.1 Definitions. Except as otherwise expressly provided,
capitalized terms used in this Amendment shall have the meanings given in the
Letter of Credit Agreement (including definitions of terms incorporated therein
from the Common Agreement).
Section 1.2 Rules of Interpretation. Except as otherwise expressly
provided, the rules of interpretation set forth in Exhibit A to the Common
Agreement shall apply to this Amendment.
ARTICLE II
AMENDMENTS; CONFIRMATION
Section 2.1 Amendments. The parties hereto agree that the Letter of Credit
Agreement is hereby amended as follows:
(a) Section 1.1(b) of the Letter of Credit Agreement is hereby
amended by:
(i) replacing the term "Closing Date" with the term "Original
Closing Date" in the second line of clause (i) of the definition of
"Applicable Margin" and in the second line of clause (ii) of the
definition of "Applicable Margin";
(ii) replacing the term "Term-Conversion" with the term
"Completion" in each of the second, third and fifth lines of clause (i) of
the definition of "Applicable Margin" and in each of the second, third and
fifth lines of clause (ii) of the definition of "Applicable Margin";
(iii) replacing the term "Closing Date" with the term
"Original Closing Date" in the second line of the definition of
"Availability Date";
2
<PAGE>
(iv) inserting the following definition after the definition
of "Letter of Credit Commitment":
"Letter of Credit Maturity Date" shall mean, (i) in the case
of the LOC Loan Letters of Credit, the LOC Loan Maturity Date, and (ii) in
the case of the VEPCO Letter of Credit-C, the Termination Date for such
Letter of Credit.; and
(v) deleting the definition of "LIBOR Rate LOC Loan" and
inserting the following definition in lieu thereof:
"LIBOR LOC Loan" shall mean any LOC Loan made and/or being
maintained at a rate of interest equal to the LIBOR Rate.;
(b) Section 2.2(f)(i) of the Letter of Credit Agreement is hereby
amended by replacing the term "Closing Date" with the term "Original Closing
Date" in the fifth line of such Section;
(c) Section 2.2(f)(ii) of the Letter of Credit Agreement is hereby
amended by replacing the letter "(h)" with the letter "(f)" after the phrase "in
accordance with this clause" in the thirteenth line of such Section;
(d) Section 2.2(h)(ii) of the Letter of Credit Agreement is hereby
amended by deleting clause (B) of such Section and inserting the following
clause in lieu thereof:
"(B) Section 7.3(c), 7.9(c), 7.9(g), 7.10, 7.11(a), 7.11(c), 7.11(d),
7.11(e) or 7.11(f) of the Common Agreement";
(e) Section 2.3(a) of the Letter of Credit Agreement is hereby
amended by (i) replacing the term "Closing Date" with the term "Original Closing
Date" in the second and ninth lines of such Section, (ii) replacing the term
"Term- Conversion" with the term "Completion" in each of the fourteenth,
fifteenth, sixteenth and seventeenth lines of such Section and (iii) deleting
the phrase ", as applicable" after the phrase "denominator of which is 360" in
the twenty-third line of such Section;
3
<PAGE>
(f) Section 2.4(g) of the Letter of Credit Agreement is hereby
amended by replacing the term "Closing Date" with the term "Original Closing
Date" in the second line of such Section;
(g) Article 4 of the Letter of Credit Agreement is hereby amended by
replacing the term "Closing Date" with the term "Original Closing Date" in the
second line of such Section;
(h) Section 6.2(a) of the Letter of Credit Agreement is hereby
amended by replacing the term "L/C Facility Bank" with the term "L/C Facility
Agent" in the eighth line of such Section;
(i) Section 6.2(b) of the Letter of Credit Agreement is hereby
amended by deleting the phrase "Subject to the Intercreditor Agreement, upon" in
the first line of such Section and replacing it with the word "Upon";
(j) The introductory paragraph of Section 7.9 of the Letter of
Credit Agreement is hereby amended by deleting the phrase "the Intercreditor
Agreement and of" after the phrase "Subject to the provisions of" in the first
line of such Section;
(k) Section 7.9(h) of the Letter of Credit Agreement is hereby
amended by deleting the word "Senior" before the words "Collateral Document" in
the second line of such Section;
(l) Section 7.9(j) of the Letter of Credit Agreement is hereby
amended by deleting the word "Senior" before the word "Collateral" in each of
the first, second and third lines of such Section;
(m) Section 7.13 of the Letter of Credit Agreement is hereby amended
by deleting the word "Senior" after the phrase "release of any material" in the
nineteenth line of such Section;
(n) Section 7.16(a) of the Letter of Credit Agreement is hereby
amended by (i) deleting the phrase "L/C Facility Agent is required to cast a
vote with respect to any consent, waiver, approval or direction in accordance
with Article 4 of the Intercreditor Agreement or the" after the phrase "In each
instance that the" in the first line of such Section and (ii) deleting the
phrase "or in the notice provided by the Intercreditor Agent to
4
<PAGE>
the L/C Facility Agent pursuant to Article 4 of the Intercreditor Agreement"
after the phrase "timeframe specified in the Common Agreement" in the sixth and
seventh lines of such Section;
(o) Section 7.16(b) of the Letter of Credit Agreement is hereby
amended by (i) deleting the phrase "Subject to the provisions of the
Intercreditor Agreement, the" in the first and second lines of the introductory
portion of such Section and replacing it with the word "The", (ii) deleting the
word "of" between the words "waiver" and "other" in the first line of clause
(iii) of such Section and replacing it with the word "or", and (iii) deleting
the phrase "therein or in the Intercreditor Agreement" in the third line of
clause (iii) of such Section and replacing it with the phrase "herein or in the
Common Agreement";
(p) Section 8.13 of the Letter of Credit Agreement is hereby amended
by deleting the word "Senior" before the words "Collateral Documents" in each of
the fourth and fifth lines of such Section; and
(q) Exhibit E to the Letter of Credit Agreement is hereby amended by
deleting the word "Senior" from each of the second, third and fifth lines of the
third paragraph of such Exhibit.
Section 2.2 Confirmation. The amendments herein are limited precisely as
written and shall not be deemed to be a consent or waiver to, or modification
of, any other term or condition in the Letter of Credit Agreement or any of the
documents referred to herein or therein. Except as expressly amended hereby, the
Letter of Credit Agreement is ratified and confirmed in all respects. On and
after the date hereof, whenever the Letter of Credit Agreement is referred to in
any of the Operative Documents or in any of the other documents or papers to be
executed and delivered in connection therewith or with the Letter of Credit
Agreement, such term shall be deemed to mean the Letter of Credit Agreement as
amended hereby.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1 Governing Law. This Amendment shall be governed by the laws of
the State of New York of the United States of America and shall for all purposes
be governed by and construed in accordance with the laws of such state without
regard to the
5
<PAGE>
conflict of law rules thereof other than Section 5-1401 of the New York General
Obligations Law.
Section 3.2 Headings Descriptive. The headings of the several sections of
this Amendment are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Amendment.
Section 3.3 Severability. In case any provision in or obligation under
this Amendment shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
Section 3.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which, taken together, shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their officers thereunto duly authorized as
of the date first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
---------------------------------
Name: Frank Hardenbergh
Title: Senior Vice President
and Secretary
CREDIT SUISSE FIRST BOSTON,
in its capacity as the L/C Facility Agent
By: /s/ Andrew B. Leon
----------------------------------
Name: Andrew B. Leon
Title: Vice President
By: /s/ Brian T. Caldwell
----------------------------------
Name: Brian T. Caldwell
Title: Associate
CREDIT SUISSE FIRST BOSTON,
in its capacity as the Letter of Credit Issuer
By: /s/ Andrew B. Leon
----------------------------------
Name: Andrew B. Leon
Title: Vice President
By: /s/ Brian T. Caldwell
----------------------------------
Name: Brian T. Caldwell
Title: Vice President
<PAGE>
Signature Page to Amendment No. 1 to Letter of Credit Agreement
CREDIT SUISSE FIRST BOSTON,
in its capacity as a Letter of Credit Bank
By: /s/ Andrew B. Leon
----------------------------------
Name: Andrew B. Leon
Title: Vice President
By: /s/ Brian T. Caldwell
----------------------------------
Name: Brian T. Caldwell
Title: Vice President
<PAGE>
Signature Page to Amendment No. 1 to Letter of Credit Agreement
<PAGE>
AMENDMENT NO. 2 TO
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This AMENDMENT NO. 2 TO LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT, dated as of May 21, 1999 (this "Amendment"), is by and among LSP
ENERGY LIMITED PARTNERSHIP, a Delaware limited partner ship (the "Partnership"),
CREDIT SUISSE FIRST BOSTON in its capacity as the VEPCO L/C Agent, CREDIT SUISSE
FIRST BOSTON in its capacity as the VEPCO L/C Issuer and each of the VEPCO L/C
Banks party to the VEPCO L/C Agreement.
RECITALS
WHEREAS, the Partnership, the VEPCO L/C Agent, the VEPCO L/C Issuer
and the VEPCO L/C Banks entered into the Letter of Credit and Reimbursement
Agreement, dated as of August 28, 1998, as amended (the "VEPCO L/C Agreement");
WHEREAS, simultaneously with the execution and delivery of the VEPCO
L/C Agreement, the Partnership, LSP Batesville Funding Corporation (the "Funding
Corporation"), LSP Batesville Holding, LLC, Credit Suisse First Boston as
Tranche A Facility Agent and VEPCO L/C Agent, and IBJ Schroder Bank & Trust
Company as Administrative Agent, Collateral Agent, Securities Intermediary and
Intercreditor Agent entered into the Common Agreement, dated as of August 28,
1998 (the "Original Common Agreement");
WHEREAS, the Partnership and Credit Suisse First Boston as Bank
Facility Agent, VEPCO L/C Agent, Administrative Agent, Collateral Agent and
Securities Intermediary entered into the Amended and Restated Common Agreement,
dated as of December 15, 1998 (the "Supplemental Common Agreement"), in order to
amend and restate the Original Common Agreement in its entirety;
WHEREAS, in connection with the execution and delivery of the
Supplemental Common Agreement, the Partnership, the VEPCO L/C Agent, the VEPCO
L/C Issuer and the VEPCO L/C Banks entered into Amendment No. 1 to VEPCO L/C
Agreement, dated as of December 15, 1998;
WHEREAS, the Partnership and the Funding Corporation have determined
to issue (i) $150,000,000 aggregate principal amount of their 7.164% Senior
Secured Bonds due January 15, 2014 (the "Series A Bonds") and (ii) $176,000,000
<PAGE>
aggregate principal amount of their 8.160% Senior Secured Bonds due July 15,
2025 (the "Series B Bonds" and, collectively with the Series A Bonds, the
"Bonds") pursuant to the Trust Indenture, dated as of the date hereof (the
"Indenture"), among the Partnership, the Funding Corporation and The Bank of
New York, as trustee (the "Trustee");
WHEREAS, in connection with the issuance and sale of the Bonds, the
Partnership, the Funding Corporation, the Collateral Agent, the Administrative
Agent and the Intercreditor Agent are entering into the Second Amended and
Restated Common Agreement, dated as of May 21, 1999 (the "Common Agreement") in
order to amend and restate the Supplemental Common Agreement in its entirety;
and
WHEREAS, in connection with the issuance and sale of the Bonds and
the execution of the Common Agreement and the other related Financing Documents,
the Partnership, the VEPCO L/C Agent, the VEPCO L/C Issuer and the VEPCO L/C
Banks wish to amend the VEPCO L/C Agreement as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions. Except as otherwise expressly provided,
capitalized terms used in this Amendment shall have the meanings given in the
VEPCO L/C Agreement (including definitions of terms incorporated therein from
the Indenture).
Section 1.2 Principles of Construction. Except as otherwise expressly
provided, the rules of interpretation set forth in the Indenture shall apply to
this Amendment.
ARTICLE II
AMENDMENTS; CONFIRMATION
Section 2.1 Amendments. The parties hereto agree that the VEPCO L/C
Agreement is hereby amended as follows:
2
<PAGE>
(a) The following terms as used in the VEPCO L/C Agreement shall be
deemed to refer to and be replaced by the terms set forth below, as such terms
are defined in the Indenture:
(i) the term "Governmental Rule" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Applicable Law";
(ii) The term "L/C Facility Agent" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "VEPCO L/C Agent";
(iii) The term "Letter of Credit Issuer" as used in the VEPCO
L/C Agreement shall be deemed to refer to the term "VEPCO L/C Issuer";
(iv) The term "Letter of Credit Banks" as used in the VEPCO
L/C Agreement shall be deemed to refer to the term "VEPCO L/C Banks";
(v) The term "Letter of Credit Agreement" as used in the VEPCO
L/C Agreement shall be deemed to refer to the term "VEPCO L/C Agreement";
(vi) The term "Secured Obligations" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Senior Secured
Obligations";
(vii) The term "Collateral Documents" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Senior Security
Documents";
(viii) The term "Operative Documents" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Transaction Documents";
(ix) The term "Credit Documents" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Financing Documents";
(x) The term "Collateral" as used in the VEPCO L/C Agreement
shall be deemed to refer to the term "Senior Collateral";
(xi) The term "Secured Parties" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Senior Secured Parties";
3
<PAGE>
(xii) The term "Repayment Date" as used in the VEPCO L/C
Agreement shall be deemed to refer to the term "Scheduled Payment Date";
(xiii) The term "VEPCO PPA" as used in the VEPCO L/C Agreement
shall be deemed to refer to the term "VEPCO Power Purchase Agreement";
(b) Section 1.1(a) of the VEPCO L/C Agreement is hereby amended by
deleting the current section and replacing it with the following:
"(i) Unless otherwise defined herein, terms defined in the
Indenture shall have such defined meanings when used herein.
(ii) Unless otherwise defined herein, terms defined in the
Supplemental Common Agreement (including, without limitation, the terms
"Banking Day," "Base Rate," "Default Rate," "Interest Period," "LIBOR
Rate" and "Original Closing Date") shall have such defined meanings when
used herein; provided, however, that if a term is defined in both the
Indenture and the Supplemental Common Agreement, the Indenture shall
control."
(c) Section 1.2 of the VEPCO L/C Agreement is hereby amended by
deleting the current Section and replacing it with the following:
"Section 1.2 Principles of Construction. Except as otherwise
expressly provided herein, the principles of construction set forth in the
Indenture shall apply to this Agreement.";
(d) Section 2.2(h)(ii)(B) of the VEPCO L/C Agreement is hereby
amended by replacing the phrase "Section 7.2(c)(ii), 7.2(d), 7.3(c), 7.9(c),
7.9(g), 7.10, 7.11(a), 7.11(c), 7.11(d), 7.11(e), 7.11(f) or 7.11(g)" and
replacing it with the phrase "Section 3.9(c) or 3.10 of the Common Agreement or
Section 6.3 of the Indenture";
(e) Section 2.2(h)(ii)(C) of the VEPCO L/C Agreement is hereby
amended by replacing the phrase "the Common Agreement" with the phrase "any
other Financing Document";
4
<PAGE>
(f) Article 3 of the VEPCO L/C Agreement is hereby amended by
inserting the word "Supplemental" before the phrase "Common Agreement" in the
fifth line of such Article;
(g) Article 4 of the VEPCO L/C Agreement is hereby amended by
inserting the word "Supplemental" before the phrase "Common Agreement" in the
third and fifth lines of such Article;
(h) Article 5 of the VEPCO L/C Agreement is hereby amended by
replacing the phrase "Section 5.1 and Section 6.1 of the Common Agreement" with
the phrase "Section 4.1 and Section 5.1 of the Indenture" in the fifth line of
such Article;
(i) Section 6.1 of the VEPCO L/C Agreement is hereby amended by
replacing the phrase "Section 8.1 of the Common Agreement" with the phrase
"Section 8.1 of the Indenture" in the second line of such Section;
(j) Section 6.2(a) of the VEPCO L/C Agreement is hereby amended by
replacing the phrase "Section 8.1(e) of the Common Agreement" with the phrase
"Section 8.1(f) or Section 8.1(g)" in the second and eighth lines of such
Section;
(k) Section 6.2(b) of the VEPCO L/C Agreement is hereby amended by
(i) replacing the word "Upon" in the first line of such Section and replacing it
with the phrase "Subject to the Intercreditor Agreement, upon" and (ii)
inserting the word "Supplemental" before the phrase "Common Agreement" in the
fifth line of such Section;
(l) The introductory paragraph of Section 7.9 of the VEPCO L/C
Agreement is hereby amended by inserting the phrase "the Intercreditor Agreement
and of" after the phrase "Subject to the provisions of" in the first line of
such Section;
(m) Section 7.16(a) of the VEPCO L/C Agreement is hereby amended by
(i) inserting the phrase "VEPCO L/C Agent is required to cast a vote with
respect to any consent, waiver, approval or direction in accordance with Article
4 of the Intercreditor Agreement or the" after the phrase "In each instance that
the" in the first line of such Section and (ii) inserting the phrase "or in the
notice provided by the Intercreditor Agent to the L/C Facility Agent pursuant to
Article 4 of the Intercreditor Agreement" after the phrase "timeframe specified
in the Common Agreement" in the sixth and seventh lines of such Section;
5
<PAGE>
(n) Section 7.16(b) of the VEPCO L/C Agreement is hereby amended by
(i) replacing the word "The" with the phrase "Subject to the provisions of the
Intercreditor Agreement, the" in the first and second lines of the introductory
portion of such Section and (ii) replacing the phrase "herein or in the Common
Agreement" with the phrase "therein or in the Intercreditor Agreement" in the
third line of clause (iii) of such Section;
(o) Section 8.1 of the VEPCO L/C Agreement is hereby amended by
replacing the phrase "Section 12.1 of the Common Agreement" with the phrase
"Section 7.1 of the Intercreditor Agreement in the fourth line of such Section;
(p) Section 8.20 of the VEPCO L/C Agreement is hereby amended by (i)
replacing the phrase "Section 5.1(j) and Section 12.4 of the Common Agreement"
with the phrase "Section 7.16 and Section 7.17 of the Intercreditor Agreement"
in the fourth and fifth lines of such Section and (ii) replacing the phrase
"such Section 5.1(j) and Section 12.4 or termination of the Common Agreement"
with the phrase Section 7.16 and Section 7.17 or termination of the Indenture"
in the sixth line of such Section;
(q) Section 8.23 of the VEPCO L/C Agreement is hereby amended by
replacing the phrase "Section 9.1 of the Common Agreement" with the phrase
"Section 14.1 of the Indenture" in the first and second lines of such Section;
and
(r) Schedule II of the VEPCO L/C Agreement is hereby amended by
deleting the current Schedule II and replacing it with the Schedule II attached
hereto as Exhibit A.
Section 2.2 Supplemental Common Agreement. The provisions of the
Supplemental Common Agreement which are incorporated by reference into the VEPCO
L/C Agreement pursuant to this Amendment shall not be affected by any amendment,
restatement, termination or other modification of the Supplemental Common
Agreement, including without limitation, the amendment and restatement of the
Supplemental Common Agreement effected by the Common Agreement. Capitalized
terms used in provisions of the Supplemental Common Agreement which are
incorporated by reference into the VEPCO L/C Agreement pursuant to this
Amendment shall have the meanings given to such terms in the Supplemental Credit
Agreement, which meanings shall not be affected by any amendment, restatement,
termination or other modification of the Supplemental Common
6
<PAGE>
Agreement, including without limitation, the amendment and restatement of the
Supplemental Common Agreement effected by the Common Agreement.
Section 2.3 Confirmation. The amendments herein are limited precisely as
written and shall not be deemed to be a consent or waiver to, or modification
of, any other term or condition in the VEPCO L/C Agreement or any of the
documents referred to herein or therein. Except as expressly amended hereby, the
VEPCO L/C Agreement is ratified and confirmed in all respects. On and after the
date hereof, whenever the VEPCO L/C Agreement is referred to in any of the
Transaction Documents or in any of the other documents or papers to be executed
and delivered in connection therewith or with the VEPCO L/C Agreement, such term
shall be deemed to mean the VEPCO L/C Agreement as amended hereby.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1 Governing Law. This Amendment shall be governed by the laws of
the State of New York of the United States of America and shall for all purposes
be governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law.
Section 3.2 Headings Descriptive. The headings of the several sections of
this Amendment are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Amendment.
Section 3.3 Severability. In case any provision in or obligation under
this Amendment shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
Section 3.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which, taken together, shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
7
<PAGE>
Section 3.5 Further Amendment and Restatement. The parties hereto hereby
agree that, at the request of any of the other parties hereto, the VEPCO L/C
Agreement shall be amended and restated to implement the amendments made by
this Amendment.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their officers thereunto duly authorized as
of the date first above written.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP Energy, Inc.,
its general partner
By: /s/ Frank Hardenbergh
---------------------
Name: Frank Hardenbergh
Title: Senior Vice President
CREDIT SUISSE FIRST BOSTON,
in its capacity as the VEPCO L/C Agent
By: /s/ Brian T. Caldwell
---------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
----------------------
Name: Pilarcita V. Naval
Title: Associate
CREDIT SUISSE FIRST BOSTON,
in its capacity as the VEPCO L/C Issuer
By: /s/ Brian T. Caldwell
---------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
----------------------
Name: Pilarcita V. Naval
Title:
<PAGE>
CREDIT SUISSE FIRST BOSTON,
in its capacity as a VEPCO L/C Bank
By: /s/ Brian T. Caldwell
---------------------
Name: Brian T. Caldwell
Title: Associate
By: /s/ Pilarcita V. Naval
----------------------
Name: Pilarcita V. Naval
Title: Associate
<PAGE>
EXHIBIT A
SCHEDULE II
AMORTIZATION SCHEDULE FOR LOC LOANS
The principal of, and interest on, outstanding LOC Loans will be
repaid in twenty (20) equal quarterly installments.
<PAGE>
[Letterhead of KPMG LLP]
EXHIBIT 23.2
INDEPENDENT CERTIFIED ACCOUNTANTS' CONSENT
LSP Energy Limited Partnership and
LSP Batesville Funding Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the registation statement.
/s/ KPMG LLP
----------------------------------------
Billings, Montana
August 2, 1999
<PAGE>
EXHIBIT 23.3
August 3, 1999
LSP Energy Limited Partnership
c/o LS Energy, Inc.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Ladies and Gentlemen:
SUBJECT: LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
$150,000,000 7.164% SERIES C SENIOR SECURED BONDS DUE JANUARY 15, 2014
$176,000,000 8.160% SERIES D SENIOR SECURED BONDS DUE JULY 15, 2025
This letter is furnished relating to the exchange of $150,000,000 of 7.164%
Series A Senior Secured Bonds Due January 15, 2014 (the "Series A Bonds") for
$150,000,000 of 7.164% Series C Senior Secured Bonds Due January 15, 2014 (the
"Series C Bonds") and the exchange of $176,000,000 of 8.160% Series B Senior
Bonds Due July 15, 2025 (the "Series B Bonds" and, together with the Series A
Bonds, the "Initial Bonds") for $176,000,000 of 8.160% Series D Senior Secured
Bonds Due July 15, 2025 (the "Series D Bonds" and, together with the Series C
Bonds, the "Exchange Bonds"), as more fully described in the Registration
Statement filed by LSP Energy Limited Partnership and LSP Batesville Funding
Corporation (the "Issuers") dated August 3, 1999 (the "Registration Statement"),
and prepared in connection with the issuance of the Exchange Bonds.
R.W. Beck, Inc. ("Beck") was retained by LSP Energy Limited Partnership and
Credit Suisse First Boston to act as the Independent Engineer in connection with
the issuance of the Initial Bonds and it prepared an Independent Engineer's
Report dated May 13, 1999 (the "Report") which is included as Appendix B to the
Registration Statement. concurrence is given to the inclusion of the Report in
the Registration Statement and to the references to Beck in the Registration
Statement under the captions "Prospectus Summary--Independent Engineer's
Report," "Risk Factors," and "Independent Engineer". Changed conditions
occurring or becoming known after May 13, 1999 could affect the information
presented in the Report to the extent of such changes.
Very truly yours,
R.W. BECK, INC.
/s/ Kenneth V. Marino
Principal
<PAGE>
[Letterhead of C.C. Pace]
EXHIBIT 23.4
POWER MARKET CONSULTANT'S CONSENT
July 29, 1999
LSP Energy Limited Partnership
LSP Batesville Funding Corporation
Two Tower Center, 29th. Floor
East Brunswick, New Jersey 08816
This letter is furnished relating to the exchange of $150,000,000 principal
amount of 7.164% Series A Senior Secured Bonds due January 15, 2014 for
$150,000,000 principal amount of 7.164% Series C Senior Secured Bonds due
January 15, 2014 (the "SERIES C BONDS") and the exchange of $176,000,000
principal amount of 8.160% Series B Senior Secured Bonds due July 15, 2025 for
$176,000,000 principal amount of 8.160% Series D Senior Secured Bonds due July
15, 2025 (the "SERIES D BONDS" and, together with the Series C Bonds, the
"EXCHANGE BONDS").
We consent to the inclusion of our report dated May 13, 1999 regarding the
southeastern power market in the Registration Statement being filed by LSP
Energy Limited Partnership and LSP Batesville Funding Corporation in respect of
the Exchange bonds and to the other references to us contained in the Prospectus
which is part of such Registration Statement.
C.C. PACE CONSULTING, L.L.C.
By: /s/ Mark A. Peterson
- ----------------------------------------
Name: Mark A. Peterson
Title: Executive Vice President
<PAGE>
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
LSP Energy Limited Partnership
LSP Batesville Funding Corporation
(Exact name of obligor as specified in its charter)
Delaware { }
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Two Tower Center - 20th Floor
East Brunswick, N.J. 08816
304 Boston Post Road
Wayland, Massachusetts 01778
(Address of principal executive offices) (Zip code)
-------------
7.164% Series C Senior Secured Bonds due 2014
8.160% Series D Senior Secured Bonds due 2025
(Title of the indenture securities)
========================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 22nd day of July, 1999.
THE BANK OF NEW YORK
By: /s/ MICHELE L. RUSSO
-----------------------------
Name: MICHELE. L. RUSSO
Title: ASSISTANT TREASURER
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
In Thousands
<S> <C>
ASSETS
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coin ..................................... $4,508,742
Interest-bearing balances .............................. 4,425,071
Securities:
Held-to-maturity securities ............................ 836,304
Available-for-sale securities .......................... 4,047,851
Federal funds sold and Securities
purchased under agreements to
resell ................................................. 1,743,269
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................................................ 39,349,679
LESS: Allowance for loan and
lease losses .......................................... 603,025
LESS: Allocated transfer risk
reserve ............................................... 15,906
Loans and leases, net of unearned
income, allowance, and reserve ........................ 38,730,748
Trading Assets ........................................... 1,571,372
Premises and fixed assets (including
capitalized leases) .................................... 685,674
Other real estate owned .................................. 10,331
Investments in unconsolidated
subsidiaries and associated
companies .............................................. 182,449
Customers' liability to this bank on
acceptances outstanding ................................ 1,184,822
Intangible assets ........................................ 1,129,636
Other assets ............................................. 2,632,309
-----------
Total assets ............................................. $61,688,578
===========
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices .................................... $25,731,036
Noninterest-bearing .................................... 10,252,589
Interest-bearing ....................................... 15,478,447
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ...................... 18,756,302
Noninterest-bearing .................................... 111,386
Interest-bearing ....................................... 18,644,916
Federal funds purchased and
Securities sold under agreements
to repurchase .......................................... 3,276,362
Demand notes issued to the
U.S.Treasury ........................................... 230,671
Trading liabilities ...................................... 1,554,493
Other borrowed money:
With remaining maturity of one
year or less .......................................... 1,154,502
With remaining maturity of more
than one year through three years ..................... 465
With remaining maturity of more
than three years ...................................... 31,080
Bank's liability on acceptances
executed and outstanding ............................... 1,185,364
Subordinated notes and debentures ........................ 1,308,000
Other liabilities ........................................ 2,743,590
-----------
Total liabilities ........................................ 55,971,865
===========
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 764,443
Undivided profits and capital
reserves ............................................... 3,807,697
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 44,106
Cumulative foreign currency
translation adjustments ................................ (34,817)
-----------
Total equity capital ..................................... 5,716,713
-----------
Total liabilities and equity capital ..................... $61,688,578
===========
</TABLE>
<PAGE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Alan R. Griffith Directors
Gerald L. Hassell
- --------------------------------------------------------------------------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF LSP ENERGY LIMITED
PARTNERSHIP AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001092435
<NAME>LSP ENERGY LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 83
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 141
<PP&E> 83,430
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,102
<CURRENT-LIABILITIES> 13,663
<BONDS> 78,000
0
0
<COMMON> 0
<OTHER-SE> (443)
<TOTAL-LIABILITY-AND-EQUITY> 94,102
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (444)
<INCOME-TAX> 0
<INCOME-CONTINUING> (444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF LSP ENERGY LIMITED
PARTNERSHIP AS OF AND FOR THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001092435
<NAME>LSP ENERGY LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 794
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 851
<PP&E> 128,901
<DEPRECIATION> 0
<TOTAL-ASSETS> 139,518
<CURRENT-LIABILITIES> 14,025
<BONDS> 120,900
0
0
<COMMON> 0
<OTHER-SE> (526)
<TOTAL-LIABILITY-AND-EQUITY> 139,518
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 83
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (83)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF LSP BATESVILLE FUNDING CORPORATION AS OF
AND FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001092435
<NAME> LSP BATESVILLE FUNDING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 1
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF LSP BATESVILLE FUNDING CORPORATION AS OF
AND FOR THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001092436
<NAME> LSP BATESVILLE FUNDING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 1
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
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</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
To Tender
Unregistered 7.164% Series A Senior Secured Bonds due 2014 and
Unregistered 8.160% Series B Senior Secured Bonds due 2025
(including those in book-entry form)
of
LSP ENERGY LIMITED PARTNERSHIP
AND
LSP BATESVILLE FUNDING CORPORATION
Pursuant to the Exchange Offer and Prospectus dated [ ], 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON [ ], 1999 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE ISSUERS.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
DELIVER TO:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY:
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street, Floor 7E
New York, NY 10286 New York, NY 10286
Attention: Reorganization Department Attention: Reorganization Department
BY OVERNIGHT DELIVERY: BY FACSIMILE:
The Bank of New York (212) 815-6339
101 Barclay Street, Floor 7E
New York, NY 10286 CONFIRM BY TELEPHONE:
Attention: Reorganization Department
[ ]
</TABLE>
ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED OR CERTIFIED MAIL, BY HAND OR BY OVERNIGHT DELIVERY SERVICE.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
IF YOU WISH TO EXCHANGE UNREGISTERED 7.164% SERIES A SENIOR SECURED BONDS
DUE 2014 (THE "SERIES A BONDS") AND UNREGISTERED 8.160% SERIES B SENIOR
SECURED BONDS DUE 2025 (THE "SERIES B BONDS" AND, TOGETHER WITH THE SERIES A
BONDS, THE "PRIVATE BONDS") FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF, IN THE
CASE OF THE SERIES A BONDS, REGISTERED 7.164% SERIES C SENIOR SECURED BONDS
DUE 2014 (THE "SERIES C BONDS") AND, IN THE CASE OF THE SERIES B BONDS,
REGISTERED 8.160% SERIES D SENIOR SECURED BONDS DUE 2025 (THE "SERIES D BONDS"
AND, TOGETHER WITH THE SERIES C BONDS, THE "EXCHANGE BONDS"), PURSUANT TO THE
EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) PRIVATE BONDS TO
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
<PAGE>
This Letter of Transmittal is to be completed by holders of Private Bonds
either if Private Bonds are to be forwarded herewith or if tenders of Private
Bonds are to be made by book-entry transfer to an account maintained by The Bank
of New York (the "Exchange Agent") at The Depository Trust Company pursuant to
the procedures set forth in "The Exchange Offer--Procedures for Tendering" in
the Prospectus (as defined).
Holders of Private Bonds whose certificates for such Private Bonds are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
who cannot complete the procedures for book-entry transfer on a timely basis,
must tender their Private Bonds according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
DESCRIPTION OF TENDERED PRIVATE BONDS
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE
NAMES(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) PRINCIPAL
AS IT APPEARS ON THE 7.164% SERIES A SECURED BONDS DUE 2014 CERTIFICATE AMOUNT
AND NUMBER(S) OF PRIVATE
8.160% SERIES B SENIOR SECURED BONDS DUE 2025 OF PRIVATE BONDS
(PLEASE FILL IN, IF BLANK) BONDS TENDERED
TOTAL
PRINCIPAL
AMOUNT OF
PRIVATE
BONDS
TENDERED
</TABLE>
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED PRIVATE BONDS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution_______________________________________________
Account Number______________________________________________________________
Transaction Code Number_____________________________________________________
/ / CHECK HERE AND ENCLOSE A COPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED PRIVATE BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)________________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution_______________________________________________
Account Number______________________________________________________________
Transaction Code Number_____________________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED PRIVATE
BONDS ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE PRIVATE BONDS FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
3
<PAGE>
LADIES AND GENTLEMEN:
1. The undersigned hereby tenders to LSP Energy Limited Partnership and LSP
Batesville Funding Corporation (together, the "Issuers"), the Private Bonds
described above pursuant to the Issuers' offer of $1,000 principal amount of
Exchange Bonds in exchange for each $1,000 principal amount of Private Bonds
upon the terms and subject to the conditions contained in the Prospectus dated
[ ], 1999 (the "Prospectus"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which together constitute the "Exchange
Offer").
2. The undersigned hereby represents and warrants that it has full
authority to tender the Private Bonds described above. The undersigned will,
upon request, execute and deliver any additional documents deemed by the Issuers
to be necessary or desirable to complete the tender of Private Bonds.
3. The undersigned understands that the tender of the Private Bonds
pursuant to all of the procedures set forth in the Prospectus will constitute an
agreement between the undersigned and the Issuers as to the terms and conditions
set forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the Exchange Bonds acquired pursuant to the Exchange Offer in
exchange for Private Bonds are being obtained in the ordinary course of
business of the undersigned and any beneficial owner(s) of such Private
Bonds or interests therein, whether or not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Bonds;
(iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such Exchange Bonds;
(iv) if the undersigned or such other person is a resident of the State
of California, it falls under the self-executing institutional investor
exemption set forth under Section 25102(i) of the Corporate Securities Law
of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky
Regulations;
(v) if the undersigned or such other person is a resident of the
Commonwealth of Pennsylvania, it falls under the self-executing
institutional investor exemption set forth under Sections 203(c), 102(d) and
(k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the
Pennsylvania Blue Sky Regulations and an interpretive opinion dated November
16, 1985;
(vi) the undersigned acknowledges and agrees that any person who is a
broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is participating in the Exchange Offer for
the purpose of distributing the Exchange Bonds must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Bonds or
interests therein acquired by such person and cannot rely on the position of
the staff of the Commission set forth in certain no-action letters;
(vii) the undersigned understands that a secondary resale transaction
described in clause (vi) above and any resales of Exchange Bonds or
interests therein obtained by such holder in exchange for Private Bonds or
interests therein originally acquired by such holder directly from the
Issuers should be covered by an effective registration statement containing
the selling security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission; and
(viii) neither the holder nor any such other person is an "affiliate,"
as such term is defined under Rule 405 promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), of the Issuers.
4
<PAGE>
5. The undersigned may, IF AND ONLY IF UNABLE TO MAKE ALL OF THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN ITEM 4 ABOVE, elect to have its
Private Bonds registered in the shelf registration described in the Registration
Rights Agreement, dated May 21, 1999, among Credit Suisse First Boston
Corporation, Scotia Capital Markets (USA) Inc., TD Securities (USA) Inc. and the
Issuers, in the form filed as an exhibit to the registration statement of which
the Prospectus is a part. Such election may be made by checking the box under
"Special Registration Instructions" on page 9. By making such election, the
undersigned agrees, jointly and severally, as a holder of transfer restricted
securities participating in a shelf registration, to indemnify and hold harmless
the Issuers, their respective directors and officers and each Person who
controls the Issuers, within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all losses, claims, damages and liabilities whatsoever
(including, without limitation, the reasonable legal and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the shelf
registration statement filed with respect to such Private Bonds or the
Prospectus or in any amendment thereof or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with information relating to the undersigned furnished to the Issuers in writing
by or on behalf of the undersigned expressly for use therein. Any such
indemnification shall be governed by the terms and subject to the conditions set
forth in the Registration Rights Agreement, including, without limitation, the
provisions regarding notice, retention of counsel, contribution and payment of
expenses set forth therein. The above summary of the indemnification provision
of the Registration Rights Agreement is not intended to be exhaustive and is
qualified in its entirety by reference to the Registration Rights Agreement.
6. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Bonds. If the undersigned is a broker-dealer that will receive Exchange
Bonds for its own account in exchange for Private Bonds that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Bonds, however, by so acknowledging and delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. If the undersigned is a broker-dealer and Private Bonds held
for its own account were not acquired as a result of market-making or other
trading activities, such Private Bonds cannot be exchanged pursuant to the
Exchange Offer.
7. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery Instructions,"
the certificates for the Exchange Bonds will be issued in the name of the
undersigned.
5
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1)
To be completed ONLY IF the Exchange Bonds are to be issued or sent to
someone other than the undersigned or to the undersigned at an address other
than that provided above.
Mail / / Issue / / (check appropriate boxes) certificates to:
Name:_________________________________________________________________________
(PLEASE PRINT)
Address:______________________________________________________________________
(INCLUDING ZIP CODE)
______________________________________________________________________________
______________________________________________________________________________
SPECIAL REGISTRATION INSTRUCTIONS
(See Item 5)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in Item 5 above, (ii) the undersigned elects to register its Private
Bonds in the Shelf Registration described in the Registration Rights Agreement
and (iii) the undersigned agrees to indemnify certain entities and individuals
as set forth in the Registration Rights Agreement and summarized in Item 5
above.
/ / By checking this box the undersigned hereby (i) represents that it is
unable to make all of the representations and warranties set forth in Item 4
above, (ii) elects to have its Private Bonds registered pursuant to the shelf
registration described in the Registration Rights Agreement and (iii) agrees
to indemnify certain entities and individuals identified in, and to the extent
provided in, the Registration Rights Agreement and summarized in Item 5 above.
6
<PAGE>
SIGNATURE
To be completed by all exchanging bondholders. Must be signed by
registered holder exactly as name appears on Private Bonds. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
X ____________________________________________________________________________
X ____________________________________________________________________________
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATURE
Dated: _______________________________________________________________________
Names(s): ____________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: ____________________________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone
No.: _________________________________________________________________________
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 1)
Certain Signatures Must be Guaranteed by an Eligible Institution
______________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
______________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
______________________________________________________________________________
(AUTHORIZED SIGNATURE)
______________________________________________________________________________
(PRINTED NAME)
______________________________________________________________________________
(TITLE)
Dated: _______________________________________________________________________
PLEASE READ THE FOLLOWING INSTRUCTIONS,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL
7
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must be
guaranteed by an eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or by an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 promulgated under the Exchange
Act (an "Eligible Institution") unless the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" above has not been completed or
the Private Bonds described above are tendered for the account of an Eligible
Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PRIVATE BONDS. The PRIVATE BONDS,
together with a properly completed and duly executed Letter of Transmittal (or
copy thereof), should be mailed or delivered to the Exchange Agent at the
address set forth above.
THE METHOD OF DELIVERY OF PRIVATE BONDS AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR PRIVATE BONDS SHOULD BE SENT TO THE ISSUERS. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES, OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If this
Letter of Transmittal is signed by a person other than a registered holder of
any Private Bonds, such Private Bonds must be endorsed or accompanied by
appropriate bond powers, signed by such registered holder exactly as such
registered holder's name appears on such Private Bonds.
If this Letter of Transmittal or any Private Bonds or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations, or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by the Issuers,
proper evidence satisfactory to the Issuers of their authority to so act must be
submitted with this Letter of Transmittal.
4. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Private
Bonds will be determined by the Issuers in their sole discretion, which
determination will be final and binding on all parties. The Issuers reserve the
absolute right to reject any or all Private Bonds not properly tendered or any
Private Bonds the Issuers' acceptance of which would, in the opinion of counsel
for the Issuers, be unlawful. The Issuers also reserve the right to waive any
defects, irregularities, or conditions of tender as to particular Private Bonds.
The Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
of Private Bonds must be cured within such time as the Issuers shall determine.
Neither the Issuers, the Exchange Agent, nor any other person shall be under any
duty to give notification of defects in such tenders or shall incur any
liability for failure to give such notification. Tenders of Private Bonds will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Private Bonds received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holder
thereof as soon as practicable following the Expiration Date.
8
<PAGE>
LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS
REGARDING THE OFFER TO EXCHANGE
$150,000,000 PRINCIPAL AMOUNT OF 7.164% SERIES C SENIOR SECURED BONDS DUE 2014
FOR ANY AND ALL OUTSTANDING $150,000,000 PRINCIPAL AMOUNT OF 7.164% SERIES A
SENIOR SECURED BONDS DUE 2014 AND $176,000,000 PRINCIPAL AMOUNT OF 8.160% SERIES
D SENIOR SECURED BONDS DUE 2025 FOR ANY AND ALL OUTSTANDING $176,000,000
PRINCIPAL AMOUNT OF 8.160% SERIES B SENIOR
SECURED BONDS DUE 2025
OF
LSP ENERGY LIMITED PARTNERSHIP
AND
LSP BATESVILLE FUNDING CORPORATION
TO REGISTERED HOLDERS AND THE DEPOSITORY TRUST COMPANY PARTICIPANTS:
We are enclosing herewith the materials listed below relating to the offer
by LSP Energy Limited Partnership and LSP Batesville Funding Corporation
(together, the "Issuers") to exchange $1000 principal amount of their 7.164%
Series C Senior Secured Bonds due 2014 (the "Series C Bonds") and $1000
principal amount of their 8.160% Series D Senior Secured Bonds due 2025 (the
"Series D Bonds" and, together with the Series C Bonds, the "Exchange Bonds"),
pursuant to an offering registered under the Securities Act of 1933, as amended
(the "Securities Act"), for, in the case of the Series C Bonds, each $1000
principal amount of their outstanding 7.164% Series A Senior Secured Bonds due
2014 (the "Series A Bonds") and, in the case of the Series D Bonds, each $1000
principal amount of their outstanding 8.160% Series B Senior Secured Bonds due
2025 (the "Series B Bonds" and together, with the Series A Bonds, the "Private
Bonds"), respectively, of which a total of $326,000,000 in aggregate principal
amount was issued on May 21, 1999 and is outstanding as of the date hereof, upon
the terms and subject to the conditions set forth in the Issuers' Prospectus,
dated [ ], 1999, and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated [ ], 1999;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder or DTC Participant from Beneficial Owner;
and
5. Letter which may be sent to your clients for whose account you hold
definitive registered bonds or book-entry interests representing Private
Bonds in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's instruction
with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE
EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
[ ], 1999, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of Private
Bonds being tendered.
To participate in the Exchange Offer, a beneficial holder must either (i)
cause to be delivered to The Bank of New York (the "Exchange Agent"), at the
address set forth in the Letter of Transmittal, definitive registered bonds
representing Private Bonds in proper form for transfer together with a
properly executed Letter of Transmittal or (ii) cause a DTC participant to
tender such holder's Private Bonds to the Exchange Agent's account maintained
at the Depository Trust Company ("DTC") for the benefit of the Exchange Agent
through DTC's Automated Tender Offer Program ("ATOP"), including
<PAGE>
transmission of a computer-generated message that acknowledges and agrees to
be bound by the terms of the Letter of Transmittal. By complying with DTC's
ATOP procedures with respect to the Exchange Offer, the DTC Participant
confirms on behalf of itself and the beneficial owners of tendered Private
Bonds all provisions of the Letter of Transmittal applicable to it and such
beneficial owners as fully as if it completed, executed and returned the
Letter of Transmittal to the Exchange Agent.
Pursuant to the Letter of Transmittal, each holder of Private Bonds will
represent to the Issuers that: (i) the Exchange Bonds or book-entry interests
therein to be acquired by such holder and any beneficial owner(s) of the
Private Bonds or interests therein ("Beneficial Owner(s)") in connection with
the Exchange Offer are being acquired by such holder and any Beneficial
Owner(s) in the ordinary course of business of the holder and any Beneficial
Owner(s), (ii) the holder and each Beneficial Owner are not participating, do
not intend to participate, and have no arrangement or understanding with any
person to participate, in the distribution of the Exchange Bonds, (iii) if the
holder or Beneficial Owner is a resident of the State of California, it falls
under the self-executing institutional investor exemption set forth under
Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10
and 260.105.14 of the California Blue Sky Regulations, (iv) if the holder or
Beneficial Owner is a resident of the Commonwealth of Pennsylvania, it falls
under the self-executing institutional investor exemption set forth under
Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972,
Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive
opinion dated November 16, 1985, (v) the holder and each Beneficial Owner
acknowledge and agree that any person who is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Bonds must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Bonds or interests therein acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters, (vi) the holder and each Beneficial Owner
understand that a secondary resale transaction described in clause (v) above
and any resales of Exchange Bonds or interests therein obtained by such holder
in exchange for Private Bonds or interests therein originally acquired by such
holder directly from the Issuers should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) neither the holder nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuers.
Upon a request by the Issuers, a holder or Beneficial Owner will deliver to
the Issuers a legal opinion confirming its representation made in clause (vii)
above. If the tendering holder of Private Bonds is (1) a broker-dealer
(whether or not it is also an "affiliate") or (2) a Beneficial Owner(s) that
will receive Exchange Bonds pursuant to the Exchange Offer, the tendering
holder will represent on behalf of itself and, if such Private Bonds are being
held on behalf of Beneficial Owner(s), on behalf of such Beneficial Owner(s)
that the Private Bonds to be exchanged for the Exchange Bonds were acquired as
a result of market-making activities or other trading activities, and
acknowledge on its own behalf and, if such Private Bonds are held on behalf of
Beneficial Owner(s), on behalf of such Beneficial Owner(s) that it or they
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Bonds; however, by so
acknowledging and by delivering a prospectus, such tendering holder will not
be deemed to admit that it or any Beneficial Owner is an "underwriter" within
the meaning of the Securities Act.
The enclosed "Instruction to Registered Holder or DTC Participant from
Beneficial Owner" form contains an authorization by the beneficial owners of
Private Bonds for you to make the foregoing representations.
The Issuers will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Private Bonds pursuant to the Exchange Offer. The
Issuers will pay or cause to be paid any transfer taxes payable on
2
<PAGE>
the transfer of Private Bonds to them, except as otherwise provided in the
section "The Exchange Offer--Fees and Expenses" of the enclosed Prospectus.
Additional copies of the enclosed material may be obtained from the
Exchange Agent.
Very truly yours,
LSP Energy Limited Partnership
LSP Batesville Funding Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE ISSUERS OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
3
<PAGE>
INSTRUCTION TO REGISTERED HOLDER OR DTC PARTICIPANT
FROM BENEFICIAL OWNER
FOR 7.164% SENIOR SECURED BONDS DUE 2014 AND/OR
8.160% SENIOR SECURED BONDS DUE 2025
OF
LSP ENERGY LIMITED PARTNERSHIP
AND
LSP BATESVILLE FUNDING CORPORATION
The undersigned hereby acknowledges receipt of the Prospectus dated
[ ], 1999 (the "Prospectus"), of LSP Energy Limited Partnership and
LSP Batesville Funding Corporation (together, the "Issuers"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal") that together
constitute the Issuers' offer (the "Exchange Offer"). Capitalized terms used but
not defined herein have the meanings assigned to them in the Prospectus and the
Letter of Transmittal.
This will instruct you as to the action to be taken by you relating to the
Exchange Offer with respect to the 7.164% Series A Senior Secured Bonds due 2014
(the "Series A Bonds") and/or the 8.160% Series B Senior Secured Bonds due 2025
(the "Series B Bonds" and, together with the Series A Bonds, the "Private
Bonds") held by you for the account of the undersigned.
The principal amount of the Private Bonds held by you for the account of the
undersigned is (fill in amount):
$______ principal amount of Series A Bonds
$______ principal amount of Series B Bonds.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/ / To TENDER the following principal amount of Private Bonds held by you
for the account of the undersigned (insert amount of Private Bonds to
be tendered, if any):
$______ principal amount of Series A Bonds
$______ principal amount of Series B Bonds.
/ / NOT to TENDER any Private Bonds held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Bonds held by you for
the account of the undersigned, it is understood that you are authorized:
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to
the undersigned as a beneficial owner, including but not limited to the
representations that (i) the 7.164% Series C Senior Secured Bonds due 2014
and the 8.160% Series D Senior Secured Bonds due 2025 (together, the
"Exchange Bonds") or book-entry interests therein to be acquired by the
undersigned in connection with the Exchange Offer are being acquired by the
undersigned in the ordinary course of business of the undersigned, (ii) the
undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the Exchange Bonds, (iii) if the undersigned is a resident
of the State of California, it falls under the self-executing institutional
investor exemption set forth under Section 25102(i) of the Corporate
Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California
Blue Sky Regulations, (iv) if the undersigned is a resident of the
Commonwealth of Pennsylvania, it falls under the self-executing
institutional investor exemption set forth under Sections 203(c), 102(d) and
(k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the
Pennsylvania Blue Sky Regulations and an interpretive opinion dated November
16, 1985, (v) the undersigned acknowledges and agrees that any person who is
a broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is participating in the Exchange Offer for
<PAGE>
the purpose of distributing the Exchange Bonds must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Bonds or
interests therein acquired by such person and cannot rely on the position of
the staff of the Commission set forth in certain no-action letters, (vi) the
undersigned understands that a secondary resale transaction described in
clause (v) above and any resales of Exchange Bonds or interests therein
obtained by such holder in exchange for Private Bonds or interests therein
originally acquired by such holder directly from the Issuers should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as applicable,
of Regulation S-K of the Commission and (vii) the undersigned is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the
Issuers. Upon a request by the Issuers, the undersigned will deliver to the
Issuers a legal opinion confirming its representation made in clause (vii)
above. If the undersigned is a broker-dealer (whether or not it is also an
"affiliate") that will receive Exchange Bonds for its own account pursuant
to the Exchange Offer, the undersigned represents that the Private Bonds to
be exchanged for the Exchange Bonds were acquired by it as a result of
market-making activities or other trading activities, and acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Bonds; however, by so
acknowledging and by delivering a prospectus, the undersigned does not and
will not be deemed to admit that is an "underwriter" within the meaning of
the Securities Act;
(b) to agree, on behalf of the undersigned, as set forth in the Letter
of Transmittal; and
(c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Private Bonds.
----------------------------------------------------------------------------
SIGN HERE
Name of Beneficial Owner(s): _______________________________________________
Signature(s): ______________________________________________________________
Name(s) (please print): ____________________________________________________
Address: ___________________________________________________________________
__________________________________________________________________
Telephone Number: __________________________________________________________
Taxpayer Identification or Social Security Number: _________________________
Date: ______________________________________________________________________
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO CLIENTS
REGARDING THE OFFER TO EXCHANGE
$150,000,000 PRINCIPAL AMOUNT OF 7.164% SERIES C SENIOR SECURED BONDS
DUE 2014 FOR ANY AND ALL OUTSTANDING $150,000,000 PRINCIPAL AMOUNT OF
7.164% SERIES A SENIOR SECURED BONDS DUE 2014 AND $176,000,000 PRINCIPAL
AMOUNT OF 8.160% SERIES D SENIOR SECURED BONDS DUE 2025 FOR ANY AND ALL
OUTSTANDING $176,000,000 PRINCIPAL AMOUNT OF 8.160% SERIES B SENIOR
SECURED BONDS DUE 2025
OF
LSP ENERGY LIMITED PARTNERSHIP
AND
LSP BATESVILLE FUNDING CORPORATION
To Our Clients:
We are enclosing herewith a Prospectus, dated [ ], 1999, of LSP Energy
Limited Partnership and LSP Batesville Funding Corporation (together, the
"Issuers") and a related Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by the Issuers to exchange $1000
principal amount of their 7.164% Series C Senior Secured Bonds due 2014 (the
"Series C Bonds") and $1000 principal amount of their 8.160% Series D Senior
Secured Bonds due 2025 (the "Series D Bonds" and, together with the Series C
Bonds, the "Exchange Bonds"), pursuant to an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), for, in the case of
the Series C Bonds, each $1000 principal amount of their outstanding 7.164%
Series A Senior Secured Bonds due 2014 (the "Series A Bonds") and, in the case
of the Series D Bonds, $1000 principal amount of their outstanding 8.160% Series
B Senior Secured Bonds due 2025 (the "Series B Bonds" and together, with the
Series A Bonds, the "Private Bonds"), respectively, of which a total of
$326,000,000 in aggregate principal amount was issued on May 21, 1999 and is
outstanding as of the date hereof, upon the terms and subject to the conditions
set forth in the Exchange Offer.
- --------------------------------------------------------------------------------
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON [ ], 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
The Exchange Offer is not conditioned upon any minimum number of Private
Bonds being tendered.
We are the Registered Holder or DTC participant through which you hold an
interest in the Private Bonds. A tender of such Private Bonds can be made only
by us pursuant to your instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to tender your
beneficial ownership of Private Bonds held by us for your account.
We request instructions as to whether you wish to tender any or all of your
Private Bonds held by us for your account pursuant to the terms and subject to
the conditions of the Exchange Offer. We also request that you confirm that we
may on your behalf make the representations contained in the Letter of
Transmittal that are to be made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of Private Bonds must
make certain representations and warranties that are set forth in the Letter of
Transmittal and in the attached form that we have provided to you for your
instructions regarding what action we should take in the Exchange Offer with
respect to your interest in the Private Bonds.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO TENDER
UNREGISTERED 7.164% SERIES A SENIOR SECURED BONDS DUE 2014 AND
UNREGISTERED 8.160% SERIES B SENIOR SECURED BONDS DUE 2025
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
LSP ENERGY LIMITED PARTNERSHIP
AND
LSP BATESVILLE FUNDING CORPORATION
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED [ ], 1999
As set forth in the Prospectus (as defined), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (i) if certificates
for unregistered 7.164% Series A Senior Secured Bonds due 2014 and unregistered
8.160% Series B Senior Secured Bonds due 2025 (together, the "Private Bonds") of
LSP Energy Limited Partnership and LSP Batesville Funding Corporation (together,
the "Issuers"), are not immediately available, (ii) time will not permit a
holder's Private Bonds or other required documents to reach The Bank of New York
(the "Exchange Agent") on or prior to the Expiration Date (as defined) or (iii)
the procedure for book-entry transfer cannot be completed on a timely basis.
This form may be delivered by facsimile transmission, registered or certified
mail, by hand or by overnight delivery service to the Exchange Agent. See "The
Exchange Offer--Procedures for Tendering" in the Prospectus.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON [ ], 1999 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE ISSUERS.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
DELIVER TO:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street, Floor 7E
New York, NY 10286 New York, NY 10286
Attention: Reorganization Department Attention: Reorganization
Department
</TABLE>
BY FACSIMILE:
(ELIGIBLE INSTITUTIONS ONLY)
(212)815-6339
FOR INFORMATION OR
CONFIRMATION BY TELEPHONE:
[ ]
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand or by overnight delivery service.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR
TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and subject to
the conditions set forth in the Prospectus dated [ ], 1999 (as the same may
be amended or supplemented from time to time, the "Prospectus"), and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate
principal amount of Private Bonds set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures."
Name(s) of Registered Holder(s): _____________________________________________
Aggregate Principal
Amount Tendered: $[______] Series A Bonds; $[______] Series B Bonds___________
Certificate No.(s)
(if available): ______________________________________________________________
(Total Principal Amount Represented by
Private Bonds Certificate(s)): _______________________________________________
$[______] Series A Bonds; $[______] Series B Bonds____________________________
If Private Bonds will be tendered by book-entry transfer, provide the
following information;
DTC Account Number: __________________________________________________________
Date: ________________________________________________________________________
* Must be in denominations of $1,000 and any integral multiple thereof.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
2
<PAGE>
PLEASE SIGN HERE
X ____________________________________________________________________________
X ____________________________________________________________________________
Signature(s) or Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number: ______________________________________________
Must be signed by the holder(s) of the Private Bonds as their name(s)
appear(s) on certificates for Private Bonds or on a security position listing,
or by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _____________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Capacity: ____________________________________________________________________
Address(es): _________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED.
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Signature Program or a
firm or other entity identified in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker, municipal securities dealer, government securities broker, or
government securities dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or learning agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program (each of the foregoing being referred to as an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent, at one of its
addresses set forth above, either the Private Bonds tendered hereby in proper
form for transfer, or confirmation of the book-entry transfer of such Private
Bonds to the Exchange Agent's account at The Depositary Trust Company, pursuant
to the procedures for book-entry transfer set forth in the Prospectus, within
three New York Stock Exchange, Inc. trading days after the date of execution of
this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Private Bonds tendered
hereby to the Exchange Agent within the time period set forth above and that
failure to do so could result in a financial loss to the undersigned.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- --------------------------------------------
Address Title
- -------------------------------------------- --------------------------------------------
Zip Code (Please Type or Print)
Area Code and Telephone No.: Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR PRIVATE BONDS WITH THIS FORM.
4
